Workshop “Developing European Labour Market Areas” and training on TTWA method The definition of Industrial Districts Silvia Lombardi ISTAT - Italian National Institute of Statistics Nuremberg, 15-16 June 2016
Workshop “Developing European Labour Market
Areas” and training on TTWA method
The definition of Industrial Districts
Silvia Lombardi
ISTAT - Italian National Institute of Statistics
Nuremberg, 15-16 June 2016
1. Introduction
2. The definition of Industrial District
3. The importance of the territorial dimension in local economic
development and policy
4. Mapping methodology of Industrial Districts: a critical review
A) LMAs-based methodologies
B) Not LMAs-based methodologies
C) European and Extra European experiences
5. A comparison across methodologies and conclusions
6. The seminar in Rome
Outline
Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016 2
Industrial districts as an application of LMAs for the
identification of meaningful territorial units in Italy
A replicable experience in Europe?
Why mapping industrial districts is important?
Which methodologies for which countries have been
implemented so far?
1. Introduction
Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016 3
It All Started with Marshall…
The theoretical history on economic agglomeration is rooted in
Alfred Marshall’s work (1890) “Principles of economics”
In particular:
Book IV, “The Agents of Production. Land, Labour, Capital and
Organization”. Ch. X, “Industrial Organization, Continued. The
Concentration of Specialized Industries in Particular
Localities”.
2. The definition of Industrial District (ID)
Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016 4
Analytical tools:
“Marshallian external economies” as determinants of the location
of industries explain the efficiency of firms in localized industries
and IDs
The “industrial atmosphere” enables people living in the district to
learn the industry as if it was “in the air” is the “advantage”
benefited by firms
“External economies are competitive advantages that an
independent producer gains from embeddedness in a system of
organized division of labour.” (Bellandi 2009 in Becattini&al. 2009)
They are external to firms but internal to the system and arise as
the the scale of production increases
5 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
The theory of ID was developed and conceptualized by the
seminal work of G. Becattini who developed Marshall thinking
Conceptualizes the industrial district as a «unit of
investigation» for the analysis -> revisited Marshall’s external
economies to explain the performance of Italian IDs
In: Becattini G. (1979). Dal “settore” industriale al “distretto”
industriale: alla ricerca dell’unità d’indagine della economia
industriale. Rivista di economia e politica industriale.
Conceptualizes the industrial district as a «model of
production» -> is the starting point for empirical research
(Tuscany, post WW2)
In: Becattini G. Edited by (1987). Mercato e forze locali: il distretto
industriale. Il Mulino, Bologna.
Setting the stage
Source: Sforzi (2015)
6 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
The ID as a socio economic concept
Definition of ID: “a socio territorial entity which is characterized by
the active presence of both a community of people and a
population of firms in one naturally and historically bounded
area.” (Becattini 1990:38)
Stylized facts on IDs: the social side
The sense of belonging of the human agents of
production (employers and workers) to the place where
production actually occurs.
The values of a local community support the industrial
organization of a population of firms
7 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Stylized facts on IDs: the tecno-economic side
SMEs-based
Firms are specialized in specific production phases of the
same production process (spinning, weaving, dyeing,
finishing, etc.) organized in flexible teams
Local phase markets
Local labour markets for specialized skills
Firms have access to external economies
(specialization, learning, creativity) based on access to
collective resources (public infrastructure, social capital
and networks and pools of human and technical capitals)
Source: Becattini (2002)
8 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Industrial district vs industrial clusters (and other forms of
localized industries)
Industrial clusters (IC): «Clusters are geographic concentrations of
interconnected companies, specialized suppliers, service
providers, firms in related industries, and associated institutions in
particular fields that compete but also cooperate» (…)
«The geographic scope of a cluster can be a single city or state
or a country or even a network of neighbouring countries»
(Porter, 1998, pp. 197 and following).
• Geographical proximity
• «industries connected through vertical (buyer/supplier) and
horizontal (common customers, technology, distribution
channels, etc.) relationships» (Porter, 1990, p.73).
“(…) people (the local community) is the missing component,
unlike in the case of the definition of the ID” (Sforzi 2015: 21)
9 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Rationale for ID: the community of people and the population of
firms, external economies, economic change
Rationale for IC: geographical proximity of firms and institutions
Rationale for industrial agglomerations: the presence of
labour pooling, intermediate inputs, and
technological/knowledge spillovers (agglomeration economies)
10 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
3. The importance of the territorial dimension in policy
making
The international debate on agglomerations of firms is increasing
i.e. The role of IDs in regional sciences, the role of industrial
clusters in emerging economies, etc. …
What matters is not only the implication of physical proximity
itself, but its effects in terms of external economies and
reproduction of local contexts
i.e. cultural proximity and its relation with learning and
innovation (knowledge spillovers); external economies and
their role in division of labour, competitive reactions to
challenges of globalization.
11 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Why localized industries are important?
Such an interest is due to the role that localized industries play in
terms of local economic development (Becattini&al. 2009)
In the Italian case, it is acknowledged the “Italian structural
paradox” (Cannari&Signorini 2000) [i.e. few large firms,
specialization in low tech “traditional sectors”]
‘Geo-sector specialization’ (Alampi&al. 2013) is therefore the
explanation of the source of competitive advantage, in addition to
firm size and high tech specialization
However, IDs are claimed to be the product of Italy’s
industrialization by some scholars
12 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Why mapping IDs is essential?
In Italy, the work of Becattini has exemplified the ID through the
empirical evidence:
IDs have been an interpretative tool in understanding Italian
development since World War II
Mapping of IDs has been the quantitative evidence of the IDs
thesis which rose the attention of policy makers
the territorial dimension as the basis for economic/industrial
(local) policies
13 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Since the 1980s, the territorial policies began to incorporate more
and more directly the concepts of local production system and
IDs
• In the case of innovation, policies began to define strategies
for providing support to the innovative processes rooted at the
local level (in addition to interventions that designed to
stimulate investments in individual firms)
-> initial attempt: the creation of business development
service centers and the promotion of consortia among IDs
firms (1980s)
In the 1990s and the beginning of the 2000s IDs were legally
recognized as instruments for industrial policy
14
The legal framework – The 1980s
The legal framework – The 1990s
1991: Law n. 317/91 «Interventions for innovation and development
in small enterprises» is the National law on IDs.
Article 36 defines ID as a “territorial area characterised by high concentration
of small enterprises having a productive specialisation and where a special
relationship between local population and enterprises exists”.
Since 1991 the ID is a legal instrument for industrial policy
Since 1993: Regional laws for the identification of IDs
1993: Decree 21/04/93 by the Ministry of Industry IDs must be identified among LMAs (ISTAT) + IDs must be manufacturing in
terms of employment and establishments. Regions can identify their own IDs
1999: Law n.140 /1999 «Regulation on productive activities» introduces Local Production Systems (IDs are a type of LPS, identified by
less rigid criteria)
15 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Source: Istat (2015c)
2001: Deliberation CIPE/2001 «Criteria for subdivision of national
territory into LMAs and identification of productive districts»
Transfers to Regions and Autonomous Provinces the role if
identifying IDs also on the basis of LMAs
2002: Institute for Industrial Promotion – Ministry of Industry is
a first assessment of the Italian experience of IDs
At the regional level, national legislation has been adopted by 13 out of 20
regions (Piedmont, Lombardy, Veneto, Friuli-Venezia Giulia, Liguria,
Marche, Toscana, Lazio, Abruzzo, Campania, Basilicata, Sicilia, Sardinia)
which have identified Ids (Regional Laws, Deliberations)
Late 2000s: regional laws supporting traditional IDs were not
implemented
16 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
The legal framework – The 2000s
Source: Istat (2015c)
During the 2010s, regional policies became more incisive with
respect to territorial systemic units and sectors
In the case of innovation, a wide number of policies target
territorial systemic units such as:
• the promotion of “technological districts” (2000s).
• the promotion of network contracts and of innovative start-
ups (plus other supporting actions to the activity of SMEs on
the basis of the SBA Directive at national and regional level)
• the national technology clusters (since the beginning of
2010s).
17
The legal framework – The 2010s
…So far: only the Italian Commission for the Guarantee of Quality
of Statistics Information (2005) has provided a complete review of
methodologies
Here an updated review is presented following three main groups
of methodologies:
A) LMAs-based methodologies
B) Not LMAs-based methodologies
C) European and Extra European experiences (IDs/ICs)
4. Mapping methodology of industrial districts: a
critical review
18 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
A) LMAs-based methodologies
A1) Istat 2015 mapping methodology (2011 LMAs methodology)
The methodology relies on employment data at the firm level
provided by 2011 Business Census (enterprises, not for profit
institutions and public institutions)
Employment data is calculated by LMAs and by economic sector
The algorithm in four steps is composed of a hierarchical procedure
which determines the dominant industry and the presence of SMEs
by means of LQ and prevalence indexes at the LMA level
It identifies LMAs specialized in manufacturing based on SMEs
and a dominant manufacturing specialization mainly based on
SMEs
19 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Variables
All production activities (NACE Rev.2) are grouped in:
Agricultural activities, Extractive industry, Construction, Manufacturing
Business services, Consumer services, Social services and Traditional
services
Manufacturing activities are grouped into eleven categories:
Textile and clothing; leather and footwear; households goods (wooden
furniture, tiles and other glass and ceramics items); jewellery, musical
instruments and toys; food and beverages; machinery; electrical and
optical equipment; manufacture of basic metals and fabricated metal
products; chemicals and plastics; transport equipment; paper, publishing
and printing; other manufacturing activities.
Firm size: four sizes-European classification of micro enterprise
Micro : up to 9 persons employed Small: 10-49 Medium: 50-249
Large: over 250 persons employed MSMEs
20 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
The four steps (some traits 1/2)
STEP 1: identification of LMAs specialized in manufacturing (among 9
macro categories of all economic sectors)
• 1.A LQm = ( LMAemp, Nace / ITAemp, Nace ) / ( LMAemp, tot / ITAemp, tot )
• 1.B Prevailing employment in Business services, consumer
services, manufacturing
[( LMAemp, Nace / ITAemp, Nace ) - ( LMAemp, tot / ITAemp, tot )] * ITAemp, Nace
LMAs with prevailing employment in munufacturing go to Step 2
STEP 2: identification of manufacturing LMAs featured by MSMEs
• ( LMAemp (class), manif / ITAemp (class), manif ) / ( LMAemp, manif / ITAemp, manif )
21 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
The four steps (some traits 2/2)
STEP 3: identification of dominant industry of manufacturing SMEs-
based LMAs (among the 11 manufacturing categories)
• 3.A ( LMAemp, ind / ITAemp, ind ) / (LMAemp, man / ITAemp, man )
• 3.B defines the dominant industry
[(LMAemp, ind / ITAemp, ind ) – (LMAemp, man / ITAemp, man )] * ITAemp, ind
STEP 4: identification of LMAs based on MSMEs by verifying firms size
of the dominant industry
• 4A ( LMAemp (mpmi), dom_ind / LMAemp (tot), dom_ind ) > 50,0%
In case of only one medium enterprise:
• 4B1 ( LMAemp (p_imp), dom_ind / LMAemp (m_imp), dom_ind ) > 50,0%
• 4B2 ( LMAemp (micro_imp), dom_ind / LMAemp (m_imp),dom_ ind ) > 50,0%
22 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Industrial Districts 2011
23 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Business Census data in 2011
identified a set of 141 IDs (out of
611 LMAs) (Istat 2015)
Almost one fourth of total Italian
employment was absorbed by
IDs (24,5%)
Such share grows up
to 37,9% in terms of
manufacturing employment
Mainly specialized in mechanicals
(27% of IDs), textile and clothing
(23%), household goods (17%) Textile and clothing
Leather Household goods Jewelry, musical instruments, etc.
Food industry Mechanicals
Metallurgy Chemicals and plastics Polygraphs
No ID
http://www.istat.it/it/archivio/150320
Istat (2015a)
LMAs 2011 (611)
Non Manufacturing
LMAs(391)
Manufacturing LMAs (220)
MSMEs based Manufacturing
LMAs(151)
LEs based Manufacturing
LMAs (69)
LEs based Manufacturing
LMAs with prevailing
MSMEs (28)
Other MSMEs
based
Manufacturing
LMAs (10)
Industrial
Districts
(141)
Other LEs based
Manufacturing LMAs (41)
Flow and intermediate results
Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016 24
Further LMAs: the role for large firms
STEP 1: identification of LMAs specialized in manufacturing
(among 9 macro categories of all economic sectors)
STEP 2: identification of manufacturing LMAs featured by Large
Enterprises (LEs) -> 69 in Italy in 2011
STEP 3: identification of dominant industry of manufacturing LEs-
based LMAs (among 11 manufacturing categories)
STEP 4: identification of LEs-based LMAs that have more than
50% of persons employed in the dominant industry of MSMEs (29
in 2001)
25 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
http://www.istat.it/it/archivio/150320
LEs-based LMAs (2011)
26 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Textile and clothing (3)
Leather (2)
Household goods (5)
Food industry (4)
Mechanicals (9)
Chemicals and plastics (3)
Polygraphs (2)
28 LMAs based on LEs with
prevalence of MPMI
One third is specialized in
mechanicals, follofew by house
hold goods(18%) and food
industry
One region (Emilia Romagna)
absorbs one third of total and
manufacturing employment of
LEs LMAs
http://www.istat.it/it/archivio/150320
Istat (2015a)
A) LMAs-based methodologies
A1) Istat 2015a mapping methodology (years 2011 and 2001)
A2) Sforzi-Istat mapping methodology (years 1981, 1991, 2001)
-> 3 firms’ class sizes Sforzi&Lorenzini (2002)
A3) Extension of Sforzi-Istat: Canello&Pavone (2015)
not NACE classification but deriving from the NAS; indicators
based on population and establishments/local units
A4) Against the dichotomy ID/not ID: Signorini&Cannari (2000);
Brusco&Paba (1997)
A5) Methodologies focused on specialization of IDs:
Fortis&Carminati (2008); Istat classifications of LMAS (2006 and
2015b) based on cluster analysis Cattivelli&Iuzzolino (2014)
27 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
B) Not LMAs-based methodologies
These approaches do not need ex-ante territorial units since they
aim to detect high levels of agglomeration on the basis of the
lowest administrative division level: the municipality in Italy
They disregard the socio-cultural environment behind the
agglomeration of firms. It is the price to pay in order to have a
more flexible and endogenous data driven algorithm
(Cannari&Signorini 2000).
B1) Iuzzolino (2004 and 2014) data driven, applies Ellison e
Glaeser (1997) agglomeration index. Filiéres are based on input-
output tables. The 2013 version is a modification of 2004 algorithm in
order to take into consideration socio-cultural aspects.
B2) Abbate&Merlini (2010): contiguity index
28 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
C) International experiences
C1) For industrial clusters (AMONG OTHERS):
- UK: Department of Industry and Trade (DTI): LQ applied to
regions in order to identify business clusters “Business
clusters in the UK - A first assessment” (2001)
- European Cluster Observatory: sectoral statistical analysis of
regional data for several key performance indicators
- US cluster mapping: regional clusters based on the LQ. The
geographic scope is the administratively defined region. The
algorithm relies upon clustering analysis incorporates
measures of inter-industry linkages based on co-location
patterns, input-output links (Delgado, Porter and Stern, 2014)
29 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
C2.1) For industrial districts - Quantitative methodologies
(Spain, Great Britain, Germany, France)
- The mapping of IDs in Spain (Boix 2009 in Becattini&al. 2009)
Commissioned by the Spanish government (Ministry of Industry)
and coordinated by the Universitat Autònoma da Barcelona.
First application: 2001 data and Istat-2001 methodology of
identification of LMAs (Boix and Galletto 2006)
Results showed (expected) similarities between Italy and Spain
since both countries have low incidence of large enterprises
(<0.5% in number and <30% in terms of contribution to
manufacturing employment)
- IDs in Germany: Brenner (2006), manufacturing firms
distribution within Kreise; Alampi et al(2013) apply
Iuzzolino/Ellison &Glaeser test to Kreise and find 37 IDs
30 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
- The mapping of IDs in UK (De Propris 2009 in Becattini&al.
2009)
In UK there was an established tradition in defining LMAs: TTWA
existed since 1980s
First attempt: Crouch and Farrell (2001) industrial local systems
identified on the basis if LQ and indexes of production
concentration and rations on 1996 data by TTWA and by 3-digit
economic sectors. 24 IDs
First application of Istat-1990 methodology to 1997 data was in De
Propris 2005 (overall 47 IDs) and then 2009 (40 IDs)
- IDs in France: INSEE, dominant sectors with respect to
national average by employment zones; Guégan&Rousier
(1989) LQ, no class sizes; Alampi et al. (2013) apply
Iuzzolino/Ellison &Glaeser agglomerations index and find 12
IDs
31 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
C2.1) For industrial districts – Qualitative studies
- France (Benko&Pecqueur 2009 in Becattini&al. 2009)
Since mid 1980s emerge Local Production Systems (LPSs) as target for
industrial policies by DATAR (Délégation interministérielle à
l'aménagement du territoire et à l'attractivité régionale). Since 2005 LPSs
take the form of Poles of competitiveness, the successors of the PLSs of
the mid 1990s and at the heart of French industrial policy
- Scandinavian countries (Johannisson in Becattini&al. 2009):
Sweden, Denmark, Norway
- The mapping of IDs in China (Wang&Mei 2009 in Becattini&al.
2009)
- Japan (Okamoto 2009 in Becattini&al. 2009): success cases
In many developed (industrialized) countries empirical evidence is
still qualitative or it is not built on a sound quantitative
methodology
32 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
A European comparison across methodologies
Territorial
unit
Methodology
for LMA
Year of
data
utilized
N. IDs
(by methodology)
% on
manufa
cturing
LMAs
% of
manufa
cturing
employ
ment in
IDs
% on
LMAs Source
ISTAT OTHER M.
ITALY LMAs Istat/2011Euro 2011 141 64% 38% 23.1% Istat (2015)
LMAs Istat/2011Euro 2001 181 Istat (2015)
LMAs Istat/2001 2001 185 Canello e Pavone (2015)
LMAs Istat/2001 2001 132 Alampi et al. (2013)
Minucipality - 2001 155 Abbate and Merlini (2010)
LMAs Istat/2001 2001 153 Edison (2008)
LMAs Istat/2001 2001 156 39.3% 22.7% Istat (2006)
Minucipality - 2001 156 50% Iuzzolino (2004)
SPAIN 806 LMAs Istat/2001 2001 205 61.7% 34.8% 25.4% Boix(2009) Handbook of IDs
GREAT
BRITAIN
232 TTWAs UK 2001 40 41.2% 4% 17.2% De Propris (2009) Handbook of IDs
TTWAs UK 1997 47 21% De Propris (2005)
TTWAs UK 1996 24 Crouch and Farrell (2001)
FRANCE 348 Ezs FR 2006 12 20.10% Alampi et al. (2013)
GERMANY 440 Kreise D 2001 37 17.10% Alampi et al. (2013)
33 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Source: author’s collection
LESSONS LEARNED (1/3)
The comparison of results of such studies high light the need for
1. A harmonized LMAs structure for EU countries
2. Study of variance of results (IDs, LEs-based LMAs) within
countries and between countries/sectors
AIM: to help policy makers in identifying the actions that should be
accomplished in order to implement European
economic/industrial/enterprise policies
34 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
• From Alampi et al. (2013):Italian industry is strongly characterized
still in the first half of the 2000s’, with respect to strong competitors
like France and Germany, by the presence of agglomerations of
SMEs, of course in the so-called low tech sectors but also in
medium to high tech sectors
• A ‘selection effect’ has to be taken into account while applying
methodologies in single countries/all countries
• From Handbook of IDs (2009): Industrial districts present a large
variety of types along history and geography
35
LESSONS LEARNED (2/3)
The role for official statistics in Policy making by a place-based
approach
• Provides harmonized statistically based geography that
identifies proper labour market at the EU level
• Countries can characterized them in terms of industries
• And estimate indicators at the LMA level in order to detect
regional disparities and tendencies useful to identify actions to
implement EU policy
36
LESSONS LEARNED (3/3)
• The algorithm: analytical steps
• The algorithm in SAS and R
• Sensitivity tests
• Output
• Bring your data!
Micro data / aggregate data by LMA
- on Business Census (establishments/local units level)
- Statistical units: Enterprises, public and not for profit institutions
- Variables: economic activity (Nace Rev.2 classification, 5 digit),
LMA
- Count: persons employed by LMA and economic activity, N. of
establishments by LMA and economic activity
5. The seminar in Rome
37 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Thank your for your attention!
38 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
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43 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016
Web sites
http://webarchive.nationalarchives.gov.uk/20070603164510/http://www.dti
.gov.uk/clusters/map/graphics/forintro.pdf
http://www.clusterobservatory.eu/
http://www.istat.it/en/files/2015/02/EN_Industrial-
districts.pdf?title=Industrial+districts+-+24+Feb+2015+-+Full+text.pdf
44 Silvia Lombardi – “The definition of Industrial Districts”. Nuremberg, 16 June 2016