Spatial agglomeration and business groups: new evidence from Italian industrial districts

2. Business groups and industrial districts

In this section we first review existing literature on the evolution of industrial districts
and its relationships with firms’ organization. On the basis of this literature we then
formulate the theoretical propositions that will be empirically tested in section four.

2.1 The background literature

Recent literature has shown that the phenomenon of business groups is not specific to
large firms as it is widely spread even among small and medium sized firms (ROSA and
SCOTT, 1997; LOISEAU, 2001; CHABANAS, 2002; IACOBUCCI, 2002). Indeed, from
available statistics it can be affirmed that the formation of a business group is the normal
way through which small firms grow.

Until a few years ago there were only a small number of studies analysing the presence
and characteristics of business groups in industrial districts (BIANCHI and GUALTIERI,
1990; BRUSCO et al., 1996; DEI OTTATI, 1996c; NUTI and CAINELLI, 1996). In these
papers the presence of business groups in industrial districts is associated with two changes
observed in this particular spatial agglomeration of firms: i) the increasing concentration of
output in the leading firms; ii) the increasing control of the production chain by the same
firms, achieved both by internalizing activities along the production chain and by
controlling the main suppliers.

From the point of view of our study, these papers present two main drawbacks. From
an empirical point of view, they generally refer to specific industrial districts or regions. For
this reason it is difficult to assess to what extent their results can be generalized. From a
theoretical point of view, they do not analyse the relationship between the characteristics of
industrial districts and the presence and features of business groups. Nor are these features
compared with those of similar groups outside industrial districts. The increasing relevance
of business groups in district areas is seen as a result of a concentration process in the
output of the industrial district (BRUSCO et al., 1996; LAZERSON and LORENZONI,
1999), or as a result of the tendency to control the production chain (NUTI and
CAINELLI, 1996), or both (DEI OTTATI, 1996c). Indeed the changing in governance
structures within industrial districts and the emergence of leading firms is considered a
general trend of Italian industrial districts (WHITFORD, 2001; CAINELLI and ZOBOLI,
2004).

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