Innovation in industrial districts: evidence from Italy

Purpose - The recent transformations brought about by the globalisation of markets have increased the competitive pressure for firms operating in traditional sectors, and in particular for those in industrial districts. The authors' aim is to understand the extent to which firms responded to these new challenges. More particularly, they investigate the determinants of innovation at firm level focusing on the role of firm's outsourcing strategies. Design/methodology/approach - Drawing on an original firm-level dataset, the authors analyse the determinants of innovation in a typical Italian industrial district, i.e. the hosiery district of Castel Goffredo in the Third Italy. They apply econometric techniques, in particular OLS and Tobit models. Findings - The authors' findings suggest that industrial districts are evolving towards a differentiated organisational structure in which innovation is driven by firms, which are focused on core competences and high valued added activities. Research limitations/implications - The authors' results should be interpreted with some caution, since the cross-sectional design of their data does not allow them to fully control for potential reverse causation effects, which might be relevant for some of the explanatory variables. Their data do not allow them to include additional instrumental variables, thus they cannot control for endogeneity. Therefore, their interpretation is limited to comment the extent and regularity of the relation between dependent and explanatory variables. Practical implications - The evidence presented in this study corroborates some arguments highlighted in the current debate about the evolution of industrial districts. A network-based organisation is the dominant organisational structure. The authors have some evidence on the importance of size as driver of innovation. Originality/value - The authors find original evidence at firm level on the relation between organisational change, in the form of outsourcing, and innovation in the context of an industrial district. They also find empirical support to arguments debated in the recent policy debates on whether small firms can be regarded as engines of innovation in industrial districts.