mechanisms prevail, fostering not only a higher productivity in existing technology but also
innovation, upgrading and product differentiation. In turn this implies substantial
modifications in the internal organization of the cluster. Quality upgrading requires a better
control of the supply chain in order to secure the quality of final products; this tends to
reduce vertical specialization. Quality upgrading also requires increasing investment in
R&D and in the market (brand image, distribution channels); these investments are subject
to relevant economies of scale. In both cases the result is an increase in the size of some,
leading, firms and a rising concentration in the final output of the district.
2.2 The theoretical setting
To develop a general framework for analysing the evolutionary patterns of industrial
districts and their relationship with firms’ organizational structures is beyond the scope of
this paper. The main aim here is to offer an initial empirical analysis of the relationships
between business clustering (in our case, industrial districts) and firms’ organizational
forms. This is done by taking advantage of a large data set on Italian business groups.
Business groups can be considered as a specific form of control of business activities.
Entrepreneurs tend to set up new companies when entering new businesses, even when the
latter are closely related to the activities already controlled by the entrepreneur
(IACOBUCCI and ROSA, 2001). This is true also in the case of acquisitions. For this
reason the characteristics of the firms belonging to a group can be used to analyse some
aspects of the growth strategies and organization of firms. Specifically, business groups
allow us to identify two important aspects: i) the degree of diversification of activities
controlled by the same entrepreneur (i.e. the direction of growth); ii) the spatial location of
these activities.
Firms belonging to industrial districts have been observed to show a higher profitability
and productivity than firms in the same sector outside industrial districts (FABIANI et al.,
2000) as well as a higher rate of product innovation (CAINELLI and DE LISO, 2004). At
the same time, most Italian industrial districts are at later stages of development, when the
learning process realized by some firms should have favoured their expansion through
horizontal and vertical integration. If, as we hypothesised, the setting up of a business
group is the main way through which firms attain growth, we can derive the following
proposition: