Industrial districts, innovation and I-district effect: territory or industrial specialization?



specialization? The industrial district theory suggests the hypothesis that the
I-district effect is related to the characteristics of the territory more than to
the industrial specialization. Thus, the objective of this research is to test
whether this effect is explained by the conditions of the territory or by the
industrial specialization.

The research contributes additional evidence of the existence and
causes of the highly intense innovation of industrial districts (I-district
effect), and an empirical procedure to differentiate the territorial and
industrial effects when both are correlated. Deep down and under the cover
of the Marshallian industrial district paradigm, this research contributes
empirical evidence of one of the most important topics in economics: the
determinants of innovation, shifting it from the firm or the sector to the
territory.

The paper is structured as follows. The second section introduces the
theoretical framework relating industrial districts, the district effect and
innovation. The third section proposes the indicator for the measurement of
innovation and the typology of LPS and specializations. The fourth section
presents the basic results by territory, specialization and their interaction. The
fifth section introduces a modification of Griliches’ empirical model in order
to measure the I-district effect and the division of the territorial and sectoral
effects, and the results of the econometric estimates. The sixth section
presents the conclusions.

2. DISTRICT EFFECT AND INNOVATION

2.1. Industrial districts

The industrial district is “a social and territorial entity that is characterized by
the active presence of both a community of people and a group of enterprises
in a natural and historically determined area” (Becattini 1990). The industrial
district proposes a new approach to the economic change departing from the
fact that this cannot be understood in isolation from the local, territorially
embedded society, where economic forces work and evolve (Sforzi and
Lorenzini 2002). Thus, the unit of analysis is transferred from the “firm” or
the “sector” to the “local production system” and one of its expressions is the
industrial district.

Industrial districts have been identified as a general phenomenon in
industrialized countries such as Italy (ISTAT 2006), Spain (Boix and Galletto
2008b), Portugal (Cerejeira 2002), the United Kingdom (De Propris 2005),
Germany (Schmitz 1994); Denmark (Illeris 1992), Russia (Levin 2006),
Japan (Okamoto 1993), the United States (Scott 1992), and Mexico
(Rabellotti and Schmitz 1999). Similar figures have been found in emerging



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