Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
“Italian SMEs in the aftermath
of the crisis: is there a new
model?”
G. Calcagnini, I. Favaretto, R. Rombaldoni
Conference on
“The economics of small business in the aftermath of the crisis.
International analysis and policies”
Urbino, October 20th-21th, 2010
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
• During the 1971-1981 period Italian firm size decreased:
the number of new firms was larger than the increase in
employees.
• Outsourcing was the preferred strategy implemented by
Italian firms.
• Firms’ vertical integration decreased.
• During the 1981-2001 period, industry restructuring
brought about a decrease both in the number of firms and
employees.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
• Following these changes, between 1990 and 2003 the
yearly average GDP growth rate of Italy (1,47%) was lower
than that of the European Union (15 countries).
• The cumulated difference in GDP growth rates summed up
to 7,3%. This result is also confirmed by per-capita GDP
growth rates.
• This divergence with Europe is strongly connected with the
structural characteristics of our productive system.
• A non-marginal explanation for the difficulties shown by the
Italian economy is to be found in its industry composition,
specifically in its concentration in industries showing lowand medium technology intensity.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
• If the intraindustry reallocation of production is taken into
account, and by considering the traditional Pavitt taxonomy
break down of industries, during the 1981-2001 the supplierdominated industries negatively affect manufacturing firms’
growth rates and, consequently, the whole Italian economy
growth rate.
Pavitt taxonomy:
- Supplier-Dominated
- Scale-Intensive
- Specialized Suppliers
- Science-based
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
• During the 1971-2001 period, supplier-dominated
industries (Textile, Clothing, Leather, Shoes, Furniture, etc.
characterized by small-sized firms) shown a relatively stable
size.
• Further, supplier-dominated industries shown a
strengthening of their production model based on industrial
districts.
• This successful model, based on small-sized firms,
allowed businesses to better and faster adapt to changing
market conditions.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
• In scale-intensive industries (steel, glass, durable
consumption goods such as automobile, characterized by
large-sized firms) average firm size progressively
decreased.
• In specialized-supplier industries (investment goods,
etc., characterized by large-sized firms) occurred the same
trend like in scale-intensive industries.
• In science-based industries (electronics,
pharmaceuticals, electrical machineries, characterized by
large-sized firms) the decrease in firms’ size was the
largest.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Trends in the Italian economy before the current economic crisis
Pavitt-industry contribution to firm and employee growth: 1971 -2001
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Most recent trends
• During the most recent period the average firms’ size of supplierdominated industries showed a slight increase because the decrease
in the number of firms was proportionally larger than the decrease in the
number of employees.
• Specialized-supplier and scale-intensive industries provided a
positive contribution to the growth of firm number (but null in terms of
employees) as a result of the success of their reallocation strategies.
• Science-based industries showed a significant increase in the
number of firms. However, given their small number, their contribution to
the whole manufacturing was modest. Very small-sized firms increased
their weight from 67,7% in 1971 to 87,4% in 2001, while the relative
number of employees at firms with less than 19 employees increased in
the same period from 4% to 23,7%.
Reallocation processes’ dynamics is the interpretative key that may help us
understanding trends within the Italian economy in the aftermath of the current economic
crisis.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
The decade of the crisis. What happened?
The index of vertical integration does not show, during the period 2002 – 2007, significant
differences among industries when the Pavitt taxonomy is used.
Index of vertical integration of Pavitt industries: 2002 – 2007.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
The decade of the crisis. What happened?
Time changes in the number of firms and employees of manufacturing
firms broken down according to the Pavitt Taxonomy (2002 – 2007)
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
The decade of the crisis. What happened?
• Small-sized firm belonging to supplier-dominated industries,
during the period 2002 – 2007, increased their share of
employees, but their average size slightly decreased from 6,1 to
5,8.
• Small-sized firm belonging to scale-intensive industries
showed a relatively stable share of employees, but their average
size significantly increased mainly due a reduction in the number
of firms.
•Specialized-supplier industries did not show significant changes
in firms’ average size and in their share of employees.
•Science-based industries showed a decrease in the number of
firms, together with a strengthening of their average size and their
share of employees.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
A synthesis of structural changes in Italian industries
Changes in the number of firms and employees within different size classes and industries
broken down according to the Pavitt Taxonomy (2002 – 2007)
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
A synthesis of structural changes in Italian industries
From the previous figure we note that:
•Stagnation is observable in all industries
•However, in supplier-dominated industries stagnation is
pervasive and involves all firm sizes
•In scale-intensive industries stagnation is minimal and
firms are more oriented to size consolidation and
expansion
•Science-based industries show the greatest variability
among firms experiencing stagnation and those
experiencing expansion.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
A synthesis of structural changes in Italian industries
Table 1 – All Firms Net Entry Rates: 2006-2009
2006
2007
2008
2009
Belgium
2.1
3.1
2.3
0.7
Finland
3.6
4.0
2.3
-
France
1.4
2.1
1.4
0.4
Germany Ireland
1.3
6.9
0.6
6.3
0.2
0.6
-
Italy
0.9
0.0
-0.8
-2.6
Netherland
2.6
3.3
4.1
2.1
Spain
2.5
3.5
1.4
2.6
UK
2.8
4.0
0.6
0.5
Japan
-1.8
-
Source: European Commission, “SME under Pressure, Annual Report 2010”)
In 2008 and 2009 entry (registration) growth rates significantly
decreased in all countries, while exit (cancellation) growth
rates significantly increased.
In the same period the net entry rate remained positive in all
countries, but in Italy and the U.S.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
US
0.8
0.5
-0.6
-2.2
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
A synthesis of structural changes in Italian industries
Table 2 - Italian firm demography: 2003-2009. All firms and artisan businesses
Registration
Cancellation
Net Growth
All Firms
5,23
5,43
5,41
5,77
6,37
6,11
6,03
2003
2004
2005
2006
2007
2008
2009
6,68
7,21
7,02
6,97
7,12
6,71
6,32
1,45
1,78
1,61
1,21
0,75
0,59
0,28
2003
2004
2005
2006
2007
2008
2009
of which: Artisan Businesses
7,95
6,77
1,17
8,65
7,30
1,35
8,30
7,26
1,04
8,22
7,51
0,71
9,25
8,41
0,84
8,40
8,03
0,37
7,25
8,32
-1,06
Source: Unioncamere-Infocamere, Movimprese
• There is a general firm demographic slowdown since 2004.
• 2007 is when exit rates peaked since 2003.
• In 2009 artisan businesses show, for the first time, a negative net entry rate.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Crisis and Restructuring
Table 3. Effect of crisis and restructuring of manufacturing firms (weighted averages, percentages, and number of
firms). 2000-2006. (Source: Investigation of Bank of Italy on industrial and service firms)
North west
Variables
North east
Centre
South
Italy
Restruct.
firms. (1)
Other
firms
Restruct.
firms. (1)
Other
firms
Restruct.
firms. (1)
Other
firms
Restruct.
firms. (1)
Other
firms
Restruct.
firms. (1)
Other
firms
N. firms
226
155
172
144
204
152
297
322
899
773
Share (%)
59,3
40,7
54,4
45,6
57,3
42,7
48,0
52,0
53,8
46,2
Sales
Decrease
in 2010
(2)
71,0
81,9
70,6
66,4
72,9
80,1
63,0
67,5
70,2
74,5
Invest.
Growth
(2) (3)
44,6
38,5
41,0
39,3
42,2
33,6
31,6
32,1
41,4
36,8
(1)
(2)
(3)
The estimates refer to the only firms present also in 2006 investigation, that declared to be (or not) under restructuring between 2000-2006.
Impact of affermative answers.
Expectations for the whole 2010, at March-April 2010.
• 54% of firms, at the national level, have gone through that process.
• The crisis affected less firms that went through restructuring.
• Expectations are on average better in all areas (with the exception of the
Southern regions).
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Crisis and Restructuring
Table 4. Effect of crisis and restructuring of manufacturing firms (weighted averages, percentages, and
number of firms). 2006-2008. (Source: Investigation of Bank of Italy on industrial and service firms)
North west
North east
Centre
South
Italy
Variables
Firms
that
invested
in R&S
(1)
Other
firms
Firms
that
invested
in R&S
(1)
Other
firms
Firms
that
invested
in R&S
(1)
Other
firms
Firms
that
invested
in R&S
(1)
Other
firms
Firms
that
invested
in R&S
(1)
Other
firms
N. firms
144
110
134
75
147
70
111
182
536
437
Share
(%)
65,7
43,3
64,1
35,9
67,7
32,3
37,9
62,1
55,1
44,9
Sales
Decrease
in 2010
(2)
76,4
84,6
76,3
79,5
78,0
80,7
64,8
61,8
75,8
78,6
Invest.
Growth
(2) (3)
48,0
44,5
48,9
28,1
41,3
38,0
34,4
35,5
46,0
37,3
(1)
(2)
(3)
The estimates refer to the only firms present also in 2006 investigation, that declared to be (or not) under restructuring between 2000-2006.
Impact of affermative answers.
Expectations for the whole 2010, at March-April 2010.
• Firms that invested in R&S (55,1%) have less frequently registered sales
reductions.
• Expectations on sales and investments are better in the North of Italy.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Who survives and who is doing better?
Relationship between GDP growth rate and firm size: 2008-2009.
-0,5
3,0
5,0
7,0
-1
BE
9,0
AT
11,0
13,0
NL
15,0
17,0
19,0
21,0
US
-1,5
DE
-2
SE
UK
-2,5
-3
IT
-3,5
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Who survives and who is doing better?
Percentage changes of sales: 2007-2009
Innovative firms with more or less than of 20 employees; firms older and younger than 15 years.
25
19,3
20
17,97
variazione % fatturato rispetto al 2007
15
10
6,25
5
0
0
2007
-5
2008
2009
-5,01
-7,55
-12,7
-10
-12,7
-15
-13,8
imprese dell’Osservatorio TrendER
-20
imprese eccellenti con meno di 15 anni e meno di 20 addetti
-12,5
-19,19
imprese eccellenti con meno di 15 anni e più di 20 addetti
-25imprese eccellenti con più di 15 anni e meno di 20 addetti
imprese eccellenti con più di 15 anni e più di 20 addetti
Source: Unimi elaboration on TrendER data and benchmarking data.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
A “pyramid scheme” to interpret the evolution of SMEs in Italy
schema a piramide per l'evoluzione del processo di decentramento
A Pyramid whoseUno
base
the intensity
of SME
presence,
its height the technology
Uuna
piramide represents
sulla cui base sia rappresentata
l'intensità di presenza
delle piccole
imprese mentre in
altezza at
si dispongano
le variabili
tecnologia
e della forma
di mercato utilizzate
variables, and areas
each level
thedella
type
of market
structure.
This nella
pyramid has been used to
schematizzazione degli stadi del processo di decentramento produttivo. Accanto ad esse si
considera anche l'intensitàprocess
e l'evoluzione of
dell'economia
sommersa o irregolare
understand the decentralization
production.
terzo stadio del decentramento:
“relazioni funzionali complesse”
secondo stadio del decentramento:
“specializzazione flessibile”
Primo stadio del decentramento:
decentramento “a cascata”
In the pyramid scheme,
each
of thein corrispondenza
three phases
of decentralization
we have
a specific configuration of the
Nellofor
schema
a piramide,
ad ognuno
dei tre stadi del decentramento
corrisponde
una
determinata
configurazione
delle
variabili
utilizzate
variables:
- side of technology
s1 – Technology basically not innovative
s2 – Qualitative investment, interindustry relationships
s3 – Strong and quick growth innovation
- side of the “grey” economy:
s1 – Large share of the “grey” economy
s2 – Reduction of the “grey”and irregular economy
s3 – Permanence of “grey”or irregular economy only due to inefficiencies of public sector
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th
Università degli Studi di Urbino “Carlo Bo”
Dipartimento di Economia e Metodi Quantitativi
Conclusion
1. Following the pyramid scheme, if more innovation is
introduced into the economy, firms will experience a
consolidation of their organization;
2. If flexibility looses its role that had during business cycles,
then micro-enterprises will also loose their traditional role in
the Italian economy;
3. Relationships among enterprises will go through deep
changes due to the unification of the productive cycle;
4. Productive decentralization will change the traditional
functional relationships (product and process quality, and
complexity);
5. Interindustry externalities will become very important, even
though the district ones will not disappear.
Calcagnini G., Favaretto I., Rombaldoni R. Italian SMEs in the Aftermath of the Crisis: Is there a New Model – Urbino, October 20th