Linking Italy’s Banking and Industry in Eastern Europe: Industrial District Outsourcing and Bank FDI

Local Economies and Internationalization in Italy Conference, p. 373, 2003

30 Pages Posted: 4 Aug 2012

Date Written: November 20, 2003

Abstract

Following deep banking crises in their early transition, Eastern European countries have opened up to foreign banks, which (mostly from Western Europe) have massively entered those markets during the last decade. Though Italian banks ventured into their Eastern Passage only in recent years, they made relatively large investment to gain a retail presence in Eastern Europe. Concurrently, over the last decade, many Italian industrial districts specializing in traditional goods responded to growing competition from emerging economies walking their own Eastern Passage. Specifically, these industrial districts found a new way to safeguard their competitive hedge by largely moving (heavy unskilled labour phases of) production to low-labour-cost Eastern Europe. We try to shed some light on whether the two Eastern Passages were related or independent.

Using detailed data for Italy, we find that banks venturing into retail business in Eastern Europe are significantly increasing their market share in Italy’s industrial districts that heavily shifted their production process to Eastern Europe in search of lower labour costs. We interpret this as indirect evidence that, with their move to Eastern Europe, Italian banks are effectively strengthening links with their national manufacturing customers. We conclude that, even though possibly motivated by other factors as well, the move by Western banks to Eastern Europe may also be interpreted as a strategy catering for the home market. Hence, the two Eastern Passages seem to be related to some extent.

Suggested Citation

Farabullini, Fabio and Ferri, Giovanni, Linking Italy’s Banking and Industry in Eastern Europe: Industrial District Outsourcing and Bank FDI (November 20, 2003). Local Economies and Internationalization in Italy Conference, p. 373, 2003. Available at SSRN: https://ssrn.com/abstract=2123291 or http://dx.doi.org/10.2139/ssrn.2123291

Fabio Farabullini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Giovanni Ferri

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

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