Reasons for the research
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by Margherita Russo
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Abstract
In the late 1990s, the wave of changes in the new economy showed the advent of an increasingly immaterial economy, in which traditional industries would have been swept away by new technologies of the information. Mechanical engineering was also included among those traditional industries.
The dynamics of the Italian economy in recent years and the challenges that must be faced in the global scenario now point policy makers towards an opposite perspective, in which mechanical production is given the role of support and engine of economic growth in the country. To what extent do these indications find support in the analysis?
Actually, there have been few attempts to analyse the characteristics of the mechanical industry in Italy.
We don’t have statistics that tell us which products or territories would be favoured by a greater innovation or a greater cost competitiveness of mechanical engineering companies.
There is little data that allows us to make a systematic analysis and the limited data available, such as census data on employment or foreign trade, do not provide an easy understanding of the dynamics of the different mechanical specialisations and the intersectoral intertwining of skills, goods and services that pass through mechanical production.
Within fifty years, after the considerable growth in mechanical employment that marked the period 1951-81, and which accompanied the development of the Italian economy, we see a phase of contraction in the period 1981-2001, with a reduction of about 214.000 employees in the decade 1981-91 and a further 35,000 in the following decade: an overall reduction of 9.75%, which is not evenly distributed in the country and in the various sectors, and in some cases the variation has a different sign from one period to the next.
Two decades of transformations that profoundly reduced the role of large companies' production systems and in which the systems of small companies' production assumed an increasing importance. In this volume we focus our attention on the mechanical industry, which will be considered in a broad sense, namely both light and instrumental mechanics - included in the Made in Italy - and heavy mechanics (steel, means of transport). It is a vast and very complex aggregate, which has been affected by profound technological and organisational changes that have redesigned the internal and external relations between companies.
The analysis of changes in the spatial configuration of the mechanical engineering industry is based on some questions raised during the METALnet 2000 empirical research on the mechanical engineering production system in the province of Modena, which is characterised by a dense network of relationships between small and medium-sized enterprises (SMEs) highly specialized in a few phases of the production process, with a wide variety of sectors that use machinery and plant produced within the production system.
The METALnet research revealed significant changes in the localisation of mechanical employment. Alongside the contraction or lower growth in the clusters of the province, where the mechanical production developed (mainly the municipal capital), there was an expansion in the neighbouring clusters. Here, the greater availability of areas of expansion and greater proximity to the sectors of use favoured, since the eighties, the location of new mechanical enterprises or the growth of employment of companies already active.
Another phenomenon found in METALnet's research concerned the intensification of processes, on the one hand, of vertical disintegration in mechanical production and, on the other hand, of integration between chains (from biomedical production to tile production) converging in the use of skills, processes and mechanical components.
In general, the questions raised during METALnet's research called for an assessment of the specificity of the phenomenon observed at local level: in which territories and with what effect there was an expansion of mechanical activities such as the one observed during the research on Modena?
The first question to be addressed concerns the criterion that must be used to identify territories with similar characteristics. The research group decided to use census data on employment to conduct a systematic analysis of national data at distinct levels of territorial breakdown.
In the spatial analysis of census data, we used the spatial plot of systemic connections that ISTAT identifies with local labour systems (LLS). The LLS seeks to grasp the relational dimension of social and economic activities in the spatial sphere of daily home-work mobility. It is therefore considered a key to the analysis of local economies and their productive characteristics.
Thus, the research focused on a broader comparison between the production system of mechanics in Modena and other production systems of small and medium sized companies with mechanical specialization in Italy.
The objective of this comparison is, first of all, to verify to what extent the results of the empirical survey on the spatial dynamics of mechanical employment are the expression of a more general phenomenon of spatial and sectoral reorganization of manufacturing activity in Italy, which affects in a differentiated way the different areas of the country.
A second objective is to identify areas comparable to the intensity of mechanical and manufacturing specialisation, and to the presence of small and medium-sized enterprises.
The time frame to which we referred the analysis is that of the census data of employment over the last fifty years, with a deepening of the dynamics of the transformations of the period 1981-2001.
With this long gaze at the past, the considerations proposed in this research will allow us to better understand the spatial effects - in the various areas of mechanical specialization in Italy - of the changes that the new international relations will have in the future. These changes are already marked by the growing use, also in the Italian mechanical engineering industry, of long supply chains of components from Eastern, Middle East and China, and this will change the geography of the specializations of the mechanical industry in Italy.
In the analysis of census data related to LLS, we used the two most recent spatial configurations elaborated by ISTAT and based on census data of 1991 and 2001.
First of all, we addressed two closely related issues: the definition of specialization in relative terms (and not referring to a threshold value, as ISTAT does) and the identification of criteria for the comparison of territories.
In Chapter 1 we propose a cluster analysis that allows to identify, starting from the employment areas identified by ISTAT, groupings of local systems with similar characteristics compared to the overall size of the system (in terms of total employees, manufacturing workers, mechanical workers), to mechanical specialization (in terms of mechanical workers' share of total manufacturing workers), to the size of the enterprise.
Conducted on the spatial configuration of employment areas in 1991 and 2001, cluster analysis highlights the expansion of areas with mechanical specialization: mechanical specialization increases not only within the most specialized territories, but also in the neighbouring territories.
Referring to the different types of LLS found in the cluster analysis of the census data on employment, we can examine changes in spatial agglomeration in the different sectors of the mechanical engineering industry, the main manufacturing sectors and the business services sector. In particular, Chapter 2 describes the trend in mechanical employment from 1951 to 2001 with reference to the cluster of LLS, while in the following three chapters the analysis focuses on the period from 1981-2001.
In Chapter 3 we investigate changes in the spatial configuration of mechanical specializations between 1981 and 2001 using the spatial agglomeration index proposed by Ellison and Glaeser (1997). We will show that when the index is calculated on the provincial data, significant and consistent results are obtained according to the case studies: for many sectors there are substantial advantages on spatial agglomeration, even if they reduced during the twenty years under examination. In our opinion, the reduction of localisation advantages is linked to the reorganisation of the production process, marked by a wide outsourcing of the phases previously carried out within the final company.
Territorial differences in the sectoral composition of the mechanical engineering industry explain the differences in terms of employment growth and in Chapter 4 we focus on a spatial description of the change in employment in the period 1981-2001 in the main sectors of mechanical specialisation, in particular those specialised in the production of machinery.
In order to summarise the spatial analysis of the differences in the sectoral composition, Chapter 5 proposes a shift-share technique, which makes it possible to highlight, for each territory, the contribution to the change in employment that derives from the particular sectoral composition of the production activity compared to the contribution attributable to other local development factors. After presenting the shift-share technique, we will present the results related to provincial data, to LLS of SMEs with mechanical specialisation identified by ISTAT and to the LLS clusters identified in Chapter 1. We will examine the dynamics of each cluster to assess whether differences in the intensity of specialization, enterprise size and size of the LLS are associated with different patterns in the variations of the shift-share analysis components. The interpretation of spatial and sectoral dynamics provides an opportunity for a critical reading of shift-share analysis. Even with the limits that will be discussed in Chapter 5, the shift-share analysis allowed us to highlight some transformations in the spatial structure of the Italian mechanical industry with references to both small and medium-sized enterprise systems in the northern areas and to the employment areas in the south, whose positive dynamics cannot be grasped by examining only the data relating to the employment areas with mechanical specialization identified by ISTAT.
After reading the spatial data based on employment census data, in Chapter 6 we propose an analysis of the territorial differences in the geographical orientation of exports of the main sectors of the mechanical industry in the period 1991-2004. In this chapter, the territorial analysis is referred to the provinces for which three-digit foreign trade data are available. Although in economic models, spatial data on exports are often approximated by employment data for which it is easier to obtain reliable statistics, this work shows that there is no linear relationship between these two variables.
The book closes with an in-depth analysis of four systems of mechanical production of small and medium sized enterprises: in the central area of Emilia-Romagna, with reference to the provinces of Bologna, Modena and Reggio Emilia, and in Lombardy, whose development of mechanical production in the province of Brescia is examined. In an historical perspective, Chapter 7 presents the comparison of the development paths of systems of small and medium mechanical enterprise that distinguished the development model of the Italian economy in the second half of the twentieth century.
The research questions required a comparison between territories. Although with all the limits discussed in this volume, the vast database of census data on employment and provincial data on exports allows a reading of the territorial differences of the sector specialization of the mechanical industry in Italy, from which we can infer the potential of income or skills that are generated in that territory. The phenomena of international fragmentation of value chains is substantially changing the geography of production relations and requires new data and analysis tools to describe changes in the spatial configuration of the productive structure. The territories characterized by systems of small and medium-sized enterprises operating in mechanics still show strong roots in local economies, in which they generated the specific skills that allowed companies to develop their business strategies. However, these enterprises are increasingly intertwined with other local economies, from which they draw not only components or materials, but also technical skills and growth opportunities that change even those local economies in which they are rooted: networks of skills and value chains can be better described by ethnographic surveys highlighting the networks of economic and social relations between businesses and between territories.
A new season of research is therefore opening, in which is possible to use the tools of dynamic analysis of networks of social relations and complex systems, which require other data to analyse local economies and their transformations in the global economy.