ANNEX 1. TYPOLOGY OF LOCAL PRODUCTION
SYSTEMS AND IDENTIFICATION OF THE DOMINANT
SPECIALIZATION
The procedure to divide the LPS by typology is based on the Sforzi-Istat
(2006) procedure for the identification of industrial districts and uses the
different filters and information on each stage to assign each LPS to a
typology:
1. Identification of LPS specialized in manufacturing: on the basis of
their ISIC/NACE codes, the productive activities are grouped into
Agricultural activities; Extractive industry; Construction; Manufacturing;
Business services; Consumer services; Social services; and Traditional
services. These groups serve to calculate a location quotient and a prevalence
index (location quotient in absolute value) for each local labour market. The
Istat (2006) procedure considers an LPS to be specialized in manufacturing
when it presents a location quotient larger than 1 (above the national mean)
for Manufacturing activities, Business services or Consumer services, and the
prevalence index for Manufacturing is larger than those for Business services
or Consumer services. If the LPS is not specialized in manufacturing, it is
assigned to the group in which it maximizes its LQ.
2. Classification of manufacturing LPS into industrial districts, large
firms LPS and others:
a) If the LPS is specialized in manufacturing, it is tested whether it is
specialized in small and medium enterprises or in large firms. A location
quotient is computed by firm size, adopting the three intervals used by the
EU (small firms with up to 49 employees, medium firms with between 50
and 249 employees, and large firms with above 250 employees). A local
labour market is specialized in SME when the maximum value of the location
quotient corresponds to small or medium enterprises, and is otherwise
specialized in large firms.
b) Identification of the dominant industry. As in the Sforzi-Istat
algorithm (2006), manufacturing activities are divided into 11 groups: Textile
and clothing; Leather and footwear; Housing goods; Jewellery, musical
instruments and toys; Food and beverages; Machinery, electrical and optical
equipment; Manufacture of basic metals and fabricated metal products;
Chemicals and plastics; Transport equipment; and Paper, publishing and
printing. Location and prevalence quotients are computed for each
manufacturing group in each local labour market. The dominant industry
corresponds to that industry with a location quotient above 1 and the largest
value in the prevalence index.
c) Firm size of the dominant industry. The dominant industry is
mainly composed of SME when the employment in SME in the dominant
industry is larger than 50% of the employment of the industry in the local
27