Not Doomed to Death: A Map of Small Firms' Business Models in the Italian Textile Apparel Industry

Abstract

International competition has severely hit the Italian textile-apparel (TA) industry, causing reductions in the number of firms, revenues, value added, export and employment. Small firms, even those located in historical and well established districts like Prato and Biella, have suffered the most, going out of business at an unprecedented rate. This trend has prompted a crowd of scholars, practitioners and policy makers to conclude that industrial districts will disappear and that small firms are doomed to death in global mature industries like TA. But a closer and more rigorous look at the data and facts behind this general picture reveals a more articulated situation with wide variation in small firms' performance and significant differences in the strategies that they have come up with to survive, and, in some cases, to thrive.

Using data from the Italian Ministry of the Economy annual industry revenue survey (Studi di Settore), we apply multiple correspondence analysis and cluster analysis to a sample of almost 30,000 small Italian textile-apparel firms to map this variation of small firms' performance onto the business models they have adopted. Using the structural business variables contained in the survey, we identify 9 business models in textiles, 4 in finishing and 12 in apparel. Some of them (those characterized by internationalization, investment in technology and skills, move up scale in the market) are associated with higher productivity and innovation, while the others lead to decline. These business models provide an interesting diagnostic and predicting tool for business practitioners and policy makers who believe small firms in mature industries can still play an important role in the economy and wish to support them as they strive to compete globally.