Forms of Enterprise in 20th Century Italy: Boundaries, Structures and Strategies

Forms of Enterprise in 20th Century Italy

Forms of Enterprise in 20th Century Italy Boundaries, Structures and Strategies

Edited by

Andrea Colli Department of Institutional Analysis and Public Management, Bocconi University, Italy

Michelangelo Vasta Department of Economics, University of Siena, Italy

Edward Elgar Cheltenham, UK • Northampton, MA, USA

© Andrea Colli and Michelangelo Vasta 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2009941010

ISBN 978 1 84720 383 0

02

Printed and bound by MPG Books Group, UK

Contents List of contributors Foreword Franco Amatori Acknowledgments 1

Introduction: forms of enterprise in 20th century Italy Andrea Colli and Michelangelo Vasta

PART I

2 3 4 5 6

8 9

1

BIG BUSINESS: CATCHING THE TECHNOLOGICAL FRONTIER

Big business (1913–2001) Renato Giannetti and Michelangelo Vasta State-owned enterprises (1936–83) Pier Angelo Toninelli and Michelangelo Vasta Foreign enterprises (1913–72) Andrea Colli Big business and Italian industrial policies after World War II Francesca Fauri Financing the largest manufacturing firms: ownership, equity, and debt (1936–2001) Leandro Conte and Giandomenico Piluso

PART II

7

vii x xii

25 52 87 112

132

THE POWER OF LOCALISM: EXPLOITING WINDOWS OF OPPORTUNITY

Small firms and local production systems (1900–1960) Mario Perugini and Valentina Romei Public utilities in the 20th century Simone Fari and Andrea Giuntini Industrial policy and artisan firms (1930s–1970s) Giuseppe Maria Longoni and Alberto Rinaldi

v

161 185 204

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Forms of enterprise in 20th century Italy

PART III

10

11

‘Leaping frogs’ in the demography of manufacturing firms (1911–71) Lucia Castellucci and Renato Giannetti The medium-sized manufacturing enterprise (1927–81) Fabio Lavista

PART IV

12

IN SEARCH OF AN IDENTITY: STRUGGLING WITH THE CONTEXT

248

COOPERATION: THE IMPORTANCE OF NETWORKING

Co-operatives (1951–2001) Patrizia Battilani and Vera Zamagni

References Index

227

273

294 323

Contributors Patrizia Battilani (University of Bologna) took her Ph.D. in Economics at the University of Bologna. She is now professor of Economic History. She has published several books and essays on tourism history and on the history of cooperative enterprises. Lucia Castellucci (University of Firenze) took her Ph.D. in Economic and Social History at Bocconi University, Milano. Andrea Colli (Bocconi University, Milano) took his Ph.D. in Economic and Social History at Bocconi University. He is now professor of Economic History. He is specialized in Business History, and his fields of interest are: the structure and evolution of SME, the role of family firms in modern economic growth, corporate governance in a comparative and historical perspective, and foreign direct investments in the long run. Leandro Conte (University of Siena) took his Ph.D. at the University of Napoli. He is now professor in Economic History and has published in academic journals on financial markets and business history. Simone Fari (University of Torino) took his Ph.D. in Economic History at the University of Bari. He is now research fellow in Economic History and research fellow in Technological History at the Science Museum of London. Francesca Fauri (University of Bologna) took her Ph.D. in Economic History at the European University Institute, Firenze. She holds a Jean Monnet Chair in European Economic History. She has extensively published on issues concerning the history of European economic integration and Italy’s postwar economic and business history. Renato Giannetti (University of Firenze) is professor in Economic History. His publications cover the history of technology and business history, especially the Italian experience from Unification to the present day. Andrea Giuntini (University of Modena and Reggio Emilia) took his Ph.D. in Economic History at the University of Napoli. He is now professor in Economic History. His research covers contemporary economic vii

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history and his main fields are: history of networks, energy, transport and communications, and urban history. Fabio Lavista (Bocconi University, Milano) took his Ph.D. in Economic and Social History at Bocconi University. He is now fellow at the Department of Institutional Analysis and Public Management. Giuseppe Maria Longoni (University of Milano) is lecturer in Contemporary History. His main research interests, particularly focused on Lombardia, include labour history, trade and business association history. Mario Perugini (Bocconi University, Milano) took his Ph.D. in Economic and Social History at Bocconi University in 2009 with a dissertation on the history of the Italian chemical industry in the 1930s. He is now research assistant at the Department of Institutional Analysis and Public Management. Giandomenico Piluso (University of Siena) took his Ph.D. in Economic and Social History at Bocconi University, Milano. He is now lecturer in Economic History, and the editor of Imprese e storia, the Italian business history journal. He has published extensively on economic history and business history, concentrating on financial institutions. Alberto Rinaldi (University of Modena and Reggio Emilia) took his Ph.D. in Economic and Social History at Bocconi University, Milano. He is now lecturer in Economic History. His research interests cover the 18th to the 20th centuries, focusing in particular on industrial districts and local production systems, interlocking directorates and international investment. Valentina Romei (Financial Times, London) took her Ph.D. in Economic History at the European University Institute, Firenze. She is now working as a statistical researcher. Pier Angelo Toninelli (University of Milano-Bicocca) is professor of Contemporary and Business History at the Department of Economics. He has published extensively on different historical subjects such as state-owned enterprise, accounting, methodology and economic development. Michelangelo Vasta (University of Siena) took his D.Phil. in Economic History at the University of Oxford. He is now professor in Economic History. His main interests concern Italian economic development focusing on both micro- and macroeconomic topics such as technical change in historical perspective, trade and growth, business history and corporate governance.

Contributors

ix

Vera Zamagni (University of Bologna) took her D.Phil. in Economic History at the University of Oxford. She is professor of Economic History and visiting professor of European Economic History at the Bologna Centre of the Johns Hopkins University. Her main publications cover Italian economic history with special reference to national income estimates, regional disequilibria, income distribution and wages, state intervention, business history, evolution of the cooperative movement and European integration.

Foreword The volume that follows is the outcome of a multiunit project sponsored by the Italian Ministry of Universities that involved scholars from Bocconi University and the Universities of Milano (Bicocca), Bologna, Modena, Firenze, and Siena. The task of writing this foreword falls to me as coordinator of the project but the reality is that this book had two determined editors as well as excellent authors so my role is almost superfluous. I cannot help but remind readers that this is an important book as it represents a significant moment for reconciling the two ‘souls’ of Italian business history. On one side there are those who, having studied in depth several cases of companies or sectors, thought that the story of Italy could be considered in a Chandlerian perspective in the sense that big business was absolutely critical to the nation’s development. On the other side are scholars with a strong quantitative inclination. Using an extensive database, Imita.db, on Italian joint stock companies, these scholars seemed inclined to consider the role of large firms as of secondary importance and thought that for Italy there was a more realistic path to development with its emphasis on the weight of small businesses and non-heavy industrial sectors. I am known as belonging to the former group and once, having written that at the end of the 19th century the word ‘industrialization’ in Italy was synonymous with ‘steel’, I was semi-seriously accused of not offering quantitative support nor archival evidence of my affirmation.1 Indeed, ‘Chandlerians’ are not so naïve as to think that in its process of industrialization Italy embodied a model based on big business American-style. Instead, we are well aware that: ● ●

●

the actors of development were different, the Gerschenkronian substitutive factors, especially the State, were very much present and, hence, politics ended up playing a different role than in the United States and in other advanced European nations; and, that the weight of small business is by far greater than in the tale told by Chandler.

x

Foreword

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Nonetheless, for Italy big business (in sectors such as metallurgy, engineering, chemicals, and electricity) was the engine of growth, especially in the phases of more intensive growth such as the glorious two decades starting in 1950, when it looked as if it would be possible to catch up with the ‘first row’ nations. ‘. . . the overall contribution of the large firms to the “Italian wealth” has been extremely relevant from all points of view and . . . it had, at least in the course of the first three-quarters of the century, been growing’. This sentence, which you can read in the editors’ introduction to this book, highlights (supported by the formidable quantitative work done by Giannetti and Vasta’s team2 that built up the Imita.db database) a merger between the esprit de geometrie and the esprit de finesse which characterized Italian historiography. Furthermore, all this is favored by the fact that both ‘currents’ are well aware of the articulation and of the peculiarities of the economic fabric of Italy where big business is placed side-by-side with very dynamic small firms that act either alone or within industrial districts, with local municipalized companies or cooperatives that are politically oriented in some way, with niche or mid-size companies that now seem to be the most representative of the lively national economy. In closing, it is my firm conviction that this volume highlights an important step ahead for Italian business historiography with its innovative aspects (for example, the attention to the action of foreign multinationals, the attempt to measure the real boundaries of the State-owned enterprise system, and the effort to trace the history of the Italian mittelstand) and a direction of research that invites further investigation so as to give an increasingly realistic portrait of the historical evolution of the Italian enterprise. Franco Amatori Bocconi University, Milano September 2009

NOTES 1. F. Amatori (1997) ‘Italy: the tormented rise of organizational capabilities between government and families’, in A.D. Chandler, Jr., F. Amatori and T. Hikino, Big Business and the Wealth of Nations, New York and Cambridge: MA Cambridge University Press, 246–76; J. Cohen and G. Federico, The Growth of the Italian Economy 1820–1960, Cambridge: Cambridge University Press, 2001, pp. 67–68. 2. R. Giannetti and M. Vasta (eds), Evolution of Italian Enterprises in the 20th Century, Heidelberg, Physica Verlag (2006).

Acknowledgments This volume is the outcome of a truly collaborative effort undertaken by five units (Bocconi University, University of Bologna, University of Firenze, University of Modena and Reggio Emilia, and University of Siena) which put together the results of a research effort lasting for almost four years. As editors of the book which summarizes the results of this research, and on behalf of the other participants to the project, we wish to acknowledge many colleagues and friends who enthusiastically provided their precious advice in order to improve the quality of this work. The chapters which compose the book have been discussed in three preliminary workshops, hosted by the University of Bologna in June 2005 and September 2006 and by University of Modena and Reggio Emilia in February 2006. We owe a special and warm thanks to Vera Zamagni and Giuliano Muzzioli for their generous hospitality. A final conference, open to the scientific community and hosted by the Bocconi University in June 2007 has involved many colleagues as discussants of the final version of the chapters. Margherita Balconi, Stefano Breschi, Giancarlo Cainarca, Giuseppe Conti, Marco Doria, Giovanni Federico, Emanuele Felice, Enrico Giovannetti, Sergio Mariotti, Mario Minoja, Luigi Orsenigo, Claudio Pavese, Francesco Silva, Andrea Sironi and Ercole Sori provided precious comments and invaluable help from which all the members of the research group greatly benefited. The project has been possible thanks to the joint financial support of Bocconi University, Universities of Bologna, Firenze, Modena and Reggio Emilia, and Siena, together with the Italian Ministry of Education, University and Research (COFIN # 2004134099). We express our gratitude to Franco Amatori, the scientific coordinator of the whole project, who has been constantly following the research’s development and providing key support from both the scientific and the organizational point of view. Special thanks go to Riccardo Benedetti for his excellent research assistance on Imita.db and other databases. The quality of this book has been enormously raised by the valuable and very patient language editing supplied by Chris Engert. Andrea Colli & Michelangelo Vasta Firenze and Varese, Summer 2009 xii

1.

Introduction: forms of enterprise in 20th century Italy* Andrea Colli and Michelangelo Vasta

1.1

GENERAL FRAMEWORK

One important issue which has recently captured the attention and the research efforts of both economists and economic historians has been the debate about the different forms of capitalism in the world today. The ‘variety of capitalism’ debate has involved scholars of different fields, from finance to management, from corporate governance to industrial economics (La Porta et al. 1999; Whitley 1999; Whittington & Mayer 2000; Hall & Soskice 2001; Morck 2005; Baumol, Litan & Schramm 2007). It is not easy to establish the starting point of this debate, which undoubtedly goes back to the explanation of the different paths of economic development (Gerschenkron 1962). The focus of the analysis was, from this perspective, mainly comparative. It tried to identify, by adopting a macro-economic approach, the national – basically institutional – determinants of the different paths of growth. Implicitly (and sometimes explicitly), when the comparison involved the advanced (Western) countries, the explanation of the different levels of development was linked to the internal structure of the country’s capitalist institutions, which regulated the economic system. Not surprisingly, this has recently become the favourite topic of those economic historians interested in the issue of the ‘great divergence’ between Europe and its Western offspring on the one hand, and India and China on the other (Pomeranz 2000; Maddison 2007). In this very last case, it is clear that the origins of this divergence are basically to be found in the affirmation of a capitalist culture which was established well before the First Industrial Revolution (Landes 1998; Acemoglu et al. 2005). Then, taking the Western lead for granted, the rise – and the fall – of the European champions has been seen as a never-ending competition about more and more efficient sets of institutions which regulate, enforce and strengthen national models of capitalism (North 1990; 2005). By identifying technical change as a key factor in the process of economic growth, another interpretation, following a Schumpeterian approach, provides a 1

2

Forms of enterprise in 20th century Italy

periodisation of world economic history as a sequence of homogeneous technological phases (Freeman & Soete 1997; Freeman & Louçã 2001). From this perspective, the variety of forms of capitalism is determined by the ability of a country to adapt to the different technological phases by striving to narrow the gap with the technological frontier (Fagerberg 1994). This is clearly due both to opportunities (for example, in terms of natural resources) and capabilities (for example, in terms of technological institutions or human capital). In this sense, differences in the structure of capitalist systems and their rate of economic growth are mainly due to the ‘technological congruence’ of the latecomer countries with the leading ones (Abramovitz 1986). By adopting a ‘meso’ perspective, another stream of analysis, largely based upon the literature which draws on the findings of industrial economics, tends to connect the issue of growth and development, as well as the differences among different capitalist systems, to the structure of manufacturing industries. From this perspective, what makes the difference among different capitalist (and non-capitalist) economic systems is the ability to foster the growth of those industries which lead the process of economic development (Mowery & Nelson 1999; Malerba 2005; Whitley 2007). From this point of view, in order to achieve high levels of performance, a national economic system has to build a system of innovation, involving research and educational institutions, an efficient financial sector, and cultural attitudes towards entrepreneurial activity in new and innovative industries (Lundvall 1992; Nelson 1993; Freeman 1995; Steil et al. 2002). Technology is thus considered to be the main driver in this process, and the differences and divergences among different systems are basically the result of the ability to develop, or to adopt, superior and new technologies, or to shift the pattern of national specialisation to those industries which are more developed and advanced in technological terms. From this perspective, institutions (which are at the core of the macrooriented argument) are taken into account when they are able to create the conditions under which the process of technological advancement can take place unhindered. Along the same pattern, another approach explains the difference in the level of economic performance of regions and/or countries by explicitly focusing on a ‘micro’ perspective, i.e. taking into consideration the different forms of enterprises as an (additional or principal) explanation of the differences in the level of growth and performance of an economic system. In other words, if the macro perspective stresses the role of institutions in determining the relative efficiency of the different national systems, the ‘micro’ view provides an explanation largely based upon the differences in the ‘demography’ of the enterprises (i.e. the mixture

Introduction

3

of small, medium and large firms), the adequateness of organisational structures and the behaviour and attitudes of the entrepreneurs. Even if an institutional influence on the persistence of certain typologies of business organisations can also be taken into account in this case, the ‘micro-approach’ literature tends to focus on the internal characteristics and on the structure of business organisations, considered as the main unit of analysis in the explanation of the differences and divergences at the macro-level. As is well known, this is the approach followed by Chandler (1962; 1977). From this perspective, the differences in the levels of performance of different economic systems largely depend on the relationship between technological waves and the adoption of the ‘right’ strategies or policies, which, in their turn, have to be supported by coherent organisational structures. Chandler (1990) provides an example of comparative analysis in order to explain the rise and decline in the efficiency of different business systems, emphasising the role played by the large, integrated enterprises in the leading capital, R&D and technology intensive industries of the Second Industrial Revolution. The comparative analysis of modern capitalist economies from a micro-structural point of view has been carried on to a further extent in another major business history synthesis (Chandler, Amatori & Hikino 1997). Even though the latter research does not explicitly address the issue of the divergences in the structure of the capitalist economies, and never mentions the concept of national business systems, the relationship between the specificities of the national models of large enterprises and the overall performance of the economic system considered emerges clearly and contributes to shaping the ‘different’ forms of national capitalism. In emphasising the impact of the ‘micro’ dimension – i.e. of the industrial corporation upon the ‘wealth of a nation’, Chandler was undoubtedly right. Under another perspective, his seminal analysis suffered from some limitations, or rather, gaps, which the following research in business history is now trying to fill. First of all, the sharp focus of the analysis converges on a very restricted number of particular actors (the large, vertically integrated corporations), which are scrutinised with regard to the coherence between their policies, or strategic choices, and their organisational structures. In some sense, it was precisely because of these characteristics that Chandler’s (and his followers’) research efforts converged on the ‘Tyrannosaurus rex’ of modern economic growth. This has clearly been reflected in both the available research and in the synthesis, recently published, on both a national and an international, comparative basis. The analysis of the strategies and structures of large enterprises – and of their national deviations from the standard American

4

Forms of enterprise in 20th century Italy

paradigm – has, for decades, been at the top of the agenda of researchers interested in understanding the evolution of economic systems starting from a micro-economic approach. Even though it is extremely useful and conceptually strong in emphasising the micro-level contribution to the macro-economic framework, as well as the necessary coherence among strategies, structures and other variables as the characteristics of the demand and the institutional and cultural framework, the classic approach which focused on large organisations provides only a partial explanation of the different patterns of economic growth among countries and within the same country in different periods (Langlois 2003). Moreover, it dismisses, or, even if not explicitly, it underestimates the contribution of other business forms and typologies of enterprises to the ‘wealth of the nation’, and, in doing so, misses the opportunity to broaden the original analytical intuition and extends it to the interpretation of the differences among various national business systems, as well as the real variety of the entrepreneurial responses to the opportunities provided by the transformation/evolution in technologies and markets, and, more generally, in the environment in which the firms operate (Scranton 1997; Lamoreaux, Raff & Temin 2003). This book moves a step forward in this direction, explicitly putting at the centre of the analysis the variety of business forms present inside a specific country – Italy – during the process of its economic growth and modernisation.

1.2

THE RESEARCH PROJECT: AIMS, SOURCES AND METHODS

Although the economic literature during the 20th century mainly focused on macro-economic issues, especially on the process of industrialisation and on aggregate growth, the last decades have witnessed deep changes. As we have seen, growing attention has been devoted to issues concerning organisational and institutional varieties, and, more generally, to the micro-behaviour of economic actors and to policies able to address them by adopting specific incentives. Moving from these considerations, the goal of this research project has been to act as a bridge between the two above-mentioned approaches – one which privileges structural continuity, while the other stresses differences and varieties – in the perspective of building a wider and more complex picture of Italian business and economic history. The main aim of the project has been to analyse the evolution of Italian capitalism during the 20th century by focusing upon those different

Introduction

5

forms of enterprise which have typified different phases of the economic growth process. The starting point of the analysis is thus the identification of the presence, in a long-term perspective, of the various dominating models of enterprise that have characterised, with their dynamism, the different stages both with regard to the nature of the technological and market opportunities and with regard to the national and international institutional contexts. The different typologies of enterprise analysed in this book were not selected upon the basis of the binary logic applied to a group of specific variables, but by adopting a fuzzy logic in which an articulated set of analytical dimensions can assume approximate, rather than precise, values (Zadeh 1965). In other words, by considering a set of dimensions such as size, legal forms, types of governance or ownership, performance and so on, we have identified eight different forms of enterprises which represent as many different fuzzy sets. This means that the membership value for each variable is not exclusively 0 or 1, as in the binary logic, but can range between these two values. At the same time, the membership is not exclusive in the sense that some single firms can belong to two or more categories of enterprises. It is clear that the different typologies do not provide a ‘robust’ taxonomy, since the dimensions that identify them (size, legal forms, etc.) are active at different levels, which may, to some extent, interact or overlap. Clearly, these forms of enterprise have been selected by considering the evolution of the Italian historiography, which has already extensively focused on some of them. The added value of the project has been to provide a more robust foundation for historical investigation, by verifying the consistency and significance of these forms upon the basis of long-term data which can allow a comparison between the variety of the forms of Italian capitalism and the models which characterise other historical experiences. With regard to firms of large dimensions, three forms of enterprise have been selected. The first one, big business, represents, in general terms, the largest Italian companies. The analysis is not only focused upon the Chandlerian-type manufacturing company, but also takes the top companies in non-financial service sectors into account. The second form analysed is the state-owned enterprise, a large and very articulated group of firms generally characterised by their large dimensions and by a wide variety of control-enhancing mechanisms, such as pyramidal structures. Furthermore, another form of enterprise is the foreign-controlled company, representing a large and variegated group of firms, which, in general, have contributed, with different strategies in the different phases, to the introduction and diffusion of new technologies. Two other forms of enterprise identified are strictly linked to the local environment. On the one hand, attention has focused on one of the typical

6

Forms of enterprise in 20th century Italy

forms of Italian capitalism, the small firms operating in a local productive system; on the other hand, the focus is upon the municipalised firms, which provide services within an administrative county or a homogenous geographical area. Then, two forms of enterprise which have emerged as relevant in recent research approaches are analysed. First of all, the focus is on the mediumsized firms, a form of enterprise which has been identified and studied over the last few years, and whose historical roots this research aims to investigate. Then, following the results of the recent literature on firms’ dynamics (Sutton 2002), attention is directed to the Italian firms which have rapidly changed their size, by either increasing or decreasing, in terms of assets. Because of their distinctive feature of ‘jumping’ up and down in the sizeranking of Italian companies, this form of enterprise has been called the ‘leaping frogs’. Last, but not least, the focus is upon a form of enterprise, the co-operative, which – proposed as an alternative to capitalist corporation and characterised by a particular model of governance – has assumed a growing importance in the Italian economy in the last decades. The research project was organised in various units which focused their attention on different forms. Although the level of knowledge about these forms was very uneven, different research units set common minimal targets. Even where the focus of the individual chapters was not always able to deal with the entire century, the attempt is to provide a general view of the topic. This means that the research project was developed by sharing aims, sources and methods, in an attempt to offer homogeneous pictures of different subjects. The mutual aim was, first of all, to identify the boundaries of the selected forms, and, secondly, to identify their performance along the time-span that we analysed. In its attempt to fill a traditional gap in Italian economic and business history, the project has been grounded on a strong quantitative base. In fact, for each form of enterprise identified, the first step was to measure its dimension and relevance within the Italian economic system, trying, at the same time, to adopt a shared conceptual framework as well as common proxies, and not just to provide a merely descriptive approach. The starting point of the research activities is the Imita.db database which has been extensively used in previous research (Giannetti & Vasta 2006) and which represents the standard source for Italian companies in historical perspective (http://imitadb.unisi.it). In some cases, such as the chapters on big business, on mittelstand (see below) or on the ‘leaping frogs’, the Imita.db was the main source employed. In other cases, such as the chapters on state-owned enterprises or for foreign enterprises, the Imita.db database has been implemented by adding information from other sources. Even for the forms of enterprise which are only partially

Introduction

7

considered by the Imita.db database, such as co-operatives or small firms, quantitative information is given upon the basis of the data collected by further traditional sources such as the Bollettino ufficiale delle società per azioni (BUSA) or other materials provided by the chambers of commerce of the individual towns.

1.3

A GLANCE AT ITALIAN FORMS OF ENTERPRISE TODAY

The specificity of the Italian business environment, and of the country’s economic, social and political history, has contributed to the creation of a large variety of business forms which accompanied the country’s economic evolution during the whole of the 20th century. Some of these forms of enterprise are strictly specific to the Italian case: small firms, co-operatives and municipalised companies corresponded, in their diffusion, form and structure, to the particular set of social conditions which characterised the 20th century. In other cases, such as for big business and multinational enterprises, the Italian situation proves to be not particularly different from that of other industrialised nations, in terms of capital concentration in mass production sectors, even if the models and forms which the large firms took in the country’s specific experience were definitely ‘national’. Even nowadays, each of these enterprise typologies presents its own relevant character within the Italian economy. In order to provide a sketch of the present relevance of these forms of enterprise, some raw proxies are shown in Table 1.1. For each form of enterprise, with the exception of the ‘leaping frogs’,1 information is provided about employment, sales and other available variables. Although these data refer to a recent period, they have been collected from several sources which were not completely homogeneous. However, the data presented are useful both to draw a general framework and, in particular, to follow the evolution of the different forms up to the beginning of the new century. Table 1.1 describes the structure of Italian capitalism on the eve of the 21st century. Big business and state-owned enterprises have considerably reduced their weight in the last few decades and represent a small share of the Italian business system, while the weight of foreign-controlled companies is even more relevant. The most important forms of enterprise are the small- and medium-size enterprises, which, even if they have been recently challenged by the rise of new competitors from less developed countries, still represent the largest segment of Italian enterprises. In this sense, it is worth mentioning the increasing weight of the mittelstand, a group of enterprises well-rooted in the local production systems and active in the

8

Employed

Table 1.1

5.6% of employees in total enterprises 9.6% of employees in manufacturing enterprises

Big business

Co-operatives 6% of employees in total enterprises

Municipalized companies 1% of employees in total enterprises

Mittelstand 20.7% of employees in total enterprises 31.2% employees in manufacturing enterprises

Small firms 49.8% of employees in enterprises with fewer than 10 employees 73.7% of employees in enterprises with fewer than 50 employees 25.9% of employees in manufacturing enterprises with fewer than 10 employees

Foreign enterprises 7% of employees in total enterprises 18.2% of employees in enterprises with more than 20 employees

State-owned enterprises

2.2% of employees in total enterprises

Forms of enterprise in Italy at the beginning of the 21st century

9

Sources:

Other

Sales

40% of TOP 200 manufacturing enterprises

14.6% of sales of total enterprises

13% of value added of manufacturing enterprises

1.4% of sales on total domestic production 11.2% of total enterprises with more than 500 employees

Goldstein & Piscitello (2007: 71); Istat (2001, 2008); Mediobanca (various years), Le principali; Mediobanca (various years), Calepino.

12% of TOP 200 manufacturing enterprises

4.7% of sales on GDP

59.3% of employees in manufacturing enterprises with fewer than 50 employees

10

Forms of enterprise in 20th century Italy

Made in Italy sectors. The municipalised enterprises have maintained their weight and, even through merger and acquisition processes, have been able to enlarge their size. Finally, co-operatives, which represent a particular trait of the Italian capitalism, play an important role, even though they are concentrated in some specific sectors.

1.4

FORMS OF ENTERPRISE AND ITALIAN LONG-TERM ECONOMIC GROWTH

This book is organised in four parts, which include chapters concerning the analysis of the individual forms of enterprise, and three in-depth chapters focusing on policies and institutional contexts. Part I, Big Business, concerns the various forms of large firms (big business, state-owned enterprises and foreign enterprises). It focuses on the characteristics and the mechanisms of the Italian way of catching up to the technological frontier at different stages of its evolution. The in-depth, monographic essays deal, on the one hand, with the relationship between big business and the financial system, and, on the other, with the specific case of technological transfer, the Marshall plan. It has already been recognised by the historiography on the Second Industrial Revolution (for a synthesis, see Chandler, Amatori & Hikino 1997), that large, modern and integrated enterprises also play a relevant role in the case of Italy. Looking at the general evolution of Italian big firms over the whole of the 20th century, the first three chapters in Part I quite clearly stress that the overall contribution of the large firms to the ‘Italian wealth’ has been extremely relevant from all points of view, and that it had, at least in the course of the first three-quarters of the century, been growing. This basically happens in coincidence with the two technological regimes of electricity, steel and oil, and cars and mass production (Freeman & Soete 1997; Freeman & Louçã 2001). The former starts in the 1880s and characterised the first decades of the 20th century up to World War I; the latter takes its shape around World War I and sees its full diffusion, at least in Europe, only during the so-called Golden Age. The analysis of big business (Chapter 2, Giannetti & Vasta), is continued by focusing, for several benchmark years over the whole 20th century, on the 200 largest enterprises in manufacturing and services ranked in terms of assets, and confirms the overall relevance of this form of enterprise in the course of the industrialisation process. It also shows its adaptation to the country’s general conditions in terms of market dimensions and dynamism, institutions, prevailing ownership and governance models as well as organisational structures.

Introduction

11

Strong turbulence is a dominant feature of Italian big business, both in the manufacturing and in the service sector. As for manufacturing, this seems to be due mainly to the sequence of the technological waves which provide new opportunities for new firms. In this sense, it is interesting to note, in the Italian case, the reduction of the lag of the spread of the different technological regimes. If, on the eve of World War I, the electricity and steel sectors were largely under-represented, at the beginning of the 1960s, the firms of the oil and mass production regime were already well established, and the technological wave of the information and communications technology (ICT) appears in Italy from the 1980s, as in the other leading countries. With regard to service sector, most of the turbulence is, instead, due to the institutional changes, with a succession of nationalisation and privatisation processes which characterised the Italian economy. This general turbulence, jointly with the unwillingness of Italian enterprises to grow, could even be due, at least partially, to characteristics of the legislation framework, such as the absence of trustworthy re-launching devices in the case of bankruptcy (Di Martino & Vasta 2010). Moreover, one particular feature of Italian big business is its ownership structure, which can be roughly divided into three main categories: privately owned (basically by individuals and/or families), state-owned, and foreign-controlled enterprises. At present, it is relatively difficult to provide a comparative analysis of the relative performance of the big firms according to their ownership structure, even though the available data highlight the (relatively obvious) superiority of multinational enterprises and state-owned enterprises over the rest in terms of the adoption and diffusion of technological standards, and (it may be added) of organisational structures and managerial practices. This emerges quite clearly from the next two chapters of Part I, in which a more detailed analysis of the contribution by state-owned enterprises (Chapter 3, Toninelli & Vasta) and foreign-controlled companies (Chapter 4, Colli) is carried out. In terms of ownership, the distribution of the largest firms becomes more and more differentiated throughout the 20th century. Foreign investments flowed to the country both before World War I and also immediately after, grew considerably after World War II and during the economic spurt of the Golden Age. Foreign-controlled firms basically tend to cluster (albeit not exclusively) in industries in which the indigenous firms are backward or even absent, and where it is necessary to have a high technological expertise. In this sense, their role in the diffusion of a new technological regime seems to be crucial. The same can be said for state-owned companies, even if, in this case, their contribution to the country’s industrial framework is concentrated in a period going from the mid-1930s to the beginning of the 1990s. Even in this case, the large

12

Forms of enterprise in 20th century Italy

state-controlled firms tend to cluster, with a more or less different degree of diversification, in all capital intensive and more innovative industries, sometimes even jointly with foreign capital and expertise. As far as the foreign-controlled enterprises are concerned, their role assumed increasing relevance during the different phases of the Italian economic growth. If the contribution of foreign enterprises as a vehicle of technological diffusion was already considerable at the beginning of the industrialisation process, during the Golden Age, foreign direct investments certainly increased and contributed to the upgrade of the Italian industrial system. Finally, from the analysis of the whole structure of big business, we can see that, starting from the 1970s and with the rise of the ICT regime, the role of multinational companies became even greater. The parabola of stateowned enterprises clearly determined their contribution to the introduction and diffusion of new technologies. In the technological regime of oil, cars and mass production, they acted, through an articulated pyramidal structure, as a substitute of the public company of the Chandlerian tradition. This confirms the crucial role of the IRI (Istituto per la Ricostruzione Industriale) group in the technological development of Italian industry during the Golden Age (Giannetti & Pastorelli 2007). It is even more interesting to note that, even after their general decline throughout the 1990s, state-owned enterprises seemed to maintain a certain role in the diffusion of the ICT regime. The evolution of big business must be analysed by taking the general framework surrounding the entrepreneurial action into account. As suggested by the Chandlerian approach, apart from the size and dynamism of the market, the relationship between big business and other elements which were able to influence its performance in various ways, such as the relationship with the state – in terms of economic policies – and with the financial system, are deemed to be relevant. One crucial example of a virtuous relationship between the state and entrepreneurs can be found in the policies followed by the Italian government immediately after World War II, in the years of the Marshall Plan (Chapter 5, Fauri). A kind of virtuous alliance was, in fact, established between the most dynamic sections of manufacturing industry (both large firms and SMEs) and government in order to try to fill the technological gap, not only in capital intensive industries, but also in specialised suppliers sectors. In this case, too, as stressed above, a solution to the technological backwardness of Italian firms was found thanks to external intervention, properly endorsed by the government. Even though this co-operation apparently helped Italian firms to achieve important results, the low level of continuity in these kinds of policies, as well as the persistent recourse to the instrument of external or exceptional intervention, instead of structural intervention, has to be

Introduction

13

stressed. After this phase of intervention, which characterised even the Golden Age – a period in which there was a notable capacity to introduce and adapt new technologies in Italy (Antonelli & Barbiellini Amidei, 2007) – state support in technology investment was considerably reduced, reverting to the situation that existed before (Vasta, 1999a). The structure of the financial system is, from another point of view, relevant in order to explain both the strategies and the performances of the large firms. The Italian case is particularly significant in this respect (Chapter 6, Conte & Piluso). A strong path-dependency towards indebtedness can, in fact, be detected, both in the case of state- and of privately owned enterprises (with the relatively obvious exception of multinationals). The particular characteristics of the Italian financial market – after the 1930s, when it was mainly based upon short-term credit provided by large banks under the control of the state and upon a weak stock exchange – emphasised a tendency by large firms, both state-owned and private, to prefer debt to equity in order to finance their needs. This phenomenon slowed down the process of separation between ownership and control, while, at the same time, increasing the degree of dispersion of corporate ownership among large firms. In this respect, two main considerations can be drawn. The first is that, even before the de facto nationalisation of a large section of the banking system in the second half of the 1930s, banks dominated over the market system. Independently of the determiners of this process, this was going to have long-term effects on Italian big business, especially in terms of ownership structures, and, hence, of managerial models and styles. The second consideration is that the largest banks, committed to financing the large firms, left another relevant section of the credit market to regional banks, which were locally active in financing small firms (Conti 1999). This explains why the local production systems could enjoy a virtuous relationship with local banks, which played an extremely relevant role in the mechanisms of formal and informal financing at the local level. Part II, The Power of Localism, focuses on forms of enterprises (small and municipalised firms) which operate in a defined area and thus have a strong connection with both formal and informal local institutions. The in-depth chapter deals with the relationship between small firms and the industrial policies and tries to verify whether and, if so, how, the former received support, as happened for big business. The long-term efficiency of small firms – both territorially dispersed and concentrated in articulated forms such as industrial districts and local production systems – is largely explained by the capacity to exploit the windows of opportunity which emerged from changes in the technological situation as, for example, in the case of the crisis of mass production in the 1970s. However, the vitality

14

Forms of enterprise in 20th century Italy

of local productive forms is dependent on a number of other factors which go from the structure of the local banking and credit system, to the local and national institutions, which foster, in different ways, the survival and efficiency of small firms as well as of artisanal workshops (Arrighetti & Seravalli 1997). What is interesting to note in this perspective – and which emerges both from the chapter dedicated to a quantitative analysis of three (Lombardy, Tuscany and Campania) regional systems (Chapter 7, Perugini & Romei) and from the essay on the industrial policies for artisan firms (Chapter 9, Longoni & Rinaldi) – is that the role of state intervention is less clear-cut than the previous literature has shown (Becattini 1998). If, on the one hand, the growth and transformation of local systems – as well as their decline – seemed to have taken place largely in the absence of direct and explicit state intervention, on the other hand, the existence of ad hoc policies conceived to sustain small and medium-size enterprises (SMEs) clearly emerges. This happened both in the case of the legislation for artisans and very small firms introduced during the years of the economic miracle, and for the policies undertaken in the last decades of the century in order to foster the process of ‘light’ industrialisation in the southern regions of the country. This is probably not sufficient to demonstrate the existence of centrally planned policies conceived to support small enterprises and spread entrepreneurship, but certainly the issue is more controversial than was once believed, and requires further investigation. This means that the traditional dichotomous view of the existence of large, state-supported enterprises on the one hand, and of small and Mancunian-like, not state-supported, enterprises on the other hand (for instance, Cafagna 1999), has to be reconsidered. The ‘upstream’ industrialisation process coming from counties, districts and regions enjoyed, at a very ‘micro’ level, the initiatives in which municipalities and local administrations were involved. Another form of institutional entrepreneurship, the municipalised company, occurred at the very beginning of the industrialisation process and continued until very recent times (Chapter 8, Fari & Giuntini). The attitude – geographically different, but nonetheless widespread throughout the country – shown by the local councils to undertake the supply of public services, or to manage public goods and public utilities, had diffused over time. It is worth noting that, even in this case, the degree of diffusion of this typology, its prevalent geographical location (in the Northern regions), and its long-standing level of economic performance, can mainly be explained by taking into account the favourable framework provided by a mixture of cultural and institutional factors, including, for instance, the Italian tradition of administrative decentralisation and autonomy. Moreover, it must be underlined that, in the last few years, some municipalised companies considerably

Introduction

15

increased their size and started to play an important role at a regional, and even at a national, level. Given the above-described forms of enterprise, the Italian business system has, for a long time, been characterised by a strong polarisation between large and small, and even very small, companies. It is, however, interesting to note that other forms of enterprise, or, rather, different strategies and behaviour among the existing companies, do appear to coincide with transformations of the external conditions. Part III, In Search of an Identity, deals with two forms of enterprise which emerged from the particular features of Italian capitalism. Firstly, the phenomenon of turbulence and the difficulty for enterprises to strengthen their position, a typical trait of Italian industrial companies, characterise the ‘leaping frogs’. Secondly, the capacity of a group of firms to compete on international markets by maintaining a limited size, as has emerged from recent research, identifies the mittelstand. Remarkable examples of these phenomena are provided by the so-called ‘leaping frogs’ (Chapter 10, Castellucci & Giannetti) – i.e. firms able to gain a dominant position quickly in specific markets by exploiting the competitive potential of a shift in the technological regime – and medium-sized, internationalised firms active in global niches (Chapter 11, Lavista). In the case of the ‘leaping frogs’, it is a mixture of technology and market conditions which determines the dynamism of this entrepreneurial form. This is a recurrent phenomenon and coincides with the emergence of a new technological regime, which determines, as we have mentioned for big business, the turnover amongst companies. What is intriguing, however, is the fact that new firms, able to concretise advantages deriving from entrepreneurial initiatives in new industries, show an extremely high degree of downward mobility, that is to say, they have a low rate of survival in innovative industries. In other words, entrepreneurial successes are, for many reasons, not likely to last, with very few exceptions. This confirms the already mentioned high turbulence, which is one of the dominant traits of Italian capitalism. The behaviour of the ‘leaping frogs’ is probably more understandable if it is compared with the last (chronologically) form of enterprise detectable in the Italian case, i.e. the medium-sized enterprises, which very often emerge from the entrepreneurial seedbed of industrial districts. In this case, too, the rise of a ‘new’ entrepreneurial form – which seemed to be almost absent before the 1990s in Italian industrial demography – can be viewed as the efficient, even though probably sub-optimal, response of the national business system to a challenge coming from the changes in the international situation. In this case, it is not (or only partially) a new technological wave which creates entrepreneurial opportunities. Instead, another phenomenon, that of globalisation, is impacting on Italian small firms, especially those in industrial

16

Forms of enterprise in 20th century Italy

districts, with a double effect: selection and growth on the one hand, and specialisation in niches, particularly in the traditional sectors, on the other (Colli 2002b). These mittelstand companies, however, go on sharing many of the features of the small firms typical of the industrial districts, including individual and family ownership, ‘oligarchic’ management models, and innovative patterns which have not been formalised. Favourable external conditions explain the emergence of this model quite well, which is, however, puzzling in its ability to last as an enduring and even successful form of enterprise because, in the long-term perspective, ‘mediumness’ is a transient condition. From the analysis, it emerges that very few firms have found their optimal size status within the middle-sized enterprise group. It seems to confirm, once again, the traditional difficulty in growth faced by Italian enterprises which, after having become medium-sized, in most cases, return to being small. Part IV, Cooperation, focuses on a peculiar form of enterprise, cooperatives, which have a long tradition in the Italian economy, and which, in the last decades, have increased their role particularly in some service sectors. The history of the Italian co-operative movement presents some important particularities in comparison to what has been generally observed for other countries. First of all, similar considerations to those previously suggested for municipalised companies can be made for co-operatives. As in the latter case, the co-operative enterprise shows at least two interesting features (Chapter 12, Battilani & Zamagni). Firstly, within this category, it is possible to find a large spectrum of companies of different dimensions, in various sectors and with different organisational structures. Secondly, like municipalised companies, co-operatives show a tendency to cluster in well-defined geographical areas, namely, in the northern and central regions of the country. Moreover, since the beginning of the co-operative movement at the end of the 19th century, co-operatives have enjoyed a favourable framework in terms of ideology (both leftist and Catholic) and legislation, not only at the local, but also at the national level. In this case, too, as in that of municipalised companies and small firms in industrial districts, the conclusion is drawn that the local conditions played a relevant role in explaining the emergence, the performance level and the long-term survival of these particular forms of enterprises which successfully adapted to the environment. Especially in the last decades of the 20th century, co-operatives were able, in some cases, to consolidate and grow considerably through a merger and acquisition process, or by creating wide networks of enterprises. This growth process recalls, at least partially, that observed for some municipalised companies. In this sense, the two forms of enterprise play the same role to replace the private initiative – particularly in large scale retailing for

Introduction

17

co-operatives and in multi-purpose utilities for municipalised companies – in the process of growth size, which becomes necessary due to the new technological and market conditions.

1.5

SUMMING UP: FORMS OF ENTERPRISE AND PERFORMANCE

The relationship between the different forms of enterprise and their performance throughout the 20th century cannot be fully addressed in this book. However, all the chapters have endeavoured to understand how and why the different forms of enterprise have been competitive during the different phases of Italian economic growth. In other words, the research has tried to focus on the capacity of the different forms of enterprise to adapt to the various changes which have characterised the 20th century. This phenomenon has, clearly, many drivers, which are assessed in depth in the individual chapters. However, in summing up the main results of the research project, it is worth mentioning at least one of the key drivers, namely, technology. This means that, looking at the sequence of the three technological regimes which characterised the world economy from the last decade of the 19th century up to the end of the 20th century, not only can we provide some explanations regarding the rise and the fall of the forms of enterprise analysed, but we can also offer some general interpretations of the evolution of Italian capitalism. In order to provide a general overview, in Figure 1.1 we illustrate the sequence of the technological regimes in relation to the performance of the different forms of enterprise. Clearly, the performance level identified must be considered merely as a raw proxy which emerged from the research project and not as a result of precise measurement.2 However, it must be taken into account that we cannot use a unique concept of performance, because each form of enterprise, having its own goals, pursues its own performance typology. Moreover, it must be borne in mind that the diffusion of the technological regimes presents a time-lag with regard to the conventional adopted date of their rise. This means, for example, that the co-evolution of the institutional context with the new technological situation may be a little delayed. Let us, thus, have a look at the dynamics of the different forms of enterprise following their pattern throughout the period analysed. Before the introduction of the technologies of the Second Industrial Revolution, Italy had yet to start its industrialisation process. At this time, the most relevant form of enterprise was the small firm, while all other forms of enterprise were not very important or were even absent. The shift from

18

1908

Oil, cars and mass production

1971

COOP

MNE

ICT

MUNICIPALISED

SOE

Figure 1.1

The evolution of Italian forms of enterprise (1880–2000)

Note: BB Big business; SOE State-owned enterprises; MNE Foreign enterprises; SME Small and medium-size enterprises; COOP Cooperatives

Electricity and steel

1880

MITTELSTAND

SME

BB

2000

Introduction

19

the technologies of the First Industrial Revolution to those of the Second Industrial Revolution, and specifically to the technological regime of electricity and steel, coincides with the first steps of the Italian process of industrialisation. In this phase, we can clearly observe the increasing pervasiveness of large firms, be they national- or even foreign-owned. The new technologies, strongly biased towards large scale enterprises, were introduced with many difficulties and through the support of the Gerschenkronian substitutive factors. The process of concentration that accompanies the success of big business reduces the importance of SMEs, which are less efficient in the new sectors. Thus, in order to catch up with the technologies of the new regime, the oligopolistic character of the Italian system of enterprises emerged, which developed an entangled network of relations between big firms and big banks, especially the German-type universal banks. The following shift from the regime of electricity and steel to that of oil, cars and mass production, occurred in Italy, but, more generally, in Europe, with a certain lag in comparison with the United States, and did not immediately provide major changes in the previous patterns. As is well known, the big crisis of the early 1930s hit the Italian economy hard. The big companies, in particular, suffered from this shock, but the large category did not lose its weight. What changed within big business were the forms of governance. In fact, the weight of the state grew consistently, with the rise of an articulated network – characterised by cross shareholdings and pyramidal structure – of state-owned enterprise, which became one of the main long-term features of Italian capitalism. The big crisis of the 1930s, with the autarky policies which followed, determined even a certain reduction of the weight of foreign-controlled enterprise. Moreover, the co-operatives, and partially even the municipalised firms, which took their first steps at the beginning of the 20th century, were subsequently regulated by the Fascist regime, which barely tolerated these forms of enterprise. The diffusion of the technological regime of mass production, which marks the Golden Age, represents the pervasive development of the largesize enterprises. There was a growth in the weight of big business in which the role of state-owned and foreign-controlled enterprises increased. With regard to the former, the expansion process started during fascism, and continued and consolidated, while, with regard to the latter, the openness of the markets allowed them to resume the role that had been neglected after the major crisis. The 1950s and the 1960s are known as the years of the Italian ‘economic miracle’, perhaps the period in which the structure of the Italian system of enterprises tended to be more similar to that of the most advanced countries. In this sense, the weight of small firms reduced

20

Forms of enterprise in 20th century Italy

consistently and seems to have become marginal. As far as co-operatives and municipalised enterprises are concerned, the situation is less clear cut: with the return of democracy, they certainly resumed a role, even though their weight remains, in general terms, quite limited. The big changes of the 1970s, with the crisis of mass production and the shift towards the technological regime of ICT, brought many ‘surprises’ to Italian capitalism. Large firms rapidly lost their importance and two phenomena can clearly be identified. The first was a tendency shown by the largest groups towards restructuring and downsizing, which were, in many cases, convenient, because of the multiplication of work conflicts, and a decentralisation of production into smaller, independent units. From another perspective, new technologies started to play a role in making medium-size enterprises efficient, in production, marketing and R&D activities. In the first phase of the shift from the mass production regime to ICT, the trajectory of the state-owned enterprise is distinct. The crisis overwhelmed many large private firms and, at least until the mid-1980s, the system of public enterprise, even though it had to cope with great difficulties, increased its weight within Italian capitalism. This was due to a large process of bailing out private firms, which considerably weakened state-owned enterprise. The full diffusion of the technological regime of ICT marks a general change in the weight of the different forms of enterprises. Big business continued its parabola, which was accompanied by the start, in the 1990s, of the great process of privatisation, considerably reducing the role of state-owned enterprises. This role was, at least partially, taken by foreign enterprises. In fact, foreign direct investments played a crucial role in the diffusion of the new information and communication technologies within the Italian industrial system. At the same time, even co-operative and municipalised enterprises conquered spaces, albeit limited to some sectors, within the large dimension companies. Finally, another aspect which must be underlined is the emergence of the medium-size enterprises: the capacity of a group of medium-size enterprises to adapt to the new technological situation by trying to play a role in the market niches which had previously been occupied by small enterprises. The rise of the ‘mediumness’ can be seen either as a new phenomenon in Italian capitalism or simply as a passing condition of some enterprises which, as often happened in the past, have a weak capacity to grow. In concluding, this book has as its main aim to move a step further towards the understanding of the features of Italian capitalism during the 20th century. By adopting an approach which focuses on different forms of enterprise, we believe that single chapters provide new elements, both qualitative and quantitative, on the Italian economic history and

Introduction

21

particularly on the main drivers which determined the structure of the national business system. We leave to the reader to evaluate whether these goals have been, at least partially, achieved.

NOTES *

We wish to thank Franco Amatori, Giuseppe Conti, Giovanni Federico, Renato Giannetti, Ercole Sori, Pierangelo Toninelli and Vera Zamagni for comments and criticisms. The usual disclaimer applies. 1. For this form of enterprise, which is not properly codified in the literature, there is no source able to offer any proxy measure. 2. In Figure 1.1 we measure the vertical axis by an ‘ideal’ index which is the outcome of different parameters capturing each form’s contribution to the wealth of the nation. Each form’s contribution can in fact be decomposed into performance measures (employment, output, turnover, added value, exports, profits, number of patents and others). To consider only one or few of these variables, both in a static and dynamic perspective, may underestimate one form’s real contribution to the whole picture. Hence our decision is to put on the vertical axis a multidimensional index largely intuitive − but possibly subject to more formal measurement − in order to capture the varied impact of the different forms on the national business system.

PART I

Big business: catching the technological frontier

2.

Big business (1913–2001)* Renato Giannetti and Michelangelo Vasta

2.1

INTRODUCTION

In economic history, the approach to big business was developed by Alfred Chandler (1962, 1977), who described the ‘strategy and structure’ of the American business system from the end of 19th century, while comparing big business – the top 200 firms – in the three main industrialised countries: the USA, the UK and Germany (Chandler 1990). According to Chandler, the rise of large manufacturing enterprises emerges from the cluster of innovations introduced during the Second Industrial Revolution, at the end of 19th century, in the fields of electricity, steel, chemicals, and later in the automobile industry.1 The size and organisation of the firms depend firstly on the characteristics of the technology which prevailed during a specific historical phase; the strategies of firms followed from their structure, according to their internal capabilities. The better adapted these capabilities were to exploit the new technology, the greater the resilience and the duration of the existing firms. The chance to remain in the leading position, thus creating long-term barriers to entry, depended on the firms’ R&D activities and on their specific organisational capabilities, which allowed the firms to grow through innovation, and later by diversification (Patel & Pavitt 1995). The aim of this chapter is to extend this research tradition by starting from the notion of ‘technological regimes’. This term describes the strong interrelations and interdependences among the innovations that clustered in a certain historical phase. These innovations were interconnected with regard to products and processes, in equipment and organisation, both technical and managerial, forming a coherent and mutually enhancing set of technologies and industries, which were capable of creating a wave of growth in the economy. The evolution of a new technological system also follows a certain collective logic, which approximates a generalised natural trajectory. In this trajectory, the dynamic of firms is characterised by an initial turbulence, due to a cluster of innovations – tied, in turn, to the emergence of a new technological regime – followed by a long-term stabilisation

25

26

Forms of enterprise in 20th century Italy

of the surviving firms until the emergence of a new technological regime where new firms introduce new technologies and grow again. This argument means that, within a ‘technological regime’ the surviving firms are those which are ‘big’ in any historical experience, depending on the specific features of the technologies involved. However, other institutional features, such as the way to finance the growth of the firm and/or their form of ownership, may differ according to local institutions. A frequently advanced argument to explain these differences refers to different forms of ownership and organisational regime seen as substitutive factors. State-owned enterprises (SOEs), for example, or state intervention for promoting the diffusion of new technologies, have often been the case, as in Gerschenkron’s approach (1962) to state and universal banks as substitutive factors for the market in the Italian and German industrialisation during the late 19th century, or in Amsden’s (2001) explanation for the ‘rise of the rest’, the Far Eastern countries, in the second part of the 20th century. In a standard approach, these differences in the behaviour of firms are explained without emphasising technology in se, but by resorting to market mechanisms. For example, a pervasive empirical finding in the recent literature shows that differences in behaviour within-sector prevails on differences in behaviour between-sector (Sutton 1998; Haltiwanger 2000). The magnitude of within-sector heterogeneity implies that idiosyncratic factors dominate the determination by which establishments create and destroy jobs while achieving rapid productivity growth or suffering productivity declines. This literature suggests that heterogeneity, uncertainty, establishment-level differences in managerial ability, vintage capital, location and disturbances as well as the diffusion of knowledge may account for a creative/destructive perspective on the dynamics of firms. According to the evolutionary perspective, we analyse Italian big business in order to identify how it reflects the ‘technological regimes’ characterising modern capitalism. In fact, national institutional patterns show some difference between the Italian experience and that observed for the most industrialised countries, as they do for firm organisation and forms of ownership in the different technological regimes (Perez 2002). This study is organised as follows: in Section 2.2 we introduce the sources and methodology adopted to identify the different samples; afterwards, we examine the role of big business in the Italian economy (Section 2.3). In Section 2.4, we focus on the structural change of the largest firms, both in manufacturing and in services. In Section 2.5, particular attention is devoted to the understanding of the strong turbulence of the leading firms. Section 2.6 focuses its attention on the relationship between ownership and technology in the top manufacturing firms. Finally, in Section 2.7, we present conclusions.

Big business

2.2

27

SOURCES AND METHODOLOGY

The samples employed in this paper are mainly drawn from Imita.db.2 From this dataset, we have selected the top 200 firms − excluding financial, in all sectors (henceforth top 200 ALL), in the manufacturing (top 200 MAN) and in the service sector (top 200 SER) − classified in terms of assets for the years 1913, 1921, 1927, 1936, 1952, 1960, 1971, 1981. For the last two benchmark years, 1991 and 2001, we used the Mediobanca data (various years) because the formerly used source ceased in 1984. These samples are updated versions if compared with previous ones employed in other studies (Giannetti & Vasta 2003a; Vasta 2006a; 2006d). Firms are ranked as to total assets, according to the majority of the historical investigation into the matter (Berle & Means 1932; Chandler 1990; White 2002). The only alternative is, in fact, the use of capital, since the data covering the entire period are not available for turnover, employment, added value or stock exchange capitalisation. The use of capital was discarded because it is a less adequate measure than assets in representing the real size of the firm, as it varied considerably according to different ownership and financial strategies. Apart from a few exceptions, only joint stock companies are included in the analysis; this does not substantially alter the picture, although, especially in the first benchmark years, even some of the larger firms adopted other legal forms (Federico & Toninelli 2006). More recently, there have also been co-operative firms which should have been included in the sample of services (see Battilani & Zamagni in this volume). Our exceptions concern some SOEs, which were not organised as joint stock companies, but are particularly important for the Italian economy, such as Ente Nazionale Idrocarburi (ENI) or Ente Nazionale per l’Energia elettrica (ENEL). Furthermore, firms in the financial and insurance sector were excluded from the analysis because their assets are not comparable to those of other firms in the sector.3 Finally, we excluded those groups of companies for which data were only available for the last two decades, when it became compulsory for firms to draw up consolidated accounts of their activities. The use of such a broad time-span creates several problems when the denomination of firms changes, or because of mergers, acquisitions and de-mergers. The criteria that we chose to provide continuity to a company are based upon a series of qualitative elements obtained from: (i) a brief historical profile that the source contains for each firm; (ii) notes in the Mediobanca and R&S volumes; (iii) historical profiles reported in the Mediobanca digital archives (R&S Mediobanca various years); (iv) information obtained from the ever more numerous company websites. We also resorted to a few traditional sources on enterprises such as the Guida

28

Forms of enterprise in 20th century Italy

Monaci, Il Taccuino dell’azionista and the Calepino dell’Azionista, as well as, in several cases, the histories of individual companies. Notwithstanding our caution, such criteria are not free from arbitrariness, essentially due to the succession of company makeovers. In general, however, we adopted a very broad continuity criterion in cases of changes within the denomination of a firm, while, in the case of mergers and acquisitions, we assigned continuity to a firm upon the basis of localisation, ownership structure and the sectoral prevalence of its activities. Finally, in the case of splitting de-mergers, we assigned continuity to the company that carried on the core business activity of the firm, classifying diversifications into other activities as new companies. Despite these caveats, the methodology that we adopted is in line with the main research carried out in other countries (Chandler 1990; Wardley 1991; Carreras & Tafunell 1993; Cassis 1997; Hannah 1976; 1999; Louçã & Mendonça 2002).

2.3

ITALIAN BIG BUSINESS: AN OVERVIEW

Following a Chandlerian approach, the literature on big business has generally focused its attention on industrial firms, and, in particular, on manufacturing firms, the latter being considered the engine of growth for the entire economic system. As underlined by some critics (Hannah 1995), this view underestimates the role of services in the economic growth process, even though Chandler has considered railway companies as the origin of the modern big business (Chandler 1965). Even Italian historiography has focused its attention on big manufacturing companies, emphasising their late and difficult development when compared with examples in the main industrialised countries (Amatori 1997). More recently, some studies, which have adopted a more quantitatively oriented approach to business history, have shown that Italian big business is smaller in size than that of the main industrialised countries. Moreover, at least during its first phase of economic growth, Italian big business tended to adapt its structure slowly to the changing technological regime (Giannetti & Vasta 2003a; Vasta 2006a). Nevertheless, Italian big business showed a very good performance, at least until the 1970s (Vasta 2006b). In order to provide an idea of the importance of big business in the Italian economy, we consider the share of total assets of the three different samples on GDP. The proxy proposed has only a descriptive aim; it is relatively approximate because, on the one hand, it compares a stock variable (assets) with a flow variable (GDP), while, on the other, an important fraction of the assets could represent the choices made by the companies in

Big business 70.0

ALL MAN SER

60.0 50.0 %

62.3 54.7 42.6

40.0 34.0

30.0 20.0 10.0 –

29

11.6 8.2

1913

10.8

17.0

6.4

1921

12.7

14.3 14.2

6.6

1927

1936

16.4

16.3

1991

2001

10.7

6.9

1952

21.8

24.1

27.5

17.4

8.1

44.7

49.1

34.3 25.7

25.2 20.6

46.2

38.5

1960

1971

1981

Years

Figure 2.1

Total assets of the 200 top firms on GDP (1913–2001)

previous periods. However, this proxy is usually adopted in a comparative historical perspective. The analysis, as shown in Figure 2.1, refers to three different samples: top 200 ALL, top 200 MAN and top 200 SER. The first element to be underlined is that the weight of big business is very large, despite the fact that small- and medium-sized enterprises are prevalent within Italian business system. As for the top 200 ALL, it can be noted that the ratio of assets to GDP is much higher than that observed for the other two samples. This depends on two effects: (i) the large share of the non-manufacturing industrial enterprises (mining and, in particular, utilities); and (ii) the high level of concentration which characterises all sectors, in which a small number of big enterprises are all included in the sample. By looking at the top 200 ALL, a marked increase prevails up to 1971. The ratio of the assets of the top 200 firms on GDP increases, in fact, from 20.6 per cent in 1913 to 54.7 per cent in 1960, reaching 62.3 per cent in 1971. This quota dropped sharply in 1981, and remained stable over following years. This pattern was mainly influenced by the dynamics of the manufacturing firms. The ratio of the assets of the top 200 MAN on Italian GDP showed a rising curve from the beginning of the period, in accordance with the rise of the technological regime following the Second Industrial Revolution and the Fordist paradigm. It reaches its highest point, with 38.5 per cent of the total GDP in 1971, in the final phase of the Golden Age, when large enterprise, based upon the low cost of raw materials and upon economies of scale, underwent a deep crisis at global level. After the great changes during the 1970s, the share of the large Italian enterprises decreased to around 25 per cent in 1981 and 1991. The decline

30

Forms of enterprise in 20th century Italy

increases in the last decade of the century, and the share of top 200 MAN falls to 16.3 per cent of the total GDP in 2001. The dynamics of the top services firms are remarkably different. The ratio of the assets of top 200 SER on GDP remains quite low, at least until 1952. Subsequently, it grew considerably from 10.7 per cent in 1960 to 16.4 per cent in 1991, but it remained at lower level in comparison with the other two samples. In 2001, it reached the 21.8 per cent, and, for the first time, it exceeded the share of the top 200 manufacturing firms. This ‘overtaking’ showed how the growth of services in the Italian economy also occurred in big business.4 Alternatively, it can also be seen as the effect of the ‘decline’ affecting big Italian manufacturing firms (Gallino 2003). Let us now see how the sectoral structure of Italian big business changed in the 20th century. Table 2.1 shows the sectoral composition of the top 200 ALL. The first point that emerges here, is a substantial structural stability between the first benchmark year, 1913, and the last one, 2001. Manufacturing firms increased from 99 to 110, while utilities drop from 39 to 31, and service enterprises decreased from 50 to 47. The number of construction firms increased (from 4 to 11) while mining companies decreased (from 5 to 1). This picture of stability seems to suggest little change in the sectoral composition within large Italian firms. If we observe the internal dynamics of the period, however, some relevant changes emerge. The first change concerns manufacturing firms, which reached their height in 1971 with 147 companies (73.5 per cent of the total), at the peak of the Fordist paradigm, and subsequently lost ground, going back almost to their starting level. Utilities show even more relevant changes, as they are essentially affected by the institutional change that characterised the sector during this period. In fact, we can see strong expansion of the firms during the 1920s and 1930s, until 1936, when there are 58 utilities amongst the top 200 enterprises (29 per cent of the total). Afterwards, we register a drop that brought the number of utilities among the top 200 firms in 1960 to 1913 levels. In 1971, due to the nationalisation of electricity which occurred in 1962 (VV.AA. 1989), only three companies were still in the sample. Finally, in the year 2001, the number of companies again increased considerably, as a consequence of the process of liberalisation of electricity production and distribution and of the decentralisation of state power to local institutions. In the last two decades, we can also observe an increase in construction firms, which were scarce until 1936, and had been completely absent in the first years after World War II, while in 1991, there are 16 construction firms dropping to 11 in 2001. As far as services were concerned, we can observe a decline from 1921 to 1952: the firms in the top 200 in this sector decreased from 50 to 30. Subsequently, a considerable growth takes place: the number of companies in 2001 is close to that of 1913.

31

3 5 142 99 39 4 50 200 1.2 2.5 66.5 43.4 21.2 2.0 29.8 100.0

% assets Agriculture, forestry and fishing Mining and quarrying Industry Manufacturing Electricity, gas and water supply Construction Services Total

1913

1.0 2.7 69.4 51.7 17.2 0.4 26.9 100.0

4 4 143 100 41 2 49 200

1921

1.3 1.7 73.7 38.2 34.9 0.6 23.3 100.0

4 6 142 84 55 3 48 200

1927

1.2 1.1 86.2 42.4 42.2 1.6 11.6 100.0

3 4 160 98 58 4 33 200

1936

0.2 1.5 86.2 53.7 32.4 0.0 12.0 100.0

2 6 162 119 43 0 30 200

1952

0.0 3.7 82.1 56.0 26.1 0.0 14.2 100.0

0 9 157 118 39 0 34 200

1960

Distribution of top 200 firms by sector (1913–2001). All firms but financial

Number Agriculture, forestry and fishing Mining and quarrying Industry Manufacturing Electricity, gas and water supply Construction Services Total

Table 2.1

0.0 4.0 78.3 57.8 20.0 0.5 17.8 100.0

0 6 153 147 3 3 41 200

1971

0.0 3.6 71.8 54.2 16.3 1.4 24.5 100.0

0 2 150 138 4 8 48 200

1981

0.0 5.0 67.8 43.3 21.8 2.7 27.3 100.0

0 2 154 131 7 16 44 200

1991

0.0 3.2 54.9 29.8 23.2 1.9 41.8 100.0

0 1 152 110 31 11 47 200

2001

32

Forms of enterprise in 20th century Italy

A glance at the sectoral distribution of the assets of the top 200 enterprises of all sectors (second part of Table 2.1) reveals further elements. The first one regards the increase in the manufacturing sector, which is similar to the evolution of the number of companies, with a peak of 57.8 per cent of the total in 1971, and a reduction to about 30 per cent in 2001. The share of utilities shows less of a see-saw movement than that previously observed for the number of companies; in this case, the share is less influenced by institutional changes, because the weight of Ente Nazionale Energia Elettrica (ENEL) compensates for the disappearance of the former private companies. It is interesting to underline the evolution of the construction sector, in which the increase in the number of firms observed in the last decades showed no corresponding increase in terms of the percentage of assets. Generally, we can observe how the share of service sector in terms of assets is more important than the share in terms of the number of firms; strong growth emerges in the last decade, when the share of their assets reaches 41.8 per cent of the total, thus achieving a prominent position among the sectors taken into consideration.5

2.4

STRUCTURAL DYNAMICS IN MANUFACTURING AND SERVICES

Having focused our attention on the overall sample, the aim of this section is to analyse the structural dynamics of the Italian big business both for manufacturing and for services. Let us start with the manufacturing companies. If we observe the evolution of sectors of the top 200 MAN (upper part of Table 2.2), we first note the great weight, in the first benchmark years, of the textile sector, as well as of other traditional sectors − leather, wood and non-specific manufacturing industries. In 1913, in fact, the four traditional sectors together make up 35.5 per cent of the total occurrences (71 firms) among the top 200 firms. This share, though declining, was still very high in 1927, with 29.5 per cent of the total (59 firms). In 1952, textile firms were still at the top of the ranking, alongside metals and metal products, with regard to the number of occurrences. The share of assets of the textile sector over the total of the top 200 MAN (lower part of Table 2.2) also confirms our observations concerning the number of firms: in 1913, their share tops that of all the other manufacturing sectors, accounting for over a quarter of the overall total assets. Regarding the observed weight in terms of the number of firms, the quota of assets of the textile sector decreased more rapidly, but, in 1927, it still reached 18.3 per cent. The structure of Italian manufacturing big business, on the eve of World

33

35 52 3 1 5 2 22 5 27 3 9 33 3 200

10 21 10 6 25 4 200

1921

28 64 2 1 6 1 22

1913 31 56 1 1 6 5 30 2 9 23 2 5 28 1 200

1927 29 41 1 1 6 11 36 3 11 23 5 10 22 1 200

1936 22 32 1 1 7 24 28 3 7 32 6 19 17 1 200

1952

Distribution of top 200 firms by sector (1913–2001). Manufacturing

Number Food products and tobacco Textiles and textile products Leather and leather products Wood and wood products Paper products, publishing and printing Coke and petroleum products Chemicals and chemical products Rubber and plastic products Other non-metallic products Basic metals and metal products Machinery and equipment Electrical and optical equipment Transport equipment Manufacturing n.e.c. Total

Table 2.2

16 10

13 28 29 3 13 30 18 26 13 1 200

9 24 33 4 13 31 6 22 16 1 200

1971

19 22

1960

9 24 28 4 13 21 24 30 23 2 200

16 6

1981

200

12 18 36 4 15 19 19 36 13

21 7

1991

12 10 34 2 17 11 21 38 22 1 200

25 4 3

2001

34

(continued)

% assets Food products and tobacco Textiles and textile products Leather and leather products Wood and wood products Paper products, publishing and printing Coke and petroleum products Chemicals and chemical products Rubber and plastic products Other non-metallic products Basic metals and metal products Machinery and equipment Electrical and optical equipment Transport equipment Manufacturing n.e.c. Total

Table 2.2

13.4 27.0 0.6 0.2 1.7 0.2 9.7 – 3.2 19.6 7.6 3.8 11.3 1.5 100.0

1913 10.0 18.7 0.6 0.2 1.1 0.4 8.5 – 1.8 21.2 8.6 5.3 22.3 1.2 100.0

1921 9.8 18.3 0.2 0.3 1.6 1.7 27.0 2.3 2.6 14.6 0.6 2.3 18.4 0.4 100.0

1927 10.1 10.6 0.2 0.2 1.9 8.3 20.9 3.5 3.1 15.7 3.5 3.4 18.2 0.6 100.0

1936 6.6 9.2 0.1 0.1 1.9 10.5 19.5 3.4 2.3 22.2 1.4 5.2 17.2 0.4 100.0

1952 4.8 5.0 – – 1.8 10.4 22.1 7.4 4.0 20.2 1.1 6.1 16.7 0.3 100.0

1960 4.1 2.0 – – 2.4 14.3 24.2 2.5 3.4 17.8 4.6 9.0 15.6 0.2 100.0

1971 3.6 1.3 – – 2.2 18.6 10.8 2.3 2.7 16.3 8.8 14.8 18.2 0.3 100.0

1981

7.2 2.1 – – 3.0 10.1 12.9 1.4 4.4 9.3 7.5 23.1 18.8 – 100.0

1991

9.9 2.0 0.8 – 6.0 7.5 11.7 0.8 5.3 6.3 9.1 18.6 21.6 0.2 100.0

2001

Big business

35

War I, was considerably different from the experience of the United States, Germany and the United Kingdom (Vasta 2006a: Table 5.4). It generally mirrors the Italian delay in the diffusion of new technologies. This difference is greater if we consider the Italian specialisation within the new technologies. There are, in fact, relevant differences in technological and productive specialisation observed at a more specific level of sectoral specialisation. In chemicals, for example, Italian firms concentrate their activities on less technologically intensive new products – nitrogenous fertilizers – and maintain their specialisation in products derived from the processing of animal fats, which have nothing in common with those of the Second Industrial Revolution (Vasta 1999a). After World War II, the structure of Italian big business underwent a change, even though it was, again, not a radical transformation. As already noted, the share of the textile sector was still high, even though it was declining; the petroleum sector emerges, due to the increasing diffusion of the car and to the strong growth in energy consumption. It is, however, the basic metals and metal products sector, as well as the electrical and optical equipment sector, which obtain the top positions for both proxies. Despite the observed permanence, by the early 1950s, a rapid convergence in the patterns of specialisation to those of the leading countries had already appeared (Vasta 2006a, Table 5.5). During the Golden Age, the share of traditional sectors decreases in a substantial way: the textile sector shrinks from 32 to 10 firms, paralleling its percentage of assets, which also decreases considerably (from 9.2 per cent to 2 per cent); the food products sector also decreases, while the leather and wood product sectors disappear from the top 200 MAN. In contrast, a considerable growth appears in the paper products and the non-metallic products sectors, both in terms of firms and in terms of overall percentage of assets. This growth depends on the development of the firms that exploit economies of scale in the paper and cement sectors. A strong increase can also be found in the machinery and equipment sector, as well as in the electrical and optical equipment sector. The rise of the machinery and equipment can be explained by ‘completing the national productive matrix’ (Pellegrini 2003) which characterised this phase of Italian economic growth; the increase of electrical and optical equipment was dependent on the large programme of automation of the national telephone network in the 1960s carried out by SIP, a state-owned enterprise (Bottiglieri 1993), and on the early emergence of electronic firms, both as multinational branches of a foreign company and national, like Olivetti (Salvati 2000). During the last 30 years of the 20th century, the phase of the development of the Third Industrial Revolution was mainly related to the diffusion of information and communication technology

36

Forms of enterprise in 20th century Italy

(ICT). The sectoral structure of the large Italian manufacturing firms adapted quite rapidly to current technological changes. There is, in fact, a substantial growth in the number of firms in the electrical and optical equipment sector, in which all the ICT firms were included. This sector ranks first with regard to the number of firms among the top 200, while it ranks second, behind transport equipment, with regard to assets. Even the transport equipment sector shows considerable growth, and, in fact, the number of firms among the top 200 in this sector increased from 13 in 1971, to 22 in the year 2001. Minor progress can also be noted in the machinery and equipment as well as in the non-metallic products sectors. The food products sector showed intense growth: from 16 companies, with a percentage of 4.1 per cent of the total assets in 1971, to 25 companies, with 9.9 per cent in 2001. During the same year, the leather products sector appears again, after 50 years, with three firms (Prada, Gucci and Tod’s), which are part of the Made in Italy brand (Quadrio Curzio & Fortis 2000a). The petroleum firms decrease in number (from 28 to 10 in the period 1971–2001) as the metal products do, decreasing from 30 to 11 during the same period. Both sectors reduced their share even with regard to the percentage of assets held. In the case of the leather sector, the reentry is mainly due to the emergence of hierarchical production systems, with the consolidation of some leading trademarks which specialised in traditional products within the local systems (Harrison 1997). With regard to petroleum products and metal product firms, their decrease depended on the extensive re-organisation caused by the privatisations of the 1990s, and, in some cases, on the transfer, presumably for taxation purposes, of company headquarters abroad, as, for example, was the case with Europa Metalli. At the beginning of the 21st century, the structure of Italian manufacturing big business is quite similar to that of the US (Vasta 2006a, Table 5.6). This convergence towards the same sectoral composition of the top 200 firms of the richest countries can be explained by the process of globalisation. Let us take a look, now, at the service sector sample, top 200 SER (Table 2.3). On the eve of World War I, almost 60 per cent of the Italian service big business was in the transport sector, mainly in land transport, and, in particular, in railways and tramways. This share is even more evident in terms of assets, amounting to 71.8 per cent of the total (54.1 per cent for railway enterprises). The nationalisation of the railway system in 1905 did not immediately prevent the railway companies from remaining at the summit of Italian big business. The presence of firms managing tramway transport on a local basis was also significant. In the transport sector, the presence of shipping companies was also high, with 22 occurrences in the top 200 and the 15.6 per cent of the assets. The other

37

12 1 30 1

12 1 30 1

5 5 200

2 46 38

11 81 22

4 2 200

1

58 5

29 3

5 1 200

1

13 47 30 2 7 10 29

1 50 4

4 2 200

4

13 49 12 1 10 9 54

2 36 3

11 2 200

4

7 35 47 2 14 8 27 1

1 38 3

6 4 200

1 7

5 27 72 1 14 7 22 1

1 28 4

5 2 200

15 1 1

6 11 42 3 32 6 21 2

8 34 11

3 1 200

1

3 1 36

13 9 17 2 24 5 17

12 43 13

200

5 200

4 29 5 18

13 6 11 6 31 16

17 17 17

2 1 7

5 5 15 3 27 4 2 1 13 4 31

16 49 20

1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

Distribution of top 200 firms by sector (1913–2001). Services

Sale, maintenance and repair of motor vehicles; retail Wholesale and commission trade, except of motor vehicles Retail trade, except of motor vehicles and motorcycles; repair Hotels and restaurants Land transport; transport via pipelines Water transport Air transport Supporting and auxiliary transport activities; travel agencies Post and telecommunications Real estate activities Renting of machinery and equipment and of personal goods Computer and related activities Research and development Other business activities Education Health and social work Sewage and refuse disposal, sanitation and similar activities Activities of membership organisation n.e.c. Recreational, cultural and sporting activities Other service activities Total

Number

Table 2.3

38

(continued)

Sale, maintenance and repair of motor vehicles; retail Wholesale and commission trade, except of motor vehicles Retail trade, except of motor vehicles and motorcycles; repair Hotels and restaurants Land transport; transport via pipelines Water transport Air transport Supporting and auxiliary transport activities; travel agencies Post and telecommunications Real estate activities Renting of machinery and equipment and of personal goods Computer and related activities Research and development Other business activities Education Health and social work Sewage and refuse disposal, sanitation and similar activities Activities of membership organization n.e.c. Recreational, cultural and sporting activities Other service activities Total

% assets

Table 2.3

– 22.0 2.9

0.2 21.2 1.6

1.2 8.9 1.6

1.7 5.5 1.4

1.7 5.3 2.0

2.5 4.7 4.3

4.8 5.8 3.8

2.6 7.7 5.0

1.9 2.1 5.3

2.4 0.5 2.9 3.6 2.1 1.7 1.1 1.4 0.9 1.1 54.1 18.7 17.9 25.0 9.6 6.7 2.5 1.9 2.5 23.8 15.6 41.3 31.2 4.6 30.8 28.1 13.6 6.1 3.2 1.6 – – 0.3 0.5 1.1 3.5 5.6 3.5 3.3 2.0 2.1 2.3 1.3 3.9 3.5 9.5 27.2 13.2 13.5 7.1 0.1 0.2 10.2 27.5 30.9 29.5 25.9 32.3 45.1 43.6 14.7 9.8 11.0 19.2 8.4 6.1 5.4 3.7 0.6 – 0.5 0.1 – – 0.1 0.1 0.2 – 0.2 0.5 – – – – – – – 0.3 1.2 3.0 – – – – – 0.1 – 0.1 0.3 0.3 – 0.2 0.2 1.9 0.6 1.2 3.5 20.8 9.8 4.5 – – – – – – 0.1 – – – – – – – – – 0.1 – – – – – – – – – – 0.1 – 0.2 – – – 0.2 – – – – – 0.1 0.9 1.7 1.9 1.6 4.2 4.0 2.9 2.0 4.0 2.9 1.1 0.3 0.2 0.4 0.3 0.6 0.2 0.2 – – 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

– 8.0 0.5

1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

Big business

39

two sectors showing most occurrences were the commercial sector with 32 firms – 29 in wholesale trade – and the real estate sector with 30 firms. In terms of assets, however, the share of the real estate sector amounts to 14.7 per cent of the total, while the commercial sector has a share of only 8.5 per cent, thus showing the difficulties of large commercial distribution in Italy. There are also 11 companies managing the largest hotels in the country. During the interwar period, a few significant changes can be noted, even though the sectoral structure did not undergo any dramatic transformation. The transport sector greatly reduces its share among the top 200 firms, with 72 companies in 1936 (43 less than in 1913), and only 34 per cent of assets, compared to more than 70 per cent in 1913; this is mainly due to the nationalisation of the railway system in 1905 and of most of the shipping sector after 1933. The real estate sector increased its share considerably with 54 occurrences in 1936, compared to 30 in 1913. There was also a slight increase in the share of assets. The commercial sector was substantially stable, probably because the late 1920s and early 1930s saw a general contraction of consumption after the boom experienced in the early 1920s. Between the 1920s and the 1930s, telephone companies came to the fore − 9 occurrences − obtaining 27.5 per cent of the total assets in 1936. The structure of the top 200 SER does not appear to have undergone any significant transformation after World War II, except for the decrease of the real estate companies. This reduction was dependent on the growing role of the state in building council houses and in promoting small property ownership from the early 1950s. In addition, there were occurrences of land transport companies facing reduction in size, being replaced by water transport companies, which increased from 12 occurrences in 1936, to 47 in 1952. The Golden Age presented several interesting changes within the service sectors. In the commercial sector, wholesale trade businesses remained stable, but there was an overall rapid growth of commercial firms essentially due to an increase in firms handling car sales, the sale of spare parts and fuel, as well as in retail trade. This progress was slower in terms of assets. In the transport sector, there was an important reduction in land and water transport firms, while auxiliary companies increased from 14 to 32, moving from 3.5 per cent of assets in 1952, to 27.2 per cent in 1971. This phenomenon, as already observed for the commercial sector, was essentially due to the diffusion of the car, which was accompanied by the rapid construction of an extended Italian motorway system. In 1971, in fact, four firms engaged in the management of the motorways were positioned among the top 10 enterprises in the service sector (Vasta 2006d). The presence of companies supplying

40

Forms of enterprise in 20th century Italy

services to businesses also emerges in a significant way, moving from 4 occurrences in 1952, to 15 in 1971, even though their share in the total assets remained quite small, reaching 3.5 per cent of the total. In this phase, the sector was characterised by companies specialising in esattorie (tax collection) and in advertising. Generally speaking, the Golden Age registers the period during which a general modernization of the services took place in Italy, but the change was built on the rapid diffusion of the car, the ‘fourth technological wave’ according to the classification of technological dynamics proposed by Freeman and Soete (1997). In Italy, the process of the diffusion of the car, from 1950 to 1970, grew at a spectacular rate, since the number of cars per 1000 inhabitants increased dramatically from 7 to 192 units (Deaton 1976). The last three decades of the 20th century coincided with the rise of ICT, which led to a general streamlining of industrial activities to the advantage of the service sector. It was in this last period that the service sector in Italy ‘overtook’ the industrial sector in terms of the number of employees. The most relevant changes occurred as an effect of the strong growth of telecommunication firms. Between 1981 and 1991, while remaining almost unchanged in terms of occurrences, they move from 32.3 per cent to 45.1 per cent with regard to their share of assets; in the following decade, they reached 16 occurrences, maintaining their share of assets as in 1991.6 The boom that was registered can be explained, for the first decade, by the emergence of private TV, while, in the second decade, it is largely due to the liberalisation of telephone services and to the expansion of mobile telephony. The extent of the transformations due to technological change is well represented by the increase in the companies specialised in supplying computer services − hardware, software and integrated systems. This sector was absent until 1971, showed 3 occurrences in 1981, which increased to 13 in 1991, and to 29 a decade later. The majority of these are mediumlarge companies which, on the whole, in the year 2001, represented only 3 per cent of the total assets. The structural change linked to the rise of ICT was also visible in the growth of the occurrences of the companies in R&D, moving from 0 in 1971, to 5 in 2001, and of those engaged in other business activities, which grew from 15 to 18, even though, in both cases, their share in terms of assets remained rather small.

2.5

STABILITY OR TURBULENCE?

According to Chandler (1990) the big enterprises emerging in a period of technological discontinuity survive for a long time thanks to their

Big business

41

800

773

MAN SER

700 600 500

457

400 300 214

200 100 0

Figure 2.2

8 2

9 3

11 7

16 8

27 17

10

9

8

7

6

29 14

5

70 54

4

97 84

3

152

2

1

Frequency of occurrence among the top 200 firms (1913–2001). Manufacturing and services

capability to create and adopt innovations. This capability ensured them a long-lasting competitive advantage also in later phases of the development of the technological regime in which they emerged, due to the fact that this capability allows them to diversify profitably in new fields (Patel & Pavitt 1987). In contrast to the predictions of the Chandlerian hypothesis, the population of large Italian firms in the 20th century is characterised by strong turbulence. In general, both samples show (Figure 2.2) this feature; as far as service firms are concerned, the phenomenon is really impressive. With regard to manufacturing, we can see that only eight firms are present in all the benchmark years, while another nine firms have nine occurrences.7 Even though the continuity criteria adopted were rather broad, the demographic change has great relevance, considerably superior, for example, to that observed for the US (Louçã & Mendonça 2002). In the American case, the authors argue for the existence of a strong turnover at the apex of American capitalism, upon the basis of the permanence of 28 firms among the top 200 during the period from 1917 to 1997. The large scale enterprises in the services sector were characterised by a higher turbulence than that observed for the manufacturing sample. In this case, only two companies were persistently present in the top 200 for all the benchmark years; three were present for nine years, and seven for eight of the benchmark years considered. Only two enterprises, apart from the two persistently present, are in the top 200 both in the initial and in the final year. In this case, it is even more evident that Italian large scale enterprises were unable to consolidate their position once they had reached the summit of the ranking.8 It is thus evident that the service sector was

42

Forms of enterprise in 20th century Italy

characterised by an even greater turbulence than the already considerable turbulence pertaining to Italian manufacturing companies. The reasons for this high degree of turbulence amongst the leading firms of Italian capitalism can be summarised with two explanations. The first regards one of the general traits of Italian capitalism, which is characterised by a low capacity to consolidate the growth of firms within their own field of specialisation, or to diversify into new sectors (Giannetti & Velucchi 2006; Vasta 2006a, 2006d). The second line of explanation is more sector-specific and probably must be explained separately for the two samples analysed. With regard to manufacturing, we have observed that, since the end of 19th century, the top 200 Italian firms show the sequence of the ‘technological regimes’ generally observed in the majority of advanced countries. This phenomenon shows two Italian peculiarities: (i) the difficulties in developing the technologies of the Second Industrial Revolution with the consequent persistence of the firms linked to the First Industrial Revolution sectors; (ii) a shortening of the delay of diffusion for firms connected to the new technological regime of ICT. If, with regard to manufacturing, the evolution observed represents the effect of technological change, as far as service firms are concerned, the high level of turbulence is, instead, due to causes that characterise the different phases. Firstly, it is mainly due to the long-term changes taking place within three important sectors (wholesale trade, water transport and real estate). These changes are respectively referable to: (i) the persistence of a highly fragmented distributive system; (ii) the different degree of international openness that characterises the different phases of development in the Italian economy; and (iii) the peculiarity of real estate companies, which are characterised by a life-cycle that was linked to site development. Secondly, institutional changes played an important role: nationalisation and privatisation processes strongly influenced, for example, transport and communications, but also different sub-sectors. The impact of technological change is not, however, null, but it does become quite significant during the last decades, when the diffusion of ICT strongly affected the structure of Italian big business in the service sector.

2.6

TECHNOLOGY AND OWNERSHIP IN THE MANUFACTURING SECTOR

According to the Chandlerian tradition, there is a precise relationship between technology, organisational features, and the ownership of big business: the leading firms were generally public companies, run by professional managers. This is true for the first mover countries, while, in the

Big business

43

followers, such as Italy, the relationship between technological regimes, ownership and the organisational features of big business could be different according to a diverse cultural and institutional environment (Mayer & Whittington 1999). Latecomers do not have an autonomous innovative capacity, but usually absorb innovations from foreign countries. In this context, firms are financed mainly by banks and not by stock markets, which are primarily concerned with the control of firms, instead of maximising their profits. A small number of families controlled big firms through groups, and the state was often a substitute actor in order to promote big business even through direct ownership. According to this framework, in this section, we reconstruct the evolution of the ownership structure of the Italian top 200 MAN to identify the relationship with their technological features during the different phases of Italian economic growth.9 In doing so, we classified the ultimate ownership of the firms according to three different typologies: (i) family firms (FF); (ii) SOE; and (iii) multinational enterprises (MNE).10 Family firms are a persistent feature of the ownership of Italian firms up to the end of the 20th century within the group form; the state became a historical substitute for the introduction of new technology, especially after World War II, and multinationals were important vehicles for the introduction of new technology into the latecomer countries. The identification of these three typologies is not simple in historical perspectives, primarily because of problems concerning the absence of precise information about the control of firms. We have thus used alternative methods, which, in general, may produce an underestimation in identifying the different typologies. In order to classify firms as FF, we have looked at the composition of their boards of directors. In particular, a firm is considered to be family-owned if, on its board of directors, there are: (i) at least three people with the same surname; (ii) at least two people with the same surname, and at least one of them holds a position on the board as chairman, vice-chairman or chief executive officer; (iii) at least one person whose surname is included in the name of the firm itself and who holds a position in the board as chairman, vice-chairman or chief executive officer. In order to avoid under-estimating the identification of some firms which are well known as being family-owned, we have also used qualitative information, and, for a few cases, we also considered as FF firms which do not respect the above-described criteria. We have then classified firms as SOEs when the state owns, directly, or indirectly through the holdings of other firms, at least 20 per cent of their capital, following the rules used by Toninelli & Vasta (in this volume). Finally, we have classified as MNEs those firms which are foreign-controlled following the rules proposed and employed by Colli (in this volume).

44

Forms of enterprise in 20th century Italy

Let us now introduce the evolution of the share with regard to the different typologies identified above on the top 200 MAN. First of all, we can observe (Figure 2.3.a) that the number of FF is very high, fluctuating around 50 per cent of the total, up to the crisis of the 1930s; after World War II, their share regularly decreases until the beginning of the 1990s (21 per cent), but, in the last benchmark year, it increases again up to 29.5 per cent. The evolution of the share of SOEs in the top 200 MAN follows the ‘parabola’ of the role of the state in the Italian economy (Figure 2.3b). There is a relevant and qualified presence, around 10 per cent, up the 1960s, which considerably increases over the following two decades, reaching about 30 per cent of the top 200 MAN in the 1981. During the 1980s, we can observe a slight reduction in the presence of SOEs amongst the Italian leading companies, which, in 1991, amount to 24 per cent of the total. The process of privatisation of the 1990s strongly reduced the share of SOEs, which, however, was still significant in 2001 with 12 per cent. The share of MNEs (Figure 2.3c) represented the different features (by technology, by countries, and by types of ownership) of the flows of foreign direct investments in Italy throughout the century. Their weight grew constantly from 12 per cent in 1913, up to 25.5 per cent at the beginning of the Golden Age, and to 35.5 in 1971. In the last benchmark year, after a slight reduction, their share reached the highest value for the entire period, amounting to 40 per cent. A first look at periodisation suggests that the different forms of ownership observed in Italy depended on institutional shocks. In particular, looking at SOEs, the first period is connected to the crisis of Italian universal banks and to the creation of the Instituto per la Ricostruzione Industriale (IRI) in 1933, which was set up in order to bail out the enterprises that the banks controlled; on the other hand, the second period depended both on the financial crisis of SOEs during the 1980s and on the wave of privatisation that followed after 1991. The most rapid growth of SOEs was concentrated between 1961 and 1981, with a stronger growth in the 1970s, albeit due to different causes. Only in the 1960s, in fact, the rise of SOEs was due to a government goal to develop strategic sectors and to increase the rate of growth of the country; after 1971, public intervention was again contingent, conceived to bail out private and state-owned enterprises that were swept away by the oil crisis and by the inflation that followed (Federico & Giannetti 1999). This picture is consistent with the ‘political economy’ approach (Pagano & Volpin 2001) advanced, for the Italian case, by Aganin & Volpin (2005); the authors assessed that, when the state has direct involvement in the economy, private firms – largely family businesses in civil law countries – were crowded out; on the other hand, if the government had a more

Big business

45

(a) FFs occurrences – % 60.0 50.0

50.0

50.0 49.0

48.0

41.5

40.0

35.5 30.0

29.5 28.0 23.5

20.0

21.0

10.0 0 1913 1921 1927 1936 1952 1960 1971 1981 1991 2001 (b) SOEs occurrences – % 40.0 29.5

30.0

24.0

22.0

20.0 10.5

10.0

11.5

12.0

7.0 0

1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

(c) MNEs occurrences – % 50.0 40.0

40.0 32.0

30.0 20.0 10.0

23.5 12.0 14.0

25.5

35.5

32.0 26.5

15.0

0 1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

Figure 2.3

Typology of ownership in the manufacturing sector (top 200 MAN)

46

Forms of enterprise in 20th century Italy

limited involvement in the economy, private business grew through the development of financial markets. Our data do not allow us to perform a deeper analysis into the ownership structure of the top 200 firms, in order to establish whether a crowding out was present in the different phases, or to say more about family business, the organisation of business groups or state intervention (Barca 1996). However, in the following, we introduce a simply structural and functional explanation for the observed evolution of the ownership of Italian big business. By using the notion of ‘technological regimes’, we can find, in different regimes, different rates of growth with regard to sectors and firms. Each ‘technological regime’ had its own characteristics which deal with specific features of firms (capabilities to absorb and generate technology, forms of organisation, access to financial resources, models of ownership, etc.) and even with environmental features (the monetary system, the education system, property law, etc.). If a country, in a certain period, has a strong presence in the most advanced sectors – those which are close to the technological frontier – it has a greater aggregate rate of growth (Freeman & Louçã 2001). According to this perspective, traditional sectors grew rapidly in the First Industrial Revolution regime; science-based and mass-production regimes were the leading ones in the Second Industrial Revolution; and science-based sectors were the driving forces of the Third Industrial Revolution of ICT. As we have previously seen (see Table 2.2), Italian big business shows, with some peculiarities, the sequence of the different technological regimes: the top 200 MAN were strongly rooted into the light sectors of the First Industrial Revolution up to the 1930s; starting from the 1950s and up to the 1970s, the sample shows the rise of the scale intensive firms in steel, petroleum, paper and non-metallic products (cement, tiles, etc.); and finally, during the last three decades, those pertaining to the Third Industrial Revolution, a strong rise of the ICT firms can be observed. In order to provide a first sketch of the relationship between technology and ownership in the Italian manufacturing big business, we have disaggregated each typology of ownership according to a taxonomy, proposed by Pavitt (1984), of technology which sub-divides firms into four distinct types upon the basis of their technological characteristics: supplier dominated (SD); economies of scale (ES); specialised suppliers (SS), and science-based (SB). In Table 2.4, we provide a sort of Revealed Technology (Pavitt’s classification based) Advantage index for the three ownership typologies.11 The ownership of the technologically leading firms in the 20th century is concentrated in MNE and SOE typologies. MNEs represented the main actors of technological diffusion both in the Second Industrial Revolution and in the Third one. They had a strong advantage in ES up to the 1960s,

Big business

Table 2.4

(a)

47

Revealed Technology Advantage index for typology of ownership

FFs

Years

ES

SS

SB

SD

1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

0.9 0.9 0.9 0.9 0.9 0.9 0.9 1.2 1.3 1.2

0.7 0.9 0.6 0.6 0.8 0.8 1.0 0.4 0.2 0.3

1.4 1.0 0.5 0.6 0.3 0.4 0.8 0.4 0.3 0.3

1.2 1.1 1.2 1.3 1.3 1.6 1.7 2.0 1.8 2.1

Years

ES

SS

SB

SD

1936 1952 1960 1971 1981 1991 2001

1.1 1.0 1.1 1.0 1.0 0.8 0.6

1.6 2.0 1.6 1.5 1.3 1.9 1.6

– 1.9 0.5 0.6 1.0 1.2 2.2

0.8 0.5 0.4 0.8 0.7 0.7 –

Years

ES

SS

SB

SD

1913 1921 1927 1936 1952 1960 1971 1981 1991 2001

1.6 1.0 1.3 1.2 1.2 1.1 1.0 1.0 0.9 0.8

1.4 1.8 1.0 0.9 0.8 1.1 1.0 0.9 0.6 1.0

– 1.2 – 1.3 1.6 1.4 1.8 1.8 1.7 1.6

0.5 0.8 0.7 0.6 0.6 0.6 0.5 0.2 0.8 0.7

(b)

(c)

SOEs

MNEs

48

Forms of enterprise in 20th century Italy

and their advantage in SB, always relevant, becomes particularly strong after 1971 with the diffusion of the ICT regime. MNEs always play a crucial role in the diffusion of new regimes in the long run, thus confirming the historical evidence suggesting that Italian firms are unable to be technological leaders (Giannetti 1998). SOEs were always specialised in SS sectors, and, over the last decades, even in SB sectors. Still in this phase, and after the strong process of privatisation of the 1990s, SOEs show a specialisation in the crucial sectors of Italian big business. The specialisation in SS sectors, which are crucial for the ICT regime because they develop product innovations as well as interaction with customers, is of particular importance. Finally, it clearly emerges that FF are always specialised in SD sectors in all different technological regimes. FF were mainly concentrated in the traditional sectors of the First Industrial Revolution, which, in the long run, characterised Italian big business. Only more recently did they provide a comparative advantage even in ES, especially in the iron and steel sectors, probably thanks to the process of privatisation.

2.7

CONCLUSIONS

This study has reconstructed the experience of Italian big business during the entire span of the 20th century with regard to its evolution in relation to the prevailing technological regime. This chapter has focused on three different samples, considering, firstly, the top 200 firms in absolute terms (top 200 ALL), and then the top firms in manufacturing (top 200 MAN), and services (top 200 SER). The first result concerns the large weight, which, in general, big business holds in the Italian economy. This crucial role was largely influenced by manufacturing firms, and, in fact, it reached its apex at the beginning of the 1970s, just before the crisis of the Fordist paradigm. Even the sectoral structure of Italian big business is strictly connected with the role played by manufacturing firms, which follow the ‘parabola’ of the Fordist paradigm, growing since the beginning of the period up to the end of the 1960s, and then losing ground over the last 30 years of the century. If we compare the beginning and the end of the period, we can notice a certain stability in the sectoral structure, although many things changed throughout the century. Afterwards, we analysed the structural evolution of both samples, the manufacturing sector and the service sector. The former sample clearly displays the sequence of the technological regimes described above, with the addition of two original characteristics. The first one, which is typical for a follower country, is the delay in the absorption of the technology of the Second Industrial Revolution, together with the consequent

Big business

49

persistence of firms rooted in the technology of the First Industrial Revolution. The second is Italy’s reduction in the time-gap with regard to the spread of firms active during the second phase of the technological wave of the Second Industrial Revolution, which was already well established in the benchmark year of 1960. In contrast, the technological wave of the Third Industrial Revolution appears in Italy from the 1980s, just as in the other leading countries. This process is also favoured by the presence in Italy of multinational firms, especially in the computer and pharmaceutical sectors. With regard to the services, the changes due to the sequence of technological regimes have a less defined effect than we see for manufacturing firms. This impact is not, however, null, but seems to have a different weight according to the rise of the different technological waves: although it was quite limited during the phase of the diffusion of the technologies of the Second Industrial Revolution, it is very important during the phase of the ICT regime. Italian big business, both in the manufacturing and in the services sector samples, is characterised by strong turbulence. In the former case, this contrasts with the Chandlerian literature, which underlines its long period stability due to the capacity to create barriers to entry and to diversify in the new technologies thanks to accumulation of skills. The Italian manufacturing firms were on the contrary, very unstable: only 8 firms are continuously present in all the benchmark years, while 457 were present only once. We do not observe any capability on behalf of consolidated firms either to diversify into new sectors or to improve their own position substantially. The firms able to take advantage of the new technological opportunities were, for the most part, new firms. It must be considered, however, that this result could depend on the habit of Italian firms to diversify through the creation of new firms belonging to groups, rather than diversifying existent firms. With regard to services, we observe a higher degree of turbulence than in the manufacturing sector: only two firms are present for all the benchmark years, while 773 firms are present only once. In this case, most of the turbulence is due to the changes taking place in wholesale trade, which is characterised by a highly fragmented distributive system, water transport, which is affected by different degree of international openness, and the real estate sector, which is characterised by a life-cycle of single projects. Even institutional changes played a crucial role with a succession of nationalisation and privatisation processes. The relationship between the ownership forms and the technological regime in the Italian manufacturing sector of big business suggests four main conclusions. The first is that MNEs always played a crucial role in the diffusion of new regimes in the long run. The second is that SOEs are the substitutive firm by which Italy developed the Second Industrial

50

Forms of enterprise in 20th century Italy

Revolution regime based upon economies of scale, differently from managerial public companies of the Chandlerian tradition. Thirdly, SOEs were present in the leading sectors of the ICT regime, working probably as network integrators. Finally, FFs were always mainly concentrated in traditional sectors and their growing presence in the last benchmark year is surprising on the eve of the Third Industrial Revolution.

NOTES *

1.

2. 3.

4.

5.

6.

7. 8.

9.

We wish to thank Leslie Hannah, Francesco Silva and Pier Angelo Toninelli for comments and criticisms. Special thanks goes to Andrea Colli for sharing his data on multinational firms. The usual disclaimer applies. We also thank Riccardo Benedetti for excellent research assistance. We adopt here the approach introduced by Freeman & Soete (1997) and Freeman & Louçã (2001), which sub-divided the modern history of technology into five different phases: (1) industrial mechanization (1770–1830), (2) steam power and railways (1830– 75); (3) electricity and steel (1875–1908); (4) oil, cars and mass production (1908–70); (5) information and communication technologies (1970–). By adopting a classical periodisation, the first two phases refer to the First Industrial Revolution, the second two to the Second Industrial Revolution, while the last phase overlaps the Third Industrial Revolution. The Imita.db is a standard historical dataset on Italian companies. It is available online at: http://imitadb.unisi.it. For further information, see Vasta (2006c). If we had included financial intermediation companies in the services sample, the picture would have been distorted. In the different benchmark years, in fact, banks, financial companies and insurance companies would have filled from 70 to 95 places among the top 100 firms in the service sector. This aspect is also discussed in Ville & Merrett (2000: 16). To some extent, this growth is due to the ‘entry’ into the sample, thanks to their transformation – in 2000–2001 – into joint stock companies, of four state-owned enterprises which manage the Italian railway system: Rete Ferroviaria Italiana (RFI), Trenitalia, Ferrovie dello Stato (FF.SS.) and Italferr. Without the weight of these firms, the quota of the service sector would still overtake that of the manufacturing sector, but with a value of 16.6 per cent. This growth is due, as we have previously seen, to the entry of the railways system companies into the sample. If one does not take into consideration this phenomenon, the weight of the service sector would still be relevant with a percentage quota of assets at 34.3 per cent. This result, however, is underestimated because of the effect of the ‘entry’, in the year 2001, of the companies belonging to the Italian railway system. Not taking this phenomenon into consideration would lead the telecommunications section, in the year 2001, to amount to over 57 per cent of the total assets in the service sector. The dataset contains 876 firms for a total of 2000 available positions (200 firms for each of the 10 years selected). A total of 457 firms, more than half of the entire sample, appear only once in the list, while 152 firms are present for two benchmark years. On the whole the top 200 SER dataset contains 1176 firms for a total of 2000 available positions: two-thirds of the sample (773 firms) appear in the list only once, while 214 firms are present for two benchmark years. Each firm, therefore, holds 1.7 positions in the dataset, while manufacturing firms, in comparison, yield 2.3 positions. We have made this analysis only for the manufacturing sectors. So far, data on ownership for the service sector for the entire period are not available. Moreover, Pavitt’s

Big business

10. 11.

51

classification was aimed to classify manufacturing firms and is not suited to illustrate service firms’ features. These typologies do not cover all the firms in the sample. Thus, there are some firms which are not included in any typologies. The Index is calculated in the same way as Revealed Comparative Advantage (RCA) first used by Balassa (1965) for the analysis of international trade. In this case, the index measures the comparative advantage of each typology of ownership for the four Pavitt categories of firm. An index value >1 reveals a comparative advantage for a kind of ownership in a single category, while an index value 500 employees) No. of coTurnover Employees ops (in millions of Euros)

Manufacturing Food & drink manufacturing Construction industry Large-scale retailing COOP CONAD Others Services Integrated services Catering Logistics Other Services Finance§ Total

No. of members*

20 17

6738 5201

27 453 20 606

75 480 75 000

15 27 11 9 7 43 27 4 5 4 3 105

5189 23 807 11 011 6300 6496 3453 1973 1082 159 239 . . .. 39 187

16 661 94 128 49 394 26 259 18 475 120 024 55 913 21 849 3712 2450 36 100 258 266

8000 5 500 404 5 507 000 3527 3877 826 072 18 605 20 806 2010 10 427 774 224 6 409 956

Notes: * In some cases, members are second level co-operatives, and thus the figure is only indicative. § Consisting of two insurance companies, one of which (Unipol) is the third largest insurance company in Italy, and of the credit unions system composed of 440 banks with 3499 branches (11.2% of the total number of bank branches in Italy) and with deposits representing 8.4% of total savings in Italy. Source: From co-operatives’ balance sheets. With the exception of a few co-ops belonging to the umbrella organisation Confcooperative, most of these co-ops are members of Legacoop. The survey is not complete, but covers at least 85% of the total.

12.3

REASONS FOR SUCCESS: THE GRADUAL OVERCOMING OF CAPITAL CONSTRAINTS

Among the factors that made the consolidation of co-operatives possible, a strategic role was played by the overcoming of capital constraints. The literature on co-operative enterprises had traditionally identified under-capitalisation as one of the typical weaknesses of co-ops. In this connection, we can mention the contribution by Furubotn & Pejovich (1970), who underlined the inadequate capitalisation of co-operatives, which limited their growth potential; this was due to the lack of a market for co-operative shares, from which the expected future flows

282

Forms of enterprise in 20th century Italy

Table 12.8

Co-operatives equity/assets ratio in 1951 and 1981

Sectors

Equity/assets % co-ops Equity/assets % co-ops ratio 1951 at a loss 1951 ratio 1981 at a loss 1981

Farming Fishing Crafts Manufacturing Utilities Workers’ co-ops Housing’ co-ops Consumers’ co-ops Other services Total

0.29 0.45 0.21 0.31 0.39 0.27 0.29 0.26 0.32 0.30

13 20 20 21 8 20 28 12 15 17

0.14 0.22 0.20 0.15 0.19 0.18 0.19 0.21 0.20 0.19

19 20 27 28 16 28 22 22 27 23

Note: The sectoral ratios are simple averages of the ratios of co-operatives belonging to the sector. Source:

Busc-Battilani database.

of profits could increase their value for the shareholders. According to this approach, the members tend to privilege strategies that maximise returns over the short term of their expected presence in the cooperative, because they are in no position to cash the capital gains on the shares when they leave. The works by Ward and Vanek reached similar conclusions that the members tended to keep investments low, because the target of co-operatives was to maximise the income of the working members and keep as low as possible the returns to capital (Ward, 1958; Vanek, 1975 and 1977). With the help of Table 12.8, we analyse the link between corporate finance and the growth of co-operative enterprises between 1951 and 1981.9 In 1951, at the end of the period of post-war re-organisation, co-operatives were in general small and showed a satisfactory equity ratio, reaching 0.30 on average. Co-operatives with the lowest ratio were those of craftsmen, workers and consumers’ co-operatives. In 1981, the equity/assets ratio worsened considerably in most sectors, and the share of co-operatives with an operating loss increased. If the figures are disaggregated by regions it can be seen that the regions with fewer co-operatives running at a loss are those with the lowest equity/assets ratio. We can advance the following explanation: expansion of the co-operatives could take place in this period only through an increase in debt, but this was an option only open to the co-ops that were trustworthy (namely, the co-ops which showed a better performance).

Co-operatives

Table 12.9

283

Share of member loans on the total liabilities of the major consumers’ co-ops, 1980–2002

Year

% member loans

1980 1985 1990 1995 2000 2002

42 51 52 51 53 55

Source:

Zamagni et al. (2004).

This severe worsening of the financial situation of co-operatives is no doubt at the basis of the strategies that the umbrella organisations of the co-operative movement put in place starting in the late 1970s, in particular, mergers and consortia, to be strengthened by increased capitalisation. To achieve this aim, the co-operative movement tried to obtain more favourable legislation which could improve the capitalisation of co-operatives through different means. The first bill approved was the ‘small reform’ (law 127 17/2/1971), which recognised loans to members as a crucial element to increase capital available to co-ops and granted incentives (Zamagni et al., 2004). The sector in which loans to members became more widespread was that of the consumer co-ops, given the very large number of members. As the history of the Coop shows (see Section 12.4), the substantial investments made in the 1980s and 1990s, which allowed the Coop to become the Italian leader in retail distribution, were largely financed through members’ loans (see Table 12.9). Even more important was the bill approved in 1977, which allowed undistributed profits set aside in indivisible reserves not to be subject to the corporate tax, a measure that increased self-finance considerably. To give evidence of the long-term impact of this strategy aimed at capitalising co-ops, we can quote a survey published at the end of the 1990s by the Central Office of the Chambers of Commerce. The survey covered co-operatives belonging to Confcooperative and monitored changes in the decade 1987–96 (Caselli 1998). In this period, the average size of the cooperatives surveyed doubled (in terms of employees) and the equity/assets ratio improved, passing from 12 per cent to 18 per cent, while net assets doubled and total capital trebled. The degree of coverage of investments by net assets remained inferior to that in capitalist enterprises, in spite of the improvements, but the members of co-operatives contributed to the funding of their enterprises through other channels, such as loans. We

284

Forms of enterprise in 20th century Italy

can therefore conclude that the members of co-ops ended up supplying, directly or indirectly, more funds to their enterprises than capitalist entrepreneurs. A similar study was carried out in 2000 by the research unit of Legacoop, covering the evolution of their associate member co-operatives in the preceding two decades (Centro Studi Legacoop, 2001). The results were similar to that of Confcooperative: in the 20 years covered by the survey, the average size of co-ops doubled and the equity/assets ratio jumped from 10 per cent to 25 per cent. In March 1983 a new bill was passed (law no. 72, known as the Visentini law, after the name of the minister who produced it), which granted cooperatives the permission to own fully or to have a majority stake in a capitalist corporation. This allowed the largest co-operatives to attract capital from the market in a variety of ways, including being quoted on the stock exchange. Another step in the direction of multiplying the financial resources for co-operatives was provided by law 59, approved in 1992, which allowed co-operatives to have members who only supplied capital (socio sovventore) and to issue special preferred shares (azioni di partecipazione cooperativa). The use of these instruments was crucial for the creation of large co-operative groups and modified the typical cooperative networks, as will be argued in the next section. Before turning to this, we present two examples in order to show how these new financial instruments were used to support long-term growth: the Granarolo group and the Manutencoop group. Granarolo was a consortium producing dairy products; its plants, machinery and brands were owned partly by the consortium and partly by the milk producing co-operatives that had formed the consortium. In 1991, they created a joint stock company with the same name, to which they transferred the assets of the consortium and the cooperatives in 1993. This became the company designing the strategic marketing and productive lines for the entire group. The original co-operatives were gathered in a single consortium which took the name of Granlatte in 1998 and became the owner of the joint stock company, together with a second consortium called Cooperlat, which joined in 1999. In this way, it was possible to resort to more substantial bank loans and to issue bonds, without the traditional disadvantages produced by the co-operative legal form. It was also possible to plan the quotation of Granarolo on the stock exchange, a target that had not yet been reached before 2010 for a variety of reasons, but was still aimed for. On the whole, at the end of the first decade of the 21st century, the group is articulated on four levels, of which the second is made up of the two co-operative consortia, which, directly or indirectly, own 11 companies. The group maintains its co-operative character, because 68 per cent of the milk processed by it comes from its member co-operatives. In

Co-operatives

285

2004, Banca Intesa, one of the largest Italian banks, acquired 19.8 per cent of the capital of Granarolo (Bertagnoni, 2004). Even more atypical is the group structure set in place by Manutencoop, which, in 2003, created the joint stock company Manutencoop Facility Management, to which it progressively conferred the assets of the facility management division of the original co-operative, including the participating companies (among which Roma Multiservizi), whilst retaining majority control (the other 25 per cent of the total capital is in the hands of private equity funds). The Manutencoop group is now composed of the original co-operative that directly controls three joint stock companies, one of which controls another seven joint stock companies. In this case, too, as with Granarolo, there are plans to quote the largest of the joint stock companies of the group on the stock exchange. However, for Manutencoop, it is more difficult to adhere to its original co-operative mission, as it has only 700 members (of whom one-third are suppliers of capital only, according to law 59/92) over around 12 000 employees. We can conclude that one of the key reasons that explains the expansion of co-operatives was finance: in the 1970s and 1980s, growth was mainly financed by member loans and undistributed profits set aside as indivisible reserves, while, in the 1990s, the most dynamic co-operatives found additional financial resources through the formation of groups within which a substantial amount of joint stock companies were created.10

12.4

REASONS FOR SUCCESS: NETWORKS

Beside finance, there is another important reason for the flourishing of co-operative enterprises in the latest decades, and this is the formation of networks. Since the vast majority of today’s large-scale co-operatives are members of Legacoop, a more detailed analysis of the strategies adopted by this umbrella organisation in the building up of tight and multiple networks can illustrate the point. Most of the results presented here stem from Zamagni & Felice (2006), aimed at reconstructing the evolution of Legacoop from the late, 1970s to the beginning of the 21st century, a period in which the turnover produced by its member co-operatives trebled (at constant prices) and the number of people employed more than doubled. There were two periods of sustained growth during this time: the decade between the end of the 1970s and the end of the 1980s, and the decade between the mid-1990s and the mid-2000s. The five-year period in between (1990–95) saw the agricultural, housing and building cooperatives of Legacoop in some difficulty, which proved, however, only

286

Forms of enterprise in 20th century Italy

to be temporary. The former period of co-operative growth was characterised by an extremely lively Italian economic performance in general, in spite of the oil crises. During the latter decade, on the other hand, the Legacoop performance (and the entire Italian co-operative movement performance) counteracted the overall trend of the Italian economy: whereas the latter experienced years of virtual stagnation and productive fragmentation, especially from 2005 to the end of the decade, co-operatives have substantially expanded and increased their size, as we have seen above. An analysis of profitability per categories of turnover which could be conducted only for the period 1992–2004, reveals interesting features: while Legacoop co-operatives with a turnover of less than 500 000 euros nearly always made losses, co-operatives in the higher turnover categories, in contrast, were constantly profitable. In particular, co-operatives with a turnover of more than 200 million euros (the number of which rose from 22 to 35 during the period) saw their profitability more than doubled, which was especially true for those with a turnover of between 500 million and one billion euros (their numbers rose from 6 to 13). This observation clearly shows that co-operatives grew in size once they decided to compete in the market effectively. We can thus hypothesise that Italy’s co-operatives were led out of marginality by two movements: the first from the late 1970s to the early 1980s focused upon the general consolidation of individual co-operatives, with expansion based upon mergers and the creation of networks (in general, consortia) on a limited geographical scale. Many of the difficulties that followed, such as the Mani Pulite (Clean Hands) trials,11 which paralysed the building industry, were of an exogenous nature, and contributed towards reinforcing in the co-operatives the belief that ‘big is beautiful’, because the larger co-operatives were perceived as having an advantage in terms of profitability, organisation, market and lobbying power. The second wave of growth saw the formation, in various ways, of ‘co-operative groups’, thus reinforcing the previous trend towards the creation of complex networks of co-operative and non-cooperative undertakings. In some sectors, large-scale co-operatives began to perform the role of aggregator and co-ordinator of the small and medium-sized co-operative and non-cooperative enterprises situated within their geographical areas. This was achieved by various means: through the explicit creation of groups, through the influence exercised in certain sectors and areas, and through the launching of consortia on a national scale. A good example of this is represented by the consumers’ co-operatives, dominated by Legacoop. There are two Legacoop organisations currently operating within this sector. The first is the ANCC, which in 2004 organised 160 Coop-brand consumers’ co-operatives (of which the top

Co-operatives

287

nine account for 90 per cent of total turnover) through a single wholesale structure – Coop Italia. This, in turn, brought together other groups of consumers’ co-operatives and retailers’ co-operatives, which were not members of Legacoop (Sait, Sigma and Despar), plus some small capitalist chains (for example, Il Gigante) in a common wholesale company ‘Centrale Italiana’, which achieved a turnover (2005–06) amounting to 23 per cent of the entire turnover of Italy’s large-scale retailing sector. The second Legacoop organisation within the retailing sector is the ANCD, which organises consortia of co-operatives of retailers (including primarily CONAD and other smaller brands) with a turnover (2005–06) that accounts for 12.2 per cent of the total turnover of large-scale retailing, and some 3000 sales outlets. In February 2006, CONAD set up the very first co-operative based upon European law – Copernic – jointly with the Belgian chain Coruyt (the third largest in Belgium), the Swiss Coop (the second largest in Switzerland), the French chain E. Leclerc (the leading hypermarket chain in France), and the German Rewe Group (Germany’s second largest chain). Copernic boasts a turnover of 96 billion euros and 17 500 sales outlets. Taken as a whole, then, the Legacoop directly organises more than one-third of Italy’s large-scale retailing activity, and this share is constantly growing. In 1977, the two organisations (ANCC and ANCD) accounted for 21 per cent of the Legacoop’s turnover; by 2004, this share had risen to 40 per cent. The previously mentioned detailed study of consumers’ coops (Zamagni et al., 2004; Battilani, 2005b) reveals that there was an initial turningpoint in the 1970s; faced with numerous company crises and management problems caused by high inflation, some of the largest co-operatives chose to strengthen their performance by accelerating the modernisation of their sales outlets (supermarkets) through mergers and the adoption of a more professional approach to marketing. This resulted in the concentration on the use of the sole brand Coop and the resort to advertising (not used before). A number of prerequisites for expansion had already been established beforehand, such as the foundation in 1967 of Coop Italia, the wholesale co-operative serving the system, and the creation of local consortia (Battilani, 1999). However, it was not until the 1970s that the decisions in favour of consolidation became irreversible, and only at the end of this decade did turnover begin to increase rapidly. In 1983, there were still some 600 consumers’ co-operatives, the top nine of which accounted for a 65 per cent share of total turnover. Ten years later, this number had fallen to 300, and the top nine then accounted for 78 per cent of total turnover. The second turning-point came in the 1990s, when the major co-operatives’ decision to focus on the hypermarket option was widely shared (the number of co-operative hypermarkets rising

288

Forms of enterprise in 20th century Italy

from 5 in 1988 to 67 in 2003), and turnover grew accordingly.12 This leap in the size of sales outlets was basically possible thanks to the widespread use of member loans, which, on average, provided 50 per cent of the necessary capital. The process of concentration of the nine leading co-operatives is still ongoing, as witnessed by the creation of three agencies (North-West, Adriatic and Tyrrhenian) each providing shared services to three large co-operatives and other smaller ones. A similar trend can be detected in the construction sector, where individual co-operatives have, indeed, been strengthened, but where, more importantly, a national consortium has been set up. This is the sector in which local-area consortia had already been created at the beginning of the 20th century, but where the biggest step forward was taken in 1978 with the merger of the powerful consortia from Bologna (founded in 1912), Modena (1914) and Ferrara (1945), under the name of Ccc (Consorzio Cooperative Costruzioni). Following this merger, the Ccc strengthened its role as business promoter and service provider, and its operational range increasingly extended beyond the areas of the original consortia. At this point, a project was drawn up to unite all the consortia present in the other Italian regions with the Ccc (by far the largest), in order to create a national consortium for the overall coordination of the Legacoop’s strategy within the construction industry, an objective which was achieved in 1990 (Fabbri, 1994). The final step consisted of the incorporation of Acam (Consorzio Nazionale cooperative approvvigionamenti – the National Consortium of Building Suppliers Co-operatives), which is the consortium that brings together the many co-operatives servicing the construction industry (Ccc, 2002). The Ccc currently has 230 member co-operatives, employing a total of some 20 000 workers, and, with a turnover of 3500 million euros, it is leader in the construction industry in Italy. More recently, the services sector has witnessed the creation of groups. The largest of these is Manutencoop, with a turnover of approximately 500 million euros, as we have seen before. A national consortium – CNS – has also been created. Set up in 1977, but only really operative from the second half of the 1980s onwards, it brings together more than 200 co-operatives operating in the following sectors: facility management, transport, porterage, custodial and cleaning services, ecology, catering, and tourismcultural services. The governance of this consortium has never been easy, and was often paralysed by internal conflicts between the larger and the smaller co-ops. A stable equilibrium was finally reached in 1998 and this spurred a sustained growth of its turnover, passing at constant 2004 prices from 161 million Euros in 1999 to 384 million in 2004. This growth has been supported by the contracting out of services which is increasingly practiced by private corporations as well as by public authorities. But

Co-operatives

289

it has also been the result of the comparative advantage that a consortium has in producing integrated services (facility management), implying the use of different specialisations and the co-ordination of different co-operatives. Moreover, CNS becomes the single responsible body in contracts, which simplifies the relationship of the smaller co-operatives with the buyers of their services. It must be noted, however, that the total turnover of the co-operatives participating in CNS is 2.5 billion Euros, as against the approximately 400 million Euros intermediated by CNS, and this is due to the fact that the larger co-operatives normally still work on their own (Battilani & Bertagnoni 2008). Co-ordination operations have proven more complicated in the food and farming sector where, while there has been a growth in average company size as a result of mergers, the creation of co-operative groups for specific areas of production is only a very recent development. The largest group affiliated to Legacoop can be found in the dairy sector (Granlatte-Granarolo,13 with a turnover of 900 million euros), as we have seen above, but there are large co-operative groups present in Parmesan cheese production (Granterre), wine (GIV), fruit and vegetables (Apofruit Italia), large-scale crops, their by-products and services (Progeo), and meat (Unipeg). The other co-operative umbrella organisation, Confcooperative, is also very much present in this sector, in the form of a number of very large co-operative groups such as Conserve Italia (with a turnover of around 800 million euros). No complete study has yet been done of the cooperative presence within this sector, where co-operation, more than the capitalistic enterprises, is preserving Italy’s competitive capacity against the overbearing presence of the multinationals, as is also the case in largescale retailing and in catering with Camst (Zamagni 2002). Another area where a form of overall system governance has been developed is that of the credit unions, which also belong to Confcooperative. This area witnessed an acceleration in the concentration and growth of co-operatives during the 1990s, and, at the end of the first decade of the 21st century, the credit unions stemming out of the original very small rural banks represent 8.4 per cent of total deposits in Italy. The degree of autonomy of the 440 co-operatives is still high, although the National Federation of Italian Credit Unions has organised a tight network of centralised services. In general, the Confcooperative’s degree of concentration and compactness is not as great as that of the Legacoop, resulting in just a few large-scale co-operatives concentrated mainly in the food and farming sector. The Confcooperative has, however, an extremely strong national consortium (CGM) grouping together 79 local consortia of social cooperatives providing personal services: these consortia are constituted by a total of 1200 social co-operatives with 40 000 employees, and they boast a

290

Forms of enterprise in 20th century Italy

turnover of around 1 billion euros (Centro Studi CGM, 2005). Legacoop, to date, has a large number of social co-operatives (1500 in total, employing some 55 000 people with a turnover of 1.8 billion euros), and has set up a national association (Legacoopsociali), but its consortia are still of a smaller size and of a more limited functionality. The system governance that emerges from the above could be analysed using the model proposed by Giovannetti (2002), summarised in Table 12.10. Giovannetti criticises the use for co-operatives of the well-known transactional approach as applied to individual isolated companies, because this approach employs the concept of externality in order to make room for all that is excluded by the calculation of efficiency done in the standard way. In the co-operative world, in contrast, externalities are substantially internalised by ‘inter-cooperative’ instruments involving the creation of consortia, of sectoral and local associations, of co-operative groups and co-operative umbrella organisations, which guarantee growth at increasing returns.

12.5

CONCLUSIONS

During the 19th century, all the major economists were very interested in the co-operative idea (Zamagni & Zamagni, 2010). For example, in the 3rd edition of his Principles of Political Economy, John Stuart Mill stated that: the form of association . . . which if mankind continue to improve, must be expected in the end to predominate, is not that which can exist between a capitalist as chief, and work-people without a voice in the management, but the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves. (IV.7.21)

However, economic democracy has proved to be even more difficult to achieve than its political counterpart, since it requires the love of freedom and the ability to self-govern, and, as a result, has been superseded by hierarchical, autocratic corporations, in which workers are paced by machinery and are governed by a top-down organisational approach, in exchange for a guaranteed wage. Through the benefits of scale and scope economies, the hierarchical corporation has strengthened its position; however, it nowadays shows major drawbacks, above all, in the service sector, where output is highly customised, requiring an intrinsic motivation and a propensity to creativity on the part of workers, two elements that are not easily activated in hierarchical corporations. This has led

Co-operatives

Table 12.10

291

Governance in the co-operative system

Corporate purpose

Nature of the agreement

Class

Collective resources

Type of co-op

Production of various goods and services

Direct involvement of members

Cooperatives of production and labour

Equipment and machinery, plant, skills, goodwill, market relations

Workers co-ops, social co-ops and professional services co-ops

Technical assistance, job acquisition, guarantees against bank loans, etc

Involvement in the management and utilisation of certain resources made available for shared use

Network hubs

Creation of process funds, guarantee funds, service funds; construction of innovative and commercial strategies

Consortia, second-level co-ops, guarantee coops, service co-ops

Purchasing goods and services on behalf of members; purchasing, building and management of property

Production of goods and services for common use, with limited direct involvement of members who delegate management

Agencies and mutual aid societies

Formation of teams specialised in: seeking opportunities and works management; the purchasing of goods and quality control; the creation of and control of club goods

Estate agents, housing coops, consumers’ co-ops, management co-ops, co-operative insurance companies

Source:

Giovannetti (2002).

292

Forms of enterprise in 20th century Italy

many to rethink the role of co-operatives. Today, the prerequisites exist for co-operatives to recover appeal, even at the theoretical level (Mazzoli & Zamagni 2005), although the capitalist corporations’ power is such that it is not easy to counter. In the case of Italy, it could be claimed that the capitalist sector’s failure in the past to achieve the power retained in other countries as a result of the excessive fragmentation and the small size of firms has left the cooperatives with more room for consolidation. Co-operatives have been able to exploit this opportunity and have, in various fields, followed a virtuous path to growth, via the strengthening of company performance as a result of mergers, on the one hand, and of the creation of vast, complex co-operative networks on the other. The state has aided this process in the form of legislative measures designed to facilitate the capitalisation of cooperatives and the formation of their networks. Clearly, the governance of large co-operative undertakings and groups including not only co-ops but also joint stock companies is not an easy task. There are no pre-established models, although there are some examples abroad; nor can the large-scale capitalist corporation models be easily copied, as the co-operatives must work within the framework of economic democracy, with a multitude of stakeholders to serve. The major challenge currently facing co-operatives in Italy (and elsewhere) is precisely that of finding a suitable form of large-scale cooperative governance. Another important challenge is represented by the globalisation of the economy, which makes it imperative for the cooperative movement to find ways of going beyond its ‘national’ borders towards the creation of genuinely international co-op networks.

NOTES * 1. 2. 3. 4.

5.

We wish to thank Enrico Giovannetti for comments and criticism. The usual disclaimer applies. The three sources of inspiration of the Italian co-operative movement have often been represented by the colours of the Italian flag: green (the liberal co-ops), red (the leftist co-ops) and white (the catholic co-ops). The first Italian political party to have no ties with the co-operative movement has been Forza Italia, founded in 1993 by Berlusconi. A description of the four existing co-operative umbrella organisations can be found on the website, www.movimentocooperativo.it, which we created, covering the Italian co-operative movement, with sections in English. There are various forms of consortia, but they are all characterised by the fact that the co-operatives belonging to them are administratively and financially independent. In general, they share the services offered to the consortium’s members and they enjoy common strategic advertising and work procurement. After the initial years in which co-ops’ balance sheets were collected at the end of all other joint stock companies’ balance sheets and published in the official bulletin,

Co-operatives

6. 7.

8. 9.

10. 11. 12. 13.

293

Busa, a special issue of that bulletin (Busc) was devoted to the co-operative societies incorporated as limited companies. It must be noted that housing co-operatives are generally not included in Istat, as they have an irrelevant impact on employment. The other two existing smaller umbrella organisations are AGCI (General Association of Italian Cooperatives), originated in 1952 from a splitting out of Legacoop of most of the non-socialist and non-communist members, and Unci (National Union of Italian Co-operatives), created in 1975 from a splinter group of Confcooperative. Note that the development of co-ops under Fascism is an under-researched topic, which has only recently attracted some attention. There are three ratios that can be calculated to measure solvency. These are: (1) debt/ assets ratio, (2) equity/assets ratio, and (3) debt/equity ratio. The debt/assets ratio is a risk measure that indicates how much of total assets is lent by creditors. The equity/ assets ratio shows how much of the company’s assets is owned by the shareholders. Given that debt + equity = assets, the ratios of debt/assets and equity/assets are complements of each other. In other words, D/A + E/A must be = 1 (i.e., the lender’s stake and the owner’s stake equal the total company assets). The debt/equity ratio is another measure of financial risk. If one ratio is known, the other two ratios can be calculated directly without any additional information. There is only one important exception to this periodisation and it is the creation of the insurance company of Legacoop, Unipol, as a joint stock company already in 1963, quoted on the stock exchange in 1986. It was an investigation by magistrates in Milan into widespread corruption in public tenders. An unpublished study of the CONAD supermarket chain reveals that co-operation among retailers, too, experienced a jump in size in the 1990s with the advent of the hypermarkets. This group unites both ‘red’ (left-wing) and ‘white’ (Catholic) co-operatives.

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Index Abramovitz, Moses 2, 130 Acemoglu, Daron 1 Acocella, Nicola 102 Affinito, Massimiliano 53 Aganin, Alexander 44, 69 Aharoni, Yair 54 Alzona, Gianluigi 53 Amatori, Franco 3, 10, 28, 52–3, 87, 135, 139, 141, 166, 228 Amin, Ash 182 Amsden, Alice H. 26, 54 Antonelli, Cristiano 13 Arrighetti, Alessandro 14, 54, 68, 86, 205, 223, 254 Audretsch, David B. 236, 267 Ayyagari, Meghana 267–8 Baccini, Alberto 212–13, 219–21, 223 Baffi, Paolo 115 Balassa, Bela 51, 128 Balconi, Margherita 53, 146, 269 Balloni, Valeriano 267 Balzani, Roberto 186 Barba Navaretti, Giorgio 266 Barberis, Corrado 224 Barbetta, Gian Paolo 248 Barbiellini Amidei, Federico 13 Barca, Fabrizio 46, 52–3, 133–5, 139, 141 Bargigli, Leonardo 85 Bartelsman, Eric 227 Barucci, Emilio 53 Battilani, Patrizia 16, 27, 127, 273, 275, 279, 287, 289 Battilossi, Stefano 186 Baumol, William J. 1 Becattini, Giacomo 14, 183, 205, 222 Beck, Thorsten 132, 267 Belfanti, Carlo Marco 161 Bellandi, Marco 161, 183, 204 Bellini, Nicola 135

Bergman, Giulio 126 Berle, Adolf Augustus 27, 85 Berlusconi, Silvio 224, 292 Berselli, Aldo 191 Berta, Giuseppe 251, 267 Bertagnoni, Giuliana 280, 285, 289 Bertini, Giorgio 54 Bertrand, Marianne 57, 86 Bianchi, Marcello 139 Bianco, Magda 139 Bigatti, Giorgio 191 Bigazzi, Duccio 122–3, 131 Birdsall, Nancy 54 Biscaini-Cotula, Anna Maria 146 Bognetti, Giuseppe 54, 68, 86 Bolchini, Piero 192, 195, 204, 268 Bondi, Massimo 228 Bonelli, Franco 52, 166, 267 Bottiglieri, Bruno 35, 119, 127, 130 Bova, Francesca 89–90, 93 Brioschi, Francesco 139, 141, 267, 269 Brusco, Sebastiano 161–2, 204, 211, 267 Butera, Federico 267 Cafagna, Luciano 14, 204, 267 Cainelli, Giulio 267–8 Calabi, Donatella 190 Camp, Richard L. 210 Campilli, Pietro 126 Capanna, Alberto 177, 182 Carli, Guido 148 Carnevali, Francesca 152, 205 Carreras, Albert 28 Casari, Marco 279 Caselli, Guido 283 Cassis, Youssef 28 Castellucci, Lucia 15 Castronovo, Valerio 119, 127, 130, 172, 194, 228 Cavazza, Fabio 53 Cazzola, Franco 279

323

324

Forms of enterprise in 20th century Italy

Chandler Jr., Alfred D. 3, 10, 25, 27–8, 40, 227 Chiaventi, Roberto 175, 268 Chick, Martin 53 Churchill, Winston 130 Ciocca, Pierluigi 139, 146 Ciullo, Laura 91 Clifton, Judith 53–4 Colajanni, Napoleone 141 Colaninno, Roberto 228 Colli, Andrea, 11, 16, 43, 53, 87, 161, 169, 171, 178, 183–4, 204, 228, 253, 267 Coltorti, Fulvio 141, 146, 148, 228, 251 Confalonieri, Antonio 52 Conte, Leandro 13 Conti, Giuseppe 13, 147 Conti, Sergio 183 Coppa, Giorgio 209 Corbetta, Guido 253 Costa, Angelo 115, 120, 123–4, 126–7, 129–30 Cotula, Franco 139 Craveri, Piero 130 Cuccia, Enrico 127, 131

Fabbri, Fabio 280, 288 Fagerberg, Jan 2 Fanfani, Amintore 216 Fari, Simone 14 Fauri, Francesca 12, 125–8, 131 Federico, Giovanni 27, 44, 161, 183–4, 204, 259, 263, 267–8 Feigenbaum, Harvey 53 Felice, Emanuele 285 Fenoaltea, Stefano 190 Ferri, Giovanni 249 Fisman, Raymond 139 Floriani, Virgilio 242 Fodor, Giorgio 115 Fornasari, Massimo 273 Fortis, Marco 36, 199, 228 Franco, Rossella 191 Franko, Lawrence G. 101 Frasca, Francesco M. 148 Freeman, Chris 2, 10, 40, 46, 50, 227 Fuà, Giorgio 183, 248 Furubotn, Eirik 281–2

Daneo, Camillo 178 Dayton, M. Leon 131 De Arcangelis, Giuseppe 249 De Benedetti, Augusto 182 De Benedetti, Carlo 228 De Cecco, Marcello 53, 134, 161 De Gasperi, Alcide 114, 130 De Grazia, Victoria 102 De Nardis, Sergio 248, 267 Deaton, Angus 40 Del Buttero, Anna 93, 101 Demirgüç-Kunt, Asli 132 Di Cesare, Michele 267 Di Martino, Paolo 11 Djelic, Marie Laure 102 Donovan, Robert J. 116 Doria, Marco 130 Dosi, Giovanni 131 Dumoulin, Michel 89, 91 Dunning, John H. 87

Galbani, Egidio 242 Galimberti, Claudia 163 Gallino, Luciano 30, 267 Gardini, Raul 228 Gerschenkron, Alexander 1, 26, 53 Giannetti, Renato 6, 10, 12, 15, 27–8, 42, 44, 48, 54–5, 142, 158, 204, 228–9, 247, 267 Gigliobianco, Alfredo 148 Gille, Bertrand 89 Giovannetti, Enrico 290–91 Giuntini, Andrea 14, 190 Gnutti, Emilio 228 Goldstein, Andrea 9 Grandi, Alberto 182 Graubard, Stephen 53 Graziani, Augusto 178, 180 Grossman, Sanford 133 Gualerni, Gualberto 177 Gualino, Riccardo 228, 241 Gualtierotti, Pietro 212, 217–18 Guerci, Carlo 267 Guzzi, Carlo 242

Easterly, William 130 Eichengreen, Barry 116 Einaudi, Luigi 114–15

Hall, Peter A. 1 Haltiwanger, John 26 Hannah, Leslie 28

Index Hansmann, Henry 277 Harrison, Bennett 36 Hart, Oliver 133 Hatzichronoglou, Thomas 237 Heertje, Arnold 113 Hertner, Peter 89, 109 Hikino, Takashi 3, 10 Jacoboni, Attilio 115 Jacobucci, Donato 267 Jalla, Ermanno 268 Johnson, Shane 132 Jones, Geoffrey 87 Jones, Joseph M. 130 Kindelberger, Charles P. 116 Kumar, Krishna 267 La Malfa, Ugo 125–6 La Porta, Rafael 1, 56–7, 85 Lagala, Canio 209 Lamoreaux, Naomi R. 4 Landes, David S. 1 Langlois, Richard N. 4 Lanthier, Pierre 53 Lavista, Fabio 15 Leo XIII 210, 273 Leonardi, Andrea 279 Levine, Ross 132, 267 Link, Albert N. 123 Lionetti, Stefano 212, 222 Litan, Robert E. 1 Lombardo, Giorgio 124–5 Longoni, Giuseppe Maria 14, 214, 224 Louçã, Francisco 2, 10, 28, 41, 46, 50, 227 Love, Inessa 139 Lundvall, Bengt-Ake 2 Lungonelli, Michele 184 Maccabelli, Terenzio 161 Maddison, Angus 1 Maione, Giuseppe 114 Malerba, Franco 2, 113 Mantegazza, Amilcare 109 Manuli, Dardanio 242 Maraffi, Marco 208–209, 216 Marchi, Alves 139 Marchionatti, Roberto 139 Marotta, Giuseppe 148

Martinez Lopez, Alberte 91 Marucco, Dora 279 Mattei, Enrico 84, 128 Mattina, Liborio 127, 216 Mayer, Colin 137 Mayer, Michael 1, 43 Mazzini, Giuseppe 273 Mazzoli, Enea 292 Means, Gardiner C. 27, 85 Megginson, William 53 Mendonça, Sandro 28, 41 Menzani, Tito 274, 280 Merrett, David T. 50 Merusi, Fabio 134 Messori, Ottavio 177, 182 Miata, Alessandra 267 Mill, John Stuart 290 Miller, Merton 132 Millward, Robert 54, 189 Modigliani, Franco 132 Moore, John 133 Morck, Randall K. 1, 56 Mortara, Alberto 68, 86 Mowery, David C. 2 Mucchetti, Massimo 54 Mullainathan, Sendhil 57, 86 Mussolini, Benito 192 Nakamura, Leonard 132 Napoli, Isabella 130 Nellis, John 54 Nelson, Richard R. 2 Nesci, Francesco 267 Netter, Jeffry 53 Nitti, Francesco Saverio 89, 111 North, Douglass C. 1 Nuti, Fabio 161 Olson, Mancur 129 Onida, Fabrizio 267 Orsenigo, Luigi 113 Ortona, Egidio 130 Osti, Gian Lupo 53, 146, 152 Paba, Sergio 161–2, 204, 267 Pagano, Marco 44, 139 Paolazzi, Luca 163 Parodi, Emanuele 242 Parrillo, Francesco 213, 219 Pasinetti, Luigi 131

325

326

Forms of enterprise in 20th century Italy

Pastorelli, Sabrina 12, 54 Patel, Pari 25, 41 Pavan, Robert J.106 Pavitt, Keith 25, 41, 46, 50–51 Pejovich, Steve 281–2 Pella, Giuseppe 125 Pellegrini, Guido 35 Perez, Carlota 26 Perlman, Mark 113 Perrone, Ferdinando Maria 228 Perugini, Mario 14 Pescarolo, Alessandra 169 Pescosolido, Guido 208 Pesole, Dino 209, 212, 216, 224 Petri, Rolf 53 Petrini, Francesco 126 Pezzini, Antonello 267 Pezzini, Mario 211 Pierobon, Federico 53 Piluso, Giandomenico 13, 131, 141, 147 Piore, Michael J. 205 Piscitello, Lucia 9 Pomeranz, Kenneth 1 Pontolillo, Vincenzo 146 Posner, Michael V. 53–4, 152 Quadrio Curzio, Alberto 36, 199, 228 Raff, Daniel M. 4 Raggi, Andrea 186 Rajan, Raghuram 132, 139 Ravenni, Gian Bruno 169 Ricciardi, Ferruccio 54 Rinaldi, Alberto 14, 85, 224 Rocca, Agostino 235 Rodrick, Dani 54 Romei, Valentina 14 Romeo, Rosario 166 Rosenberg, Nathan 112 Roth, Kendall 267 Rugge, Fabio 191 Sabel, Charles F. 205 Saita, Massimo 268 Saletnich, Enrico 54 Salvati, Michele 35 Sapelli, Giulio 53, 129, 152, 186 Saraceno, Pasquale 69, 135

Sartori, Romolo 54 Sassi, Olinto Mario 131 Sbrana, Filippo 127 Schiaffino, Federico 241 Schimberni, Mario 228 Schramm, Carl J. 1 Schreyer, Paul 267 Schumpeter, Joseph A. 227 Scranton, Philip 4 Segreto, Luciano 114 Sekai, Kentaro 267 Seravalli, Gilberto 14, 205, 223, 254 Sforzi, Fabio 162, 183 Shleifer, Andrei 53 Short, Robert P. 53 Siciliano, Giovanni 139 Siglienti, Sergio 130 Simoncini, Franco 209 Soete, Luc 2, 10, 40, 50 Solimene, Laura 200 Soskice, David 1 Spadavecchia, Anna 183, 205 Spagnolo, Carlo 54, 68, 86 Stampini, Marco 268 Steil, Benn 2 Stiglitz, Joseph 53–4 Sutton, John 6, 26, 227 Tafunell, Xavier 28 Tarchiani, Alberto 114 Temin, Peter 4 Termini, Valeria 199 Thurik, Roy 267 Tirole, Jean 158 Togliatti, Palmiro 211 Toninelli, Pier Angelo 11, 27, 43, 52–3, 85, 135, 158 Toniolo, Gianni 129, 177, 211 Traù, Fabrizio 248, 267 Trento, Sandro 52–3, 134–5, 141 Trezzi, Luigi 117 Turani, Giuseppe 267 Vaccà, Sergio 201–202 Valletta, Vittorio 122, 127 Valli, Vittorio 228 Valotti, Giovanni 200 Van der Wee, Herman 53 Vanek, Jaroslav 282 Varni, Angelo 194

Index Vasta, Michelangelo 6, 10–11, 13, 27–8, 35–6, 39, 42–3, 50, 55, 85–6, 88, 142, 158, 204, 228, 247, 256, 267–8 Velucchi, Margherita 42, 229, 247 Ventura, Marco 249 Viesti, Gianfranco 163, 182 Ville, Simon 50 Volpin, Paolo 44, 69 Ward, Benjamin 282 Wardley, Peter 28 Weiss, Linda 205, 211, 219, 222–4 Wellisz, Stanislaw H. 122 Wexler, Imanuel 116 White, Lawrence 27, 61, 137 Whitley, Richard 1–2

327

Whittington, Richard 1, 43 Wilkins, Mira 89, 92–3 Woolf, Stuart J. 53–4, 152 Yosha, Oved 132 Zacchia, Carlo 183 Zadeh, Lotfi Asker 5 Zamagni, Stefano 290, 292 Zamagni, Vera 16, 27, 89, 112, 127, 178, 206, 208, 214, 273–4, 279–80, 283, 285, 287, 289–90 Zanetti, Giovanni 53 Zangheri, Renato 274 Zanussi, Antonio 242 Zingales, Luigi 132, 139 Zoboli, Roberto 267