SMALL-FIRM CONSORTIA IN ITALY:AN INSTRUMENT FOR ECONOMIC DEVELOPMENT

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SMALL-FIRM CONSORTIA IN ITALY:AN INSTRUMENT FOR ECONOMIC DEVELOPMENT

INTRODUCTION
Models of economic development have recently begun to recognize the importance
of rooting growth firmly in local contexts in order to produce projects which are
viable over time. This approach has placed the emphasis onto small and medium
enterprises (SMEs), on one hand, and on analyses of territorial development on the
other. The notion that small firms should be the focus of economic development
programs highlights their importance in models of “bottom-up” growth and
increased employment. Added benefits of these programs include greater social and
political stability. However, this focus on SMEs does not overlook their intrinsic
limitations. Clearly SMEs do suffer the consequences of their reduced size. Therefore, as
development projects are designed around SMEs, their weaknesses must be
recognized and overcome. One way to do this is through forms of inter-firm
cooperation among SMEs. These forms of cooperation are widely diffused and have
been instrumental in the success of small firms in various contexts. This paper will
describe such inter-firm cooperation as it has occurred in Italy. Lessons will be drawn
from this experience, including suggestions on how to stimulate cooperation, in an
attempt to inform development activity in emerging countries.
Inter-firm cooperation in Italy has mainly been associated with the widespread
presence of cooperatives and consortia. Along with the traditional productive and
consumption cooperatives, established by individuals, a wide array of consortia,
founded by firms, has developed since the early 1950s. These consortia were aimed at
supporting small firms in areas where they are traditionally weak, such as finance or
export. Thus consortia had specific targets and membership requirements, such as a
sectoral focus or firm dimension criteria. The most traditional and developed
examples in Italy are the credit guarantee cooperatives, export consortia or consortia
for product valorization. In establishing these consortia the entrepreneurial
associations have played a crucial role, in particular in northern Italy, thanks to the
strong relationships with small firms and to their ability in coordinating and promoting
the new consortia to local and national governments. The associations’ activities in
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the early phases of these consortia consisted in providing organizational support and
collecting funds among firms and public institutions.
Public support for consortia in Italy is now supplied both by national and local
governments. However, this is a relatively recent phenomenon. In fact, the first
national legislation specifically dedicated to encouraging the creation of SME
clusters and forms of inter-firm cooperation among SMEs was approved only in 1991.
At the time of this paper, many portions of the law have yet to be implemented due
to numerous bureaucratic difficulties. Along with specific interventions for export and
credit cooperatives, national Law 317, 1991, dedicates a whole paragraph to other
forms of consortia involving SMEs, with the intention of filling the gaps characterizing
the national system of incentives for inter-firm cooperation. More generally, Law 317 is
the legal instrument created to respond to the need for a real policy for SMEs: indeed
the overall objective of the law is “to promote development, innovation and
competitiveness of small firms”, intervening not only by supporting firm investment,
but also through the creation of those conditions necessary to the creation of an
external environment favorable to competitive growth.
The formal recognition of the importance of the local environment to economic
development reveals a major change in SME policy. What the literature on industrial
districts and SME clusters has argued for some time now has finally been incorporated
in an attempt to help create competitive environments to stimulate SMEs. Of note is
that forms of inter-firm cooperation in Italy are often born within industrial districts
and serve to reinforce the dynamic institutional context.
Law 317 furthermore favors the participation of local institutions in consortia in roles
of responsibility. In fact this policy clearly emphasizes the fact that local bodies
represent the vehicles, or intermediaries, for economic development.
Local governments are now among consortia’s main interlocutors, providing in many
cases financial support for specific interventions. This is the situation in Italy. In other
contexts, and in emerging countries in particular, it is possible that local institutional
environments will vary greatly. Strong local institutions, capable of sustaining efforts
on the part of the private sector certainly facilitate inter-firm cooperation efforts as
we have seen in the Italian case. However, in areas lacking such support structures,
the impetus for SME cooperation may stem solely from the private sector and, only
later, involve local bodies when these become solid enough to effectively
participate.
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The following paragraphs will focus in detail on the two main forms of consortia:
credit guarantee cooperatives and export consortia.