università degli studi di urbino carlo bodipartimento di economia e metodi quantitativi calcagnini...

Università degli Studi di Urbino “Carlo Bo” Dipartimento di Economia e Metodi Quantitativi

Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th

“Italian SMEs in the aftermath of the crisis: is there a new

model?”G. Calcagnini, I. Favaretto, R. Rombaldoni

Conference on“The economics of small business in the aftermath of the crisis.

International analysis and policies”Urbino, October 20th-21th, 2010



Trends in the Italian economy before the current economic crisis

• During the 1971-1981 period Italian firm size decreased: the number of new firms was larger than the increase in employees.

• Outsourcing was the preferred strategy implemented by Italian firms. • Firms’ vertical integration decreased.

• During the 1981-2001 period, industry restructuring brought about a decrease both in the number of firms and employees.




• Following these changes, between 1990 and 2003 the yearly average GDP growth rate of Italy (1,47%) was lower than that of the European Union (15 countries).

• The cumulated difference in GDP growth rates summed up to 7,3%. This result is also confirmed by per-capita GDP growth rates.

• This divergence with Europe is strongly connected with the structural characteristics of our productive system.

• A non-marginal explanation for the difficulties shown by the Italian economy is to be found in its industry composition, specifically in its concentration in industries showing low- and medium technology intensity.




• If the intraindustry reallocation of production is taken into account, and by considering the traditional Pavitt taxonomy break down of industries, during the 1981-2001 the supplier-dominated industries negatively affect manufacturing firms’ growth rates and, consequently, the whole Italian economy growth rate.

Pavitt taxonomy: - Supplier-Dominated - Scale-Intensive - Specialized Suppliers - Science-based




• During the 1971-2001 period, supplier-dominated industries (Textile, Clothing, Leather, Shoes, Furniture, etc. characterized by small-sized firms) shown a relatively stable size.

• Further, supplier-dominated industries shown a strengthening of their production model based on industrial districts.

• This successful model, based on small-sized firms, allowed businesses to better and faster adapt to changing market conditions.




• In scale-intensive industries (steel, glass, durable consumption goods such as automobile, characterized by large-sized firms) average firm size progressively decreased.

• In specialized-supplier industries (investment goods, etc., characterized by large-sized firms) occurred the same trend like in scale-intensive industries.

• In science-based industries (electronics, pharmaceuticals, electrical machineries, characterized by large-sized firms) the decrease in firms’ size was the largest.




Pavitt-industry contribution to firm and employee growth: 1971 -2001



Most recent trends

• During the most recent period the average firms’ size of supplier-dominated industries showed a slight increase because the decrease in the number of firms was proportionally larger than the decrease in the number of employees.

• Specialized-supplier and scale-intensive industries provided a positive contribution to the growth of firm number (but null in terms of employees) as a result of the success of their reallocation strategies.

• Science-based industries showed a significant increase in the number of firms. However, given their small number, their contribution to the whole manufacturing was modest. Very small-sized firms increased their weight from 67,7% in 1971 to 87,4% in 2001, while the relative number of employees at firms with less than 19 employees increased in the same period from 4% to 23,7%.

Reallocation processes’ dynamics is the interpretative key that may help us understanding trends within the Italian economy in the aftermath of the current economic

crisis.



The decade of the crisis. What happened?

The index of vertical integration does not show, during the period 2002 – 2007, significant differences among industries when the Pavitt taxonomy is used.

Index of vertical integration of Pavitt industries: 2002 – 2007.




Time changes in the number of firms and employees of manufacturing firms broken down according to the Pavitt Taxonomy (2002 – 2007)




• Small-sized firm belonging to supplier-dominated industries, during the period 2002 – 2007, increased their share of employees, but their average size slightly decreased from 6,1 to 5,8.

• Small-sized firm belonging to scale-intensive industries showed a relatively stable share of employees, but their average size significantly increased mainly due a reduction in the number of firms.

•Specialized-supplier industries did not show significant changes in firms’ average size and in their share of employees.

•Science-based industries showed a decrease in the number of firms, together with a strengthening of their average size and their share of employees.



A synthesis of structural changes in Italian industries

Changes in the number of firms and employees within different size classes and industries broken down according to the Pavitt Taxonomy (2002 – 2007)




From the previous figure we note that:

•Stagnation is observable in all industries •However, in supplier-dominated industries stagnation is pervasive and involves all firm sizes

•In scale-intensive industries stagnation is minimal and firms are more oriented to size consolidation and expansion

•Science-based industries show the greatest variability among firms experiencing stagnation and those experiencing expansion.




Belgium Finland France Germany Ireland Italy Netherland Spain UK Japan US

2006 2.1 3.6 1.4 1.3 6.9 0.9 2.6 2.5 2.8 -1.8 0.8 2007 3.1 4.0 2.1 0.6 6.3 0.0 3.3 3.5 4.0 - 0.5 2008 2.3 2.3 1.4 0.2 - -0.8 4.1 1.4 0.6 - -0.6 2009 0.7 - 0.4 0.6 - -2.6 2.1 2.6 0.5 - -2.2

Table 1 – All Firms Net Entry Rates: 2006-2009

Source: European Commission, “SME under Pressure, Annual Report 2010”)

In 2008 and 2009 entry (registration) growth rates significantly decreased in all countries, while exit (cancellation) growth rates significantly increased.

In the same period the net entry rate remained positive in all countries, but in Italy and the U.S.




Table 2 - Italian firm demography: 2003-2009. All firms and artisan businesses

Source: Unioncamere-Infocamere, Movimprese

Registration Cancellation Net Growth

2003 6,68 5,23 1,452004 7,21 5,43 1,782005 7,02 5,41 1,612006 6,97 5,77 1,212007 7,12 6,37 0,752008 6,71 6,11 0,592009 6,32 6,03 0,28

2003 7,95 6,77 1,172004 8,65 7,30 1,352005 8,30 7,26 1,042006 8,22 7,51 0,712007 9,25 8,41 0,842008 8,40 8,03 0,372009 7,25 8,32 -1,06

All Firms

of which: Artisan Businesses

• There is a general firm demographic slowdown since 2004.

• 2007 is when exit rates peaked since 2003.

• In 2009 artisan businesses show, for the first time, a negative net entry rate.



Crisis and Restructuring

Table 3. Effect of crisis and restructuring of manufacturing firms (weighted averages, percentages, and number of firms). 2000-2006. (Source: Investigation of Bank of Italy on industrial and service firms)

Variables

North west North east Centre South Italy

Restruct. firms. (1)

Other firms


Other firms


Other firms


Other firms


Other firms

N. firms 226 155 172 144 204 152 297 322 899 773

Share (%) 59,3 40,7 54,4 45,6 57,3 42,7 48,0 52,0 53,8 46,2

Sales Decrease in 2010 (2)

71,0 81,9 70,6 66,4 72,9 80,1 63,0 67,5 70,2 74,5

Invest.

Growth (2) (3)

44,6 38,5 41,0 39,3 42,2 33,6 31,6 32,1 41,4 36,8

(1) The estimates refer to the only firms present also in 2006 investigation, that declared to be (or not) under restructuring between 2000-2006.

(2) Impact of affermative answers.

(3) Expectations for the whole 2010, at March-April 2010.

• 54% of firms, at the national level, have gone through that process.

• The crisis affected less firms that went through restructuring.

• Expectations are on average better in all areas (with the exception of the Southern regions).



Crisis and Restructuring

• Firms that invested in R&S (55,1%) have less frequently registered sales reductions.

• Expectations on sales and investments are better in the North of Italy.

Table 4. Effect of crisis and restructuring of manufacturing firms (weighted averages, percentages, and number of firms). 2006-2008. (Source: Investigation of Bank of Italy on industrial and service firms)

Variables

North west North east Centre South Italy

Firms

that invested in R&S (1)

Other firms

Firms


Other firms

Firms


Other firms

Firms


Other firms

Firms


Other firms

N. firms 144 110 134 75 147 70 111 182 536 437

Share (%)

65,7 43,3 64,1 35,9 67,7 32,3 37,9 62,1 55,1 44,9

Sales Decrease in 2010 (2)

76,4 84,6 76,3 79,5 78,0 80,7 64,8 61,8 75,8 78,6

Invest.

Growth (2) (3)

48,0 44,5 48,9 28,1 41,3 38,0 34,4 35,5 46,0 37,3

(1) The estimates refer to the only firms present also in 2006 investigation, that declared to be (or not) under restructuring between 2000-2006.

(2) Impact of affermative answers.

(3) Expectations for the whole 2010, at March-April 2010.



Who survives and who is doing better?

SEDE

BENL

IT

AT

UK

US

-3,5

-3

-2,5

-2

-1,5

-1

-0,53,0 5,0 7,0 9,0 11,0 13,0 15,0 17,0 19,0 21,0

Relationship between GDP growth rate and firm size: 2008-2009.



Who survives and who is doing better?

Percentage changes of sales: 2007-2009 Innovative firms with more or less than of 20 employees; firms older and younger than 15 years.

0

-5,01

-19,19

0

-7,55

-12,7

19,317,97

-13,8-12,5

0

6,25

-12,7

-25

-20

-15

-10

-5

0

5

10

15

20

25

2007 2008 2009

va

ria

zio

ne

% f

att

ura

to r

isp

ett

o a

l 20

07

imprese dell’Osservatorio TrendER

imprese eccellenti con meno di 15 anni e meno di 20 addetti

imprese eccellenti con meno di 15 anni e più di 20 addetti

imprese eccellenti con più di 15 anni e meno di 20 addetti

imprese eccellenti con più di 15 anni e più di 20 addetti

Source: Unimi elaboration on TrendER data and benchmarking data.



A “pyramid scheme” to interpret the evolution of SMEs in Italy A Pyramid whose base represents the intensity of SME presence, its height the technology variables, and areas at each level the type of market structure. This pyramid has been used to understand the decentralization process of production.

In the pyramid scheme, for each of the three phases of decentralization we have a specific configuration of the variables:- side of technologys1 – Technology basically not innovatives2 – Qualitative investment, interindustry relationshipss3 – Strong and quick growth innovation - side of the “grey” economy:s1 – Large share of the “grey” economys2 – Reduction of the “grey”and irregular economys3 – Permanence of “grey”or irregular economy only due to inefficiencies of public sector

Uno schema a piramide per l'evoluzione del processo di decentramento Uuna piramide sulla cui base sia rappresentata l'intensità di presenza delle piccole imprese mentre in altezza si dispongano le variabili della tecnologia e della forma di mercato utilizzate nella schematizzazione degli stadi del processo di decentramento produttivo. Accanto ad esse si considera anche l'intensità e l'evoluzione dell'economia sommersa o irregolare Nello schema a piramide, in corrispondenza ad ognuno dei tre stadi del decentramento corrisponde una determinata configurazione delle variabili utilizzate

terzo stadio del decentramento: “relazioni funzionali complesse”

secondo stadio del decentramento: “specializzazione flessibile”

Primo stadio del decentramento: decentramento “a cascata”



Conclusion

1. Following the pyramid scheme, if more innovation is introduced into the economy, firms will experience a consolidation of their organization;

2. If flexibility looses its role that had during business cycles, then micro-enterprises will also loose their traditional role in the Italian economy;

3. Relationships among enterprises will go through deep changes due to the unification of the productive cycle;

4. Productive decentralization will change the traditional functional relationships (product and process quality, and complexity);

5. Interindustry externalities will become very important, even though the district ones will not disappear.

università degli studi di urbino carlo bodipartimento di economia e metodi quantitativi calcagnini...

Documents

italian smes

italian firms

new model urbino

urbino carlo bodipartimento

italian economy growth

current economic crisis

policies urbino

universit degli studi