The Rise, Decline, and Regeneration of Industrial Districts: Enhanced HRM, SMEs, and Location

Introduction

There have been a range of analyses of location and competitiveness, including regional and urban studies, theories of networking, theories of innovation and ‘new economic geography’ (e.g. Krugman, 1995), but fewer in terms of human resource management rather than local and regional development policies. There is a wide literature on the role of tacit knowledge in competitiveness but only some on its role in successful small and medium firms (SMEs) in industrial districts. This chapter seeks to address such issues from a Schumpeterian perspective on product and process innovation. It is critical of the local ‘cluster analysis’ of Michael Porter (1980, 1990, 1998) and contrasts it with the more dynamic analysis of local and global polarisation of François Perroux (1955, 1961, 1964, 1965) which was influenced by Schumpeter’s (1949) concept of ‘creative destruction’ as well as parallel dynamics in the circular and cumulative causation of growing and declining areas in Gunnar Myrdal (1957).

Drawing on Streek (1989) it analyses the concept of flexible specialisation and the claims for this of Piore and Sabel (1984) and Beccatini (1978, 1986, 1990, 2003) for a new production paradigm in the industrial districts of the ‘Third Italy’. It recognises the importance of flexible specialisation for some industrial districts of small and medium firms, yet also evidences that by failing to match high levels of process innovation by product innovation many of the districts in the ‘Third Italy’ already were in decline by the time that Piore and Sabel and Beccatini claimed to have derived a new production paradigm from them. It also illustrates cases of ‘reverse globalisation’ such as how regeneration of a declining Italian industrial district which at its height accounted for a quarter of Italian textile and clothing exports - Prato - has seen the development a ‘parallel’ district through immigration of Chinese entrepreneurs.

The chapter also shows that the industrial district model of Piore and Sabel and Beccatini assumes a micro foundation of small and medium enterprise within a framework of imperfect competition. In qualifying this in a global context, it distinguishes micro local economic systems such as small firm industrial districts from meso intermediate regions in the global economy, such as Southern Europe or South East Asia (Amoroso, 1996, 1998; Gallina, 2003; Papadaskalopoulos et al., 2005; Roth, 2007; Scott & Garofoli, (2007). It also differentiates micro from large meso firms and how the latter influence both micro and global outcomes. It further distinguishes between very small firms of less than 10 employees and medium sized firms, recognising that the former may have little scope for HRM, whereas enhancing it may be imperative for those that Eurostat definitions deem micro, of up 250 employees.