For years there has been talk of the weakness of the Italian economy, attributable according to most to sectoral specialization, focused on manufacturing and low-tech sectors - and therefore exposed to competition from areas with lower labor costs - and to the prevalence of medium-small size, financially fragile, and therefore particularly sensitive to shock cheap. The dominant thought (for all the Report of the Bank of Italy on the trends of the Italian production system of 2009 – Economics and finance issues, n.45 -, its latest Annual Reports and the variously expressed thoughts of its economists) assumes the myth of large size, which would allow increases in productivity and efficiency, would favor innovation and internationalization and would make possible the adoption of ICT. On the other hand, the smaller size would not allow to take advantage of the economies of scale inherent in technological innovation and in all the activities upstream and downstream of production, which are considered fundamental for the competitive capacity of companies, and would make it difficult to absorb the related fixed costs with the start of an export or production activity abroad and the information asymmetries regarding the modalities of access to foreign markets. Consider the larger companies less risky and more financially solid, the smaller ones too much indebted, especially in the short term, therefore more vulnerable and risky. Identify the constraints to growth in finance, embracing the myth of financial gaps, according to which the smaller companies are such due to constraints supply side access to capital.
The analysis carried out on the financial statements of manufacturing companies in Italy in the Mediobanca archive, in the decade 2001-2010 (for the results in detail, see Venanzi in no. 3/2012 of the Journal of Economic Policy) does not seem to support this reading, confirming what also emerged from other studies, more or less recent (see for example Becattini-Bellandi in n.2/2002 of Italian economy and Coltorti on n.2/2012 of QA Magazine of the Rossi-Doria Association).
The analysis was conducted on a broad and representative set of manufacturing: over 5.000 companies, which represent around 60% of turnover and added value, around 49% of employees and 64% of investments in Italian manufacturing, with reference to the latest available Istat data of companies with more than 20 employees, relating to 2008.
The perspective taken is dimensional e Italian. The major Italian-controlled groups were compared with medium-sized (henceforth MI) and medium-large enterprises and with Italian foreign-controlled enterprises[1]. It must be said that the minor enterprise in this analysis is the medium enterprise and not the small or micro enterprise. But Italian MIs are smaller firms than the range of employees that defines them suggests: the two lower classes (50-99 and 100-249 employees) in fact represent 90% of the companies, the medium-sized company of the upper class stands close to the lower threshold of the range and the median of the universe considered is 108 employees. Furthermore, since there is a significant "contamination" between small and medium-sized companies (the most accentuated turbulence in the universe of MIs occurs towards the lower threshold), it is to be assumed that there is a certain similarity in the business fundamentals of small and medium-sized companies , which are mainly “formerly small”. The financial statements used also consider only the activities located in Italy, with the intention of highlighting the contribution in the decade considered to Italian manufacturing and its development.
The following evidence emerges from the analysis:
la smaller size does not lose comparison with the big one: in the decade 2001-2010, the smaller size is not the cause of lower profitability or higher risk. On the contrary, the smaller size favors adaptation to the ups and downs of the economic situation, allowing the negative effects to be contained in the years of crisis;
- le smaller firms are no more financially fragile than larger ones: even when more indebted, they are as solvent as the big ones (but often more) and show a greater balance between loans and sources by maturity. In the decade considered, they strengthened their financial solidity: the improvement in debt exposure, in a period of adverse economic conditions, did not derive from a contraction in activity, but rather from the reinvestment of the profits achieved to a significant extent, while the major groups and foreign-controlled companies pay dividends even when they close the year with a loss, using previously accumulated profit reserves;
- la Italian manufacture in the considered decade rests on medium-sized companiesin terms of employment and investment. The major groups have de-verticalized and de-localized production processes, achieve low profitability and bear high risks; medium-large and foreign-controlled companies have partially followed them in de-verticalisation, while medium-sized companies have kept industrial assets prevailing, have retained employees and increased investments. Therefore, a different strategy corresponds to a different dimension. The ownership of the medium-sized company believes in the company and, even in the most difficult years, continues to make investments to maintain its competitiveness, safeguards its workforce, which has a know-how crucial to its success, it renounces margins to maintain market shares and renounces dividends, to self-finance investments or reduce debt and strengthen solidity;
- in the niche productions of the Italian manufacturing sectors, the smaller size allows for higher productivity of factors of production: cost leadership is not the winner, but the differentiation and qualitative specialization of the products, which allows higher prices and margins and favors the export. The greater stability of the margins on the sales of medium-sized companies in the decade considered and their better stability even in the declining phases of the economic cycle testify to the quality of the products of these companies and their competitive strength on markets, including international ones.
- le medium-sized enterprises in the district areas do better than those in the large enterprise areas (refer to the classification of Becattini-Coltorti on n.1/2004 of the Italian Journal of Economists), despite carrying out the same job and adopting a relatively similar structure, and this is especially true in times of negative economic conditions. They are more profitable, more internationalised, less risky and financially sounder. The distinction is not geographical, but implies differences in the business model, in the type of products offered, in the production and distribution organization, in the interchange in the broadest sense with the territory. The district location therefore produces beneficial effects on profitability and risk: a "quality brand" that counteracts the drop in demand and a "social context" that cushions the impact of the crisis.
Therefore, the supposed dimensional advantage in the strategies on which the competitiveness of firms depends really seems to be a false myth, the result of an excess of abstraction in economic analysis, which does not update the models to the variety and variability of the realities investigated and which above all does not distinguish companies for the production and market strategies pursued. It now seems inadequate to think in terms of internal economies of the firm and the physical productivity of factors. The productions of the sectors that contribute the most to the added value of manufacturing in Italy are niche and not mass productions; not goods of homogeneous quality, but differentiated products, which evolve in relation to changes in demand or to counter competition, for which margins do not depend on production efficiency which lowers costs, but rather on quality, customer service, from differentiation and personalization, which allows you to raise prices. In niche productions, returns decrease as quantity increases, innovation is prevalently of the product and not of the process and the increase in productivity is pursued in terms of greater value of the product produced, streamlining of the production structure which outsources some stages of the supply chain (mainly to local companies connected to the network) to ensure efficiency and distribute invested capital and risk among several companies. The economies can therefore be external to the firm but internal to the system of firms, understood as a district or chain (even international) of the supply. And this also applies to learning economies, for example favored by local roots. And it is the quality of the product that drives the export: the idea that smaller firms are disadvantaged by growing globalization must be demonstrated (on the contrary, their relative advantage appears more probable), and the micro and macro data seem to disprove it (in this regard, Coltorti, in n.2/2012 of Italian economy).
The dominant perspective appears to be spoiled by excessive attention to the supply side, forgetting the problems of market outlets: after all, in hindsight, in a way no different from the recipes it proposes for the current crisis. On the finance side, for example, assuming the causal nexus development of the financial system–real growth and development (which does not find univocal support in the international empirical evidence), he explains the medium or small size as forced by external financial constraints (thus assuming smaller firms more indebted and less solvent) and completely neglects the prospect demand sidei.e. that it could be a (winning) choice based on reasons of economic-strategic opportunity or in any case linked to objectives and projects of the ownership/management (Becattini's "life project" company), even when the financial markets are developed and the solvency and financial equilibrium of the enterprise guaranteed. From the foregoing, useful indications could be drawn for the decisions of , if only one wanted to look “beyond the myth”.
[1] The major Italian-controlled groups are companies with a turnover of more than 3 billion euros or which belong to groups with a turnover of more than 3 billion euros or with a publicly controlled shareholder; medium-large companies have at least 500 employees or a turnover of more than 330 million, but less than 3 billion euros; medium-sized enterprises are joint-stock companies that simultaneously meet the following requirements: employees in the range of 50-499, turnover between 15 and 330 million euros and not belonging to large groups.
