Revue d’économie industrielle

Economic development, organization of production and territory

Gioacchino Garofoli

Abstract
The emergence of new models of development and the reversal of territorial trajectories have shown the incapacity of old
theoretical models in fitting the changing reality. The emergence of localized networks among firms and external economies has
led to a new paradigm for economic development based on territory.
The paper stresses the existence of different patterns of local development and deals with the key variables for the singling out
their typology.

Résumé
L'émergence de nouveaux modèles de développement et le renversement des trajectoires territoriales ont démontré l'incapacité
des anciens modèles théoriques à comprendre la réalité économique en voie de transformation. L'émergence de réseaux
d'entreprises territorialisés et les économies externes ont conduit à un nouveau paradigme du développement économique qui
est fortement fondé sur le territoire.
Cet article souligne l'existence de plusieurs modèles de développement local et discute les variables clefs pour la construction
d'une typologie de ces modèles.

Citer ce document / Cite this document :

Garofoli Gioacchino. Economic development, organization of production and territory. In: Revue d’économie industrielle, vol.
64, 2e trimestre 1993. pp. 22-37;

doi : https://doi.org/10.3406/rei.1993.1475

https://www.persee.fr/doc/rei_0154-3229_1993_num_64_1_1475

Fichier pdf généré le 09/04/2018

 Gioacchino GAROFOLI
Université de Pavie

ECONOMIC DEVELOPMENT,
ORGANIZATION OF PRODUCTION

AND TERRITORY

I. — INTRODUCTION

Iwill deal, in this paper, with territory and economic development, underlying
the active role of the territory in the process of development. With respect
to these issues, particularly to the relationship between economic development and
territorial organization of production, my departure point is that we need a bridge
between theory and reality, in fact we are in a phase of transformation not only
with reference to economic organization (and world economic scenarios) but also
to economic theory.

It seems to me quite important, in this phase, to work in a more systematic way

on inductive analysis, exploring deeply the different cases of development to
reconstruct some typologies of local development.

In my introduction I will deal with two main issues, and precisely :

a) the crisis of paradigms in regional development ;

b) the interaction between local and global.

What seems to be particularly important, in the economic transformation of

the last two decades, is the progressive emergence - at all the observable scales :
from local to national and international level - of new models of development,
of reversal of territorial trajectories, of the incapacity of the old theoretical models
to interpret the changing reality (cf., mainly, the fall of the core-periphery
paradigm).

With the new models of development there are emerging new actors (local
institutions, local State, collective private subjects/actors,...) that are able to influence
the process of economic and social transformations. These actors have been
forgotten from previous theoretical schemes. Moreover there is the breakdown of
the idea of deterministic laws of development and new opportunities are
emerging. Local communities have some chances (and responsibilities) to promote deve-

22 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

lopment ; there are opportunities (higher or lower) everywhere ; different, of
course, will be the paths to follow and the policies to introduce and to implement
according to the different models and the different goals to fulfil.

But another point is important to underline : the overall mechanism of

development is not a zero sum game, that means the relationships between regions
cannot be based only on a competitive struggle.

To conclude this first point it is necessary to underline the role of endogenous

variables and external economies (external to the firms but internal to specific areas)
that have given new centrality to the territory (interpreted as the sedimentation
of specific knowledges and cultures) and forms of social regulation managed locally.

The second point of this introduction concerns the relationship between local
and global/international. It could seem a quite strange position to investigate the
role of local economies in a world more and more globalized. But we must take
into account the following two phenomena :

1) The crisis of the fordist model and the decreasing role of the forms of social
regulation at the national level ;

2) the emerging of overnational governance (cf., for instance, the EEC

governance), in one side, and of local and regional governance (cf. the decentralisation
laws in several countries, like Italy, France, Spain), in the second one, on a large
set of economic and social issues that let decrease the role of national governance.

So, the increasing role of external economies and agglomeration advantages and
the internalization of production lead to a contemporary puzzle posed by the
marked reagglomeration of production, in one hand, and the globalization of
economic flows on the other (Scott and Storper, 1990).

Local and international become, then, the two poles of a new dialectics of
development : the firm is then oriented to the local dimension (to turn into account
the stock of techno-scientific and cultural and professional knowledges) and to
the external dimension (looking for stimuli and provocations for the innovation,
the productive differentiation, to organize new networks of exchanges and
collaborations).

According to the networks among firms then, it is possible to note that

information, goods and components exchange networks are realised both at the local
level and at the international one, but it is at the local level that the culture of
collaboration among firms is acquired.

II. — THE EMERGENCE OF TERRITORY

Polarized development, concentrated territorially, and the diffusion of

development "from above" have for some time been the dominant theoretical
paradigm on which development strategies and regional policies have been based.
Development was made possible by the continuous expansion of large scale industry,
prevalently localized in large urban centres since the typology of technological inno-

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 23

vation, economic policies and the development of infrastructures allowed the
formation of large scale economies and growing external economies (Garofoli, 1983b,
1984a, 1991b).

The development policy based on the "transfer" of the model based on big
business (by implicitly accepting the theory of automatic mechanisms of income
multiplier and new economic linkages) has characterized the greater part of
government interventions for a number of decades both in developed and developing
countries.

In the past 10 to 15 years the growing inability of the functionalist model to

explain the ever more complex redistribution of productive activities over
territory and the emergence of autonomous patterns of development in many
relatively peripheral regions (1) have progressively attracted scholars' attention to the
territorial dimension of development and to the categories of environment (or
"milieu") and territory seen as the "sedimentation" of specific and interrelated
historical, social and cultural factors in local areas which generate significantly
different processes of development directly due to local specifications (2).

These considerations lead us to a new paradigm for the research of economic

development mainly based on territory, while at the same time consideration
regarding the local characteristics of models of endogenous development, including its
internal control, gives rise to the paradigm of development "from below" (Stöhr,
1978, 1981 and 1984). During the late 1970s and the early 1980s the literature,
at an international level, on endogenous and "self-centred" development, on
territorial and "agropolitan" development (Friedmann and Douglass, 1975 ; Fried-
mann and Weawer, 1979), on the mobilization of "indigenous potential" (CCE,
1981), etc., began to increase notably.

The end result of these varied reformulations of the problem of development

has been above all a different concept of space held by economists. Space is not
only the distance between different places, something which conditions the exchange
of goods and a source of cost for economic agents, as in the traditional theories
of industrial location. In these new interpretations space assumes the
distinguishing feature of territory ; it becomes a strategic factor of development
opportunities and of its specific characteristics. Territory represents a clustering of social
relations, it is also the place where local culture and other non-transferable local
features have been sedimented. It is the place where men and business establish
relationships, where public and local institutions intervene to regulate society.
Territory represents the meeting place of market relationships and social regulation
forms, which determine different forms of production organization and different
innovative capacities (regarding both products and processes) leading to a
diversification of products presented to the market not simply on the basis of relative
cost of factors (Garofoli, 1991a).

The relationship between business systems and environment is then highlighted

and constitutes the basis for the frequent existence of external economies to the
firms, but internal to the area. These external economies make the adoption of

(1) Cf., for instance, the collection of papers in Garofoli, 1992 a.

(2) Cf., for instance, Vasquez Barquero, 1988 ; Pecqueur, 1989 ; Garofoli, 1991 a.

24 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

different productive techniques possible together with organization processes and
strategies different even in areas where the same goods are produced independently
of the simple relationships between the prices of "factors" or those of usable inputs
(Garofoli, 1984b, 1992b).

Local specificities are mainly based on localized networks among firms and also
on the specific relationships between economic structure and the environment and
the local "milieu". All this leads to the following points :

— the existence of different patterns of local development ;

— the crucial role of local policies for development (cf., especially, local
solidarities and the forms of social regulation introduced at local level).

III. — MODELS OF DEVELOPMENT

AND TERRITORIAL ORGANIZATION OF PRODUCTION

In abstract terms, it is possible to reflect about the characteristics of the

territorial organization of production, combining in different ways the main units
(variables/issues) of analysis (i.e. internal and external economies, scale and scope
economies, linkages among firms).

Plants and firms vary not only in terms of the output they produce, but also
in terms of their internal structure and their relations to a wider economic milieu.
In particular, they tend to seek out to the maximum possible degree both internal
and external economies. Economies of both types break down into two sub-
categories, related to scale and scope effects.

The notion of external economies has particularly relevance to the issue of

regional development, starting from Marshall's work, through the Becattini's revisita-
tion (Becattini, 1979 and 1989), as it is possible to see in the vast literature on
regional development (cf., for instance, Garofoli, 1981, 1983a, 1991a ; Scott, 1986
and 1988 ; Courlet, Pecqueur, 1991).

Internal economies of scale may break down under certain circumstances (e.g.
related to changes in technology or market conditions) giving rise to horizontal
disintegration in which producers of any type become smaller and more
numerous, thus tending to increase external economies of scale. Second, internal
economies of scope also may begin to decay leading to vertical disintegration (or
intensification of the social division of labour), thus promoting external economies of
scope through the proliferation of specialized but interdependent producers (Scott
and Storper, 1990).

The reasons why horizontal and vertical disintegration may occur are many and
varied, but one general factor of special significance involves the destabilization
and increasing contestability of markets. In these conditions, large batch
production of standardized products combined with vertical integration (over an
extended series of tasks) becomes increasingly inefficient, and levels of disintegration
will tend to rise. The net result is a shift of the production system in the direction
of a complex of smaller specialized plants focusing on small batch outputs and

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 25

able to move rapidly in and out of particular market niches. At the same time
the shifting configurations of production will create higher instability in the tran-
sactional relations among producers and this will rise the levels of external
economies in the production system (Scott and Storper, 1990).

Summarising this point, it is possible to say that the key element governing the
shape and substance of productive systems is the interplay between internal and
external economies. Combining the two variables we can obtain, for example, the
following four possible alternatives of productive systems (cf. Figure 1) :

FIGURE 1 : Typologies of production systems cross-classified

by internal and external economies

Internal economies

Low High
!

Low Isolated Process

workshop industry

External economies

High Disintegrated Large-scale

network assembly
production systems

The representative cases are, then :

a) the isolated workshop (serving restricted markets) ;

b) the process industry (with marked indivisibilities) ;
c) the disintegrated network production (with extended social division of labour
and transactions intensive interlinkages) ;
d) large-scale assembly systems (with high levels of vertical integration and a
lot of direct and indirect suppliers).
The industrial complexes characterized by a large amount of interlinkages,
especially if small in scale and rapidly changing in space and time, will have a
tendency to converge around a territorial centre of gravity, forming a clustering of
firms. In this cases, the external economies created through disintegration are trans-

26 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

formed into agglomeration economies. Producers without these sorts of transac-
tional interrelations will be relatively independent from a location point of view.
The first two types of productive systems are, then, found in dispersed
geographical patterns, whereas the second two types are found in clustered patterns.

Following the same criteria, it is possible to look at different combinations of

productive systems using different crucial variables in the organization of
production like location patterns (or, better, territorial organization of production)
and networks forms (or forms of relationships among firms). This will produce
the results observable in Figure 2, with the opposition of typologies of
organization of production based on collaboration links (like the systems of small firms
- industrial districts and system-areas in Italy (Prato, Vigevano, Carpi, ..-) to
typologies based on hierarchical relationships among firms (both geographically
agglomerated - like the large-scale assembly system followed by Fiat in Italy especially
during 50s and 60s - and geographically dispersed with high decentralization of
production - like the Benetton's model -).

FIGURE 2 : Typologies of production systems cross-classified

by networks among firms and location patterns

Networks among firms

Hierarchical Cooperative
networks links

Agglomeration Large-scale System of

assembly system small firms
(industrial
Territorial district)
organization
of production

Dispersed Production Strategic

Production decentralization collaboration
(with dominant agreements
mother firm)

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 27

 But location outcomes and organization forms of production are also
conditioned by many other factors, such as resource availability, local labour market
characteristics, political interventions systems and forms of social regulation, etc. All
this brings the necessity to individuate the strategic variables for the organization
of production leading to different typologies of local models of development.

What it is important to underline, at this moment, is that each type of system

may evolve over time in unexpected direction, sometimes even being transformed
into another type. Actual examples are the shift of the Los Angeles film industry
from a large-scale assembly industry to a disintegrated network system (cf. Stor-
per and Christopher son, 1987), segments of the American and British shoe industry,
at the beginning of this century, from disintegrated network production to
something quite close to a process industry, the Italian car industry, during 70s and
80s, from a large-scale assembly industry into a dispersed (territorial fragmented)
organization of production with hierarchical relationships among plants and firms.

All this means that not only we are in presence of a plurality of local models
of development but also that predetermined stages of development do not exist
or, in other terms, that general laws of transformation cannot be established.

With this kind of exercise we can only refer to structured possibilities for the
organization of production. These possibilities are in reality defined by and
realized only when they are constituted in the form of historically - and geographically
- specific technological-institutional systems.

Among the factors affecting the possibilities of organization of production we

could include, for example, the following set of variables (3) :

a) economic structure and productive organization (i.e. the degree of

specialization/diversification of local economy, plants'size, existence or absence of local
productive linkages among firms) ;

b) evolving technological system (i.e. modalities of introduction and diffusion

of innovation) ;

c) labour market and industrial relations (i.e. employment structure, workers'

origin, professional training) ;

d) social actors and social structure (i.e., local vs. external firms, social
structure and prevalence of previous productive relations, reproduction of skills and
entrepreneurial capacities, management culture and norms) ;

e) market structure and forms of competition (i.e., market outlets, market

forms) ;

f) information system ;

g) regulatory institutions.

(3) For a wider discussion of these points cf., for example, Garofoli, 1991 a ; Scott and Storper, 1990.

28 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

 The various combinations of this set of variables could help us in constructing
a typology of local models of development or of different modes of productive
organization (cf., for example, Garofoli, 1990 and 1991a ; Harrison and Storper,
1990). What it is important is not the capability of constructing an exhaustive
typology of productive systems, but the possibility to stress the coexistence, in the same
historical phases, of different models of organization of production.

It seems, in any case, quite important to reflect in more detail on endogenous

models of development also because, in these cases, there is a higher possibility
to control the process of development locally and improve opportunities for local
economic policies.

A model of endogenous development capable of guaranteeing the autonomy

of the process of transformation of the local economic system and which is
relatively self-sustaining must be based on local characteristics and on the ability to
control certain fundamental variables. In particular, it would seem to be based
on (Garofoli, 1991a and 1992a) :

1) use of local resources (e.g., work, local historically accumulated capital, entre-
preneurship, specific knowledge of production processes, specific professional tasks
and material resources) ;

2) the ability to check the accumulation process locally ;

3) the capacity to innovate ;

4) the existence of (and the ability to develop) productive interdependences, both

infrasectoral and inter sectoral, at a local level.

Endogenous development does not mean "closed economy", even if many

statements found in some contributions to this topic underline the importance of
concentrating on the expansion of the internal market (regional and interregional)
which should be covered by local production, solving the specific problems of the
area and satisfying the basic needs of local communities (cf., e.g., Friedmann and
Weawer, 1979 ; Stöhr, 1984) by choosing strategies of selective economic
protection and "territorial closure", which will allow the continuous expansion of the
use of local resources (especially work) as opposed to fetishism of economic growth
and efficiency (Friedmann and Weawer, 1979, p. 195).

Endogenous development means in effect (Garofoli, 1992a) :

a) the capacity to transform the social-economic system ;

b) the ability to react to external challenges ;
c) the promotion of social learning ;
d) the ability to introduce specific forms of social regulation at local level which
favour the aforementioned points.

Endogenous development is, in other words, the ability to innovate at a local

level.

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 29

IV. — LOCAL PRODUCTIVE SYSTEMS :
THE CASE OF SMALL FIRMS SYSTEMS

Among the endogenous patterns of development we will deal now with the local
systems of small firms which represent the most interesting cases, especially because
they represent the "sublimation" of the model of flexible specialization.

As it has been already stated, the relationship between the economy and the
economic milieu and, in the context of strictly economic relations, the
relationship between firms are determinant elements of the local pattern of development.

If we limit the analysis to economic relations, it seems possible to identify the

following structural characteristics of industrial districts or system-areas (Garo-
foli, 1981, 1983a, 1992b) :

1 . A remarkable productive specialization at the local level caused by the over-

presence of one industry or a production system which links together various
industries and sectors related to the productive cycle of the typical local product.

2. The production of the local system is quite important, covering a remarkable

share of national, and sometimes international, production of the specific
product or sector.

3 . A high level of division of labour between firms in the local productive system
that gives rise to very close input-output relations, both intrasectoral and inter-,
sectoral. The high horizontal integration of production depends upon low costs
of transaction among local firms.

4. The large number of local agents (the "plurality of protagonists") and the
lack of a leader or dominant firm. This prevents the formation of a monopsonis-
tic market for subcontracting, avoiding an excessive bargaining power of "mother"
firms and leads to diffuse adoption of "trial and error" behaviour. This implies
a greater likelihood of finding satisfactory solutions to economic problems by at
least some actors, followed by immediate imitation by other actors.

5. A remarkable specialization of production at the level of the firm and plant

which limits the field of activity, stimulates the accumulation of specialized
knowledge, facilitates the introduction of new technologies and, eventually, increases
through the rise of labour productivity the economic autonomy of firms and
subsystems in the area.

6. The existence of an efficient system of transmitting information at local level

that guarantees the rapid and efficient circulation of information about :

a) outlet markets ;
b) alternative technologies ;
c) new raw materials ;
d) components and intermediate products which could be used in the
production cycle ;
e) new marketing, commercial and financial techniques.

30 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

 This helps the transformation of the knowledge of each individual actor into
the "common economic heritage" of the area.

7. The high level of skills of workers in the area, as a result of a historical

sedimentation of knowledges on the applied technologies.

8. The increase in the "face to face" relationships between economic actors

(especially between suppliers and users of intermediate products, machine tools and
business services). This facilitates the diffusion of technological and
organizational improvements that increase the overall efficiency of the local system.

The importance of the model based on the system of small firms and of the
analysis of this model for a new theoretical approach on development lies on the
following issues that have emerged from the research :

a) the crucial role of external economies embodied on the territory, that means
capability to reproduce locally specific knowledges, professional tasks and "savoir
faire" that leads to the possibility to use different forms of organization of
production without taking into account only differences in cost of labour, cost of
capital and land ;

b) the structural existence, in this system, of a permanent balance between

competition and cooperation among firms, that means existence of norms and rules
among firms that lead a strong reduction in the transaction costs ;

c) the existence of a balance between the rules of the market and the rules of
social regulation at local level, that means introduction of specific institutions for
overcoming some types of market failure and for taking into account the
necessity and the value of social solidarity.

We must consider, moreover, that the model based on the system of small firms
is, in any case, a dynamic model, that means the conditions for the survival of
the system are changing in time. Then, it seems necessary to reflect on the
strategic variables for the strengthening of these local productive systems.

The conditions for survival change constantly : the system of small firms is a
pattern of continuous change and not of mere adaptation, both in the
interrelationships within the area (relationships among firms, interrelationships with the
economic "milieu" and with the institutions) and those with the outside forces
(the market, the other competing areas, the other territorial systems). All this has
obvious consequences on the placing of the local system in the territorial division
of labour. Change and innovation are therefore the conditions for the survival
of the system of small firms. This being the case, it is necessary to transform the
local system, which entails an ability to understand the relative position of the
local system and to predict the scenario in the medium-to-long term. It is difficult
for individual small firms to have this ability, thus it becomes evident that
decisions need to be taken at the consortia level, and that suitable local economic
policies are called for, in order to take more advantage of the relations between the
local institutions and the local economy.

The fundamental conditions for the strengthening of the local productive system
is the achievement of an increasing "systemic" structure which reinforces the eco-

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 31

nomic links between firms and the relationship with the economic milieu, so that
local specific characteristics become the most important factor in location and
development.

The crucial variables for the strengthening of the local system are both
endogenous (completely controlled within the area) and exogenous.

Among the variables which could be controlled within the local system, we can
remember (Garofoli, 1984b and 1992a) :

a) Technological-organizational innovation which increasingly takes on (in small

firms 'systems) the characteristics of a continuous process (with a large number
of technological changes, all of them small, cumulative and interdependent) ; and
then an incremental process of innovation (à la Rosenberg) and not with great
leaps (á la Schumpeter). Technological innovation in local systems is not only the
result of a process of territorial diffusion but very often it is itself the product
of the local system with original introduction of techniques, especially when there
is the production of machine tools for the typical local product. The shifting of
the technological frontier is therefore crucial for the consolidation and survival
of the local system.

b) The information system : a rapid and efficient circulation and diffusion of

information, an opportune knowledge of the markets, the diffusion of
information on technology and on inputs, are in fact the basis of a correct assessment
of the prospects of development for local firms.

c) The ability to control the market ; the strengthening of the commercial

capacity of the system of small firms is one of the crucial factors for the achieving
of the autonomy of industrial districts and, at the same time, a continuous
opportunity for the introduction of new products.

d) The forms of social regulation, which operate outside the market and depend
upon a useful integration between the institutions and the local economy (cf. Sabel,
Zeitlin, 1982 and 1985 ; Zeitlin, 1985). It is enough to think of the crucial role,
for the development of firms and local system, which can be performed by
quality control systems, technological centres, business services centres established on
the basis of agreements between local public bodies, local institutions and consor-
tia of firms ; centres for professional training and institutions which regulate
competition between enterprises, favouring competition in new products and
processes rather than competition based on cost cutting and, indirectly, labour costs
cutting, that means without brutal price wars.

Summarizing, it is possible to stress that some quite important theoretical points

come out from this kind of research, and particularly :

a) the crucial role played by external economies (mainly linked with the
existence of strategic local specificities - technical and professional knowledges,
relationships among firms, local forms of social regulation, etc. -) ;

b) the reduced importance of economies of scale (the minimum optimum size

must be defined, at least, at the level of each working phase and not at plant's
level) ;

32 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

 c) the importance of the transactional costs (that are quite reduced within the
system of small firms according to the thick linkages among local firms and the
diffuse collaboration relationships) ;

d) the role of the products' differentiation and different competitive forms ;

e) the crisis of the dualistic interpretations (mainly linked with the idea of the
overlapping of small firm and backward sector), due to the discovery of the
diffuse capability to innovate in small firms and, especially, in systems of small firms.

All this means that territory (or local "milieu") is playing a crucial role in the
process of economic development. In fact local milieu is the place that rules :

a) the diffusion of information (organizing an information system governing

the flows of information on productive techniques, on outlet markets, on other
strategic issues) ;

b) the organization of production (caused by the social division of labour among

local firms) ;

c) the local labour market (with the introduction of specific industrial relations) ;

d) the reproduction of professional skills and "savoir faire" ;

e) the local forms of social regulation (cf. socio-institutional governance).

This means that territory (and local milieu) covers the following spheres :

— information ;
— production ;
— labour market ;
— socio-institutional governance.

V. — THE BALANCE BETWEEN MARKET AND STATE :

LOCAL ECONOMIC POLICIES

External economies and local specificities of the organization of production are

mainly due to inter-firm transactions, technological innovation and local labour
market organization and restructuring. Because these items cannot be ruled
exclusively through market relations and because local competitiveness depends on a
large extent on the capability to maintain external economies and specific local
advantages, it seems important to reflect on the market failures on these spheres
and individuate specific fields for local economic intervention.

Inter-firm transactions are quite important not only for the reduction of
transactional costs but also for the increasing social division of labour within a local
area (which stimulates the formation of new firms). Agglomeration is a location
strategy often followed by producers because proximity translates into lower costs
of transaction and wider opportunities for matching needs and capabilities. But
agglomeration alone does not necessary lead to the formation of efficient tran-

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 33

sactional interrelations, because there are powerful forces which may work against
this phenomenon. For example, breakdowns of information exchange occur where
one party holds privileged information that can be traded on opportunistically
(e.g., when sub-contractor's information is asymmetric with that of the mother
firm) or in case of failures of trust among local firms (Scott and Storper, 1990).

All of these problems could be kept at bay by institutional infrastructures or

social practices which increase information exchange and trust at local level (and
limit the probability that opportunistic behaviour will benefit those who practice it).

Similar sort of infrastructures facilitates exchange of technical information. In

the area of technological innovation, in fact, market failures abound. Profit-seeking
firms tend to underinvest in many forms of product and process development ;
in many critical sectors, moreover, the basic research inputs come from nonprofit
sector or are induced by public subsidies. Technological innovations are frequently
place-bound : the stocks of knowledge and human capital upon which
technological changes are based tend to be concentrated in the specialized labour forces
which themselves are highly localized in a small number of places.

Market failures can limit the industry's ability to carry out innovative activity.
It is sufficient to remember the small and medium sized firms' fear to invest in
long-term research projects, or the insufficient level of financial resources for
technical leading firms but small in size. Local specific institutions (like technological
centres) are sometimes necessary to overcome some of these types of market
failures.

An additional area for local economic intervention is that of local labour

markets. Local labour markets depend for their effective operation on the
development and circulation of information. This is particularly relevant in local labour
markets associated with productive systems in which employment opportunities
are rapidly changing and in which the amount and kind of information are
changing too.

The transmission of information about job vacancies could be severely

hindered in the absence of collectivised channels of information transmission. Very often,
moreover, if training is not well planned and organized it is easy to note an under-
supply of appropriate skills. Institutional support, like the organization of
centres of employment, becomes a necessary condition for a rational provision of
skills and retraining activities.

In this sense, it is possible to conclude with Scott and Storper (1990) that
regional economic development is open to multiple pathways that depend on the
interplay between economic forces and the politics of place.

The attention to local institutions and local culture is, then, a sort of response
to market failures, due to the presence of externalities, of imperfect information
and so on. The idea that successful reproduction of economic systems cannot
proceed in the absence of institutionalized agencies and collective action holds not
only at the level of the national economy but also (and particularly) at the level
of the local economy and local productive systems.

34 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

 Market failures in technological innovation and transfer, in providing business
services to SMEs and in labour training, are frequently in evidence. In some areas
of flexible production agglomeration, institutionalized efforts to face these
problems have been made by the provision of publicly-funded research activities,
business services agencies and educational-training institutions, very often with the
cooperation (in planning, financing, monitoring, management and control) with
collective private actors (like entrepreneurs associations or consortia of firms) (cf. ,
concerning the Italian experience, the cases of Citer in Carpi, of Città Studi Biella,
of Cil and Professional Training Schemes in Lecco).

VI. — SOME CONCLUSIVE REMARKS

So we have seen how local institutions and collective actors (both private actors
- i.e. consortia of firms - and public agents) could intervene for the strengthening
of the success elements (and for reducing the weak points) of the local productive
system, through the introduction of specific tools supporting the local economy,
solving for example the problems arisen from the market's failures. This means
not only the introduction of specific forms of local social regulation but also the
constitution of informal links between productive system and local society.

In the same way, local institutions and collective actors should intervene for
the constitution of collaboration networks between different areas and regions
both at the national level but especially at the international one. It is easier, indeed,
to find common problems for areas which belong to different countries than, often,
for areas in the same country or region.

When we will be able to refute and overcome the ideology of the interregional
competition (which has been, in fact, dominant during the 80s) and which is based
upon the competition in attracting floating capital and upon the hypothesis of
the "zero sum game" (that implies the gain in the position in one region
corresponds to a lose for another region) - and that has been stressed by the neo-liberistic
and neo-conservative economic policies, which have stopped the overall demand
at the international level - and we accept an idea of the development process based
upon the "valorization" of unused or badly used resources (Hirschman, 1958)
with the goal of facing social needs not yet satisfied, we will enter in a complete
different scenario. In this case, the overall scenario of regional development should
change radically and the experiences already made in one area could be of great
interest and utility for another area with a similar productive structure or with
similar problems to face, also if we cannot accept the possibility to export
successful models of development. Actual examples of this kind of cooperation are
found in the knowledges and technological transfer programmes - mainly with
intermediate technology more appropriate for developing regions and countries
based on small firms - managed at local level (cf. the French cases in Savoy and
Doubs remembered by Courlet, 1992), in labour training transfer programmes
organized in several Italian areas based on small firms systems (like the experience of
Citer in Carpi), in the constitution of "quality circles" of local productive systems
with interregional discussion groups (like the case of the cooperation agreement
between the industrial districts of Cluses and Lecco still in progress).

Voir bibliographie page suivante

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 35

 RÉFÉRENCES BIBLIOGRAPHIQUES
G. BECATTINI (1979) : "Dal "settore" industríale al "distretto" industríale. Alcune considerazioni
sull'unità di indagine dell'economia industriale", Rivista di Economía e Politica Industriale,
V, n° 1, January-April.
G. BECATTINI (éd.) (1989) : "Modelli locali di sviluppo", II Mulino, Bologna.
CCE (1981) : "The Mobilization of Indigenous Potential", internal documentation of regional policy
in the Community, Brussels, n° 10, September.
C. COURLET (1992) :"Local industrial policies in favour of small and medium-sized firms : the French
case, in G. Garofoli, (ed.) (1992).
C. COURLET et B. PECQUEUR (1991) : "Local industrial systems and externalities : an essay in
typology", Entrepreneurship and Regional Development, vol. 3, n° 4, October-December.
J. FRIEDMANN et M. DOUGLASS (1975) : "Agropolitan Development : Towards a New Strategy
for Regional Development in Asia", United Nations Centre for Regional Development, Nagoya
(Japan), November.
J. FRIEDMANN et C. WEAWER (1979) : "Territory and Function : The Evolution of Regional
Planning", E. Arnold Publication, London.
G. GAROFOLI (1981) : "Lo sviluppo delle "aree periferiche" nell'economia italiana degli anni set-
tanta", l'lndustria, II, n° 3, July-Sept.
G. GAROFOLI (1983a) : "Industrializzazione diffusa in Lombardia", I.Re.R., Franco Angeli, Milano.
G. GAROFOLI (1983b) : "Sviluppo regionale e ristrutturazione industriale : il modello italiano degli
anni 70", Rassegna Económica, XL VII, n° 6, November-December.
G. GAROFOLI (1984a) : "Diffuse Industrialization and Small Firms : The Italian Pattern in the 70s",
in R. Hudson, (ed.), Small Firms and Regional Development, Institute for Transport,
Tourism and Regional Economy, Copenhagen School of Economics and Business Administration,
publication n° 39, Copenhagen.
G. GAROFOLI (1984b) : "Modelli locali di sviluppo", paper presented at the 25th Scientific Meeting
of the Società Italiana degli Economisti, Rome, November (published in Becattini, 1989).
G. GAROFOLI (1990) : "Local Development : Patterns and Policy Implications", in N. Konsolas
(ed.), Local Development, Regional Development Institute, Athens.
G. GAROFOLI (1991 a) : "Modelli locali di sviluppo", Franco Angeli, Milano.
G. GAROFOLI (1991 b) : "The Italian Model of Spatial Development in the 1970s and 1980s", in
G. Benko, M. Dunford (eds.), Industrial Change & Regional Development, Belhaven Press,
London.
G. GAROFOLI (ed.) (1992 a) : "Endogenous Development and Southern Europe", Avebury, Aldershot.
G. GAROFOLI (1992 b) : "Les systèmes de petites entreprises : un cas paradigmatique de
développement endogène", in G. Benko, A. Lipietz (eds), Les régions qui gagnent, Presses
Universitaires de France, Paris.
B. HARRISON et M. STORPER (1990) : "Flexibility, Hierarchy and Regional Development : The
Changing Structure of Industrial Production Systems and Their Forms of Governance in the
1990s", School of Architecture and Planning, University of California at Los Angeles,
working paper, January.
A.O. HIRSCHMAN (1958) : "The Strategies of Economic Development", Yale University Press, New
Haven.
B. PECQUEUR (1989) : "Le développement local : mode ou modèle ?", Syros/ Alternatives, Paris.

36 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993

C. SÄBEL
nc 5,et August.
J. ZEITLIN (1982) : "Alternative storiche alla produzione di massa", Stato e Mercato,

C. SÄBEL et J. ZEITLIN (1985) : "Historical Alternatives to Mass Production : Politics, Markets

and Technology in Nineteenth Century Industrialisation", Past and Present, n° 108, August.
A.J. SCOTT (1986) : "Industrial Organization and Location : Division of Labour, The Firm and Spatial
Process", Economic Geography, n° 3, July.
A.J. SCOTT (1988) : "New Industrial Spaces : Flexible Production Organization and Regional
Development in North America and Western Europe", Pion, London.
A.J. SCOTT et M. STORPER (1990) : "Regional Development Reconsidered", The Lewis Center
for Regional Policies Studies, University of California - L.A., working paper n° 1, Los
Angeles, December.
W.B. STÖHR (1978) : "Center-Down-and-Outward Development versus Periphery-up-and-Inward
Development : A Comparison of Two Paradigms", I.I.V.R.S., University of Economics, Vienna.
W.B. STÖHR (1981) : "Development from below : the Bottom-up and Periphery-Inward
Development Paradigm", in W.B. Stöhr, D.R.F. Taylor (eds), Development from above or below ?
The Dialectics of Regional Planning in Developing Countries, J. Wiley & Sons Ltd., Chichester.
W.B. STÖHR (1984) : "La crise économique demande-t-elle de nouvelles stratégies de développement
régional ?", in Ph. Aydalot (ed.), Crise & espace, Económica, Paris.
M. STORPER et S. CHRISTOPHERSON (1987) : "Flexible specialization and regional industrial
agglomerations : the case of the U.S. motion picture industry", Annals of the Association of
American Geographers, 77, 104-117.
A. VAZQUEZ BARQUERO (1988) : "Desarollo local", Pirámide, Madrid.
J. ZEITLIN (1985) : "Distretti industriali e struttura industriale in prospettiva storica", in R.Inno-
centi (ed.), Piccola città & piccola impresa, Franco Angelí, Milano.

REVUE D'ÉCONOMIE INDUSTRIELLE — n° 64, 2e trimestre 1993 37