countries like China (Fan and Scott 2003), Brazil (Rabellotti and Schmitz
1999) and India (Holmstrom and Cadene 1998).
The social organisation of production in specialized localities
produces external localization economies (Marshall 1890), which depend on
conditions that are external to the firm and internal to the place. These
advantages lead to reductions in costs, continuous innovation and higher
levels of technical efficiency producing the so-called “district effect”, which
explains the competitiveness of industrial districts.
2.2. The “district effect”
The term “district effect” was coined by Signorini (1994) to explain the
higher rates of efficiency of firms located in industrial districts. Dei Ottati
(2006, p.74) defines the “district effect” as the “collection of competitive
advantages derived from a strongly related collection of economies external
to the individual firms although internal to the district”.
Empirical research of the “district effect” has relied on several
categories of indicators where the most suitable are productivity/efficiency,
competitiveness/exports and innovation (Table 1)2 :
1. The main line of research seeks to quantify the differential
performance of industrial districts on productivity and efficiency and
includes Signorini (1994), Fabianini et al. (2000), Soler (2000), Hemandez
and Soler (2003), Brasili and Ricci (2003), Cainelli and de Liso (2003),
Becchetti et al. (2007) and Botelho and Hernandez (2007). Results vary
depending on the country, sector and type of measurement although in
general they provide evidence of the district effect in the form of higher
productivity and higher efficiency (lesser inefficiency).
2. The district effect on competitiveness is directly addressed in
Costa and Viladecans (1999), Becchetti and Rossi (2000), Gola and Mori
(2000) and Bronzini (2000). Aggregated results for manufacturing as a whole
suggest the existence of a large positive district effect on the export ratio, a
positive but slower effect on the probability of being an exporter, and the
existence of revealed competitive advantages. Data disaggregated by sectors
is not conclusive although it suggests the existence of a district effect in more
than half of the sectors.
3. The existence of a district effect on innovation has been addressed
by Santarelli (2004), Muscio (2006) and Boix and Galletto (2008a). The
former uses a fixed effects model by firm to explain the determinants of the
number of EPO patents of firms located in the Italian region of Emilia-
Romagna, where the localization in an industrial district is introduced as a
2 The difference is noted between the “district effect” (productivity/efficiency,
competitiveness, innovation) and other “characteristics of districts” such as the degree
of vertical integration, smaller size of establishments or a premium on wages.