Local liabilities between immigrant and native entrepreneurship in clusters and global value chains

Simone Guercini


The chapter proposes the new concept of “local liabilities” for a better understanding of the link between immigrant entrepreneurship in industrial districts (IDs) and global value chains (GVCs). Local liabilities, in which the term “local” refers to social space, emerges in settings where two (or more) separate communities (of persons and firms) exist: the greater the separation between the communities, the larger the local liabilities. This new form of liability has not yet found a place in the business literature. The term “liability” refers to conditions of disadvantage experienced by certain business actors. It has been widely addressed both in international business studies (the liability of foreignness, the liability of outsidership - Johanson and Vahlne, 1977, 2009; Johanson and Wiedersheim-Paul, 1975), as well as in studies on the role of the age and size of enterprises in determining conditions for success (liability of newness, liability of smallness - Stinchcombe, 1965; Freeman et al., 1983; Aldrich and Auster, 1986). The chapter proposes and elaborates on the concept of “local liabilities”, specifically with regard to the problems associated with changes to clusters of originally district-based enterprises (Becattini, 1990; Varaldo and Ferrucci, 1996), a phenomenon which has been contextually observed during the development of immigrant entrepreneurship (Waldinger, 1986; Aldrich and Waldinger, 1990).

The concept of local liability is moreover addressed in relation to communities of enterprises and people, both in local settings and in the global value chains to which the enterprises belong (Gereffi, 1999). The separation between different communities of people and enterprises does not exclude the presence of even significant transactions between immigrant and native entrepreneurship. Such separation, however, reduces the possibilities for interaction, thereby creating not only weak bonds (that could have positive effects - Granovetter, 1973), but limiting the contact between the actors associated with different communities of people (Guercini and Ranfagni, 2016). Local liability thus represents a barrier to the development of trust and reciprocal learning (Camuffo and Grandinetti, 2011; Grandinetti, 2011) and business interaction (Hakansson, 1982; Guercini and Runfola, 2015).

The relation between native and immigrant entrepreneurship and their respective value chains is examined with regard to the consequences of the local liabilities that may emerge in industrial clusters. The possibilities for interaction are influenced by the different characteristics of the relationships between the industrial cluster’s enterprises and the actors in their respective value chains. A division of these relationships is proposed, according to whether the native and immigrant enterprises belong to the same or different global value chains (Gereffi, 1999; Cattaneo et al., 2010). The fact that the enterprises belong to different value chains likely plays an important role in fostering the survival of the two (or more) communities of people and enterprises, despite the disrupting influence of local liabilities

(Humphrey and Schmitz, 2002). For example, there are different value chains when companies of the two (or more) communities evolve in very different ways and times in the shift from “producer-driven” to “buyer-driven” commodity chains (Gereffi, 1994) and the business of the different communities interact with different and separate groups of customers and suppliers both locally and globally. Moreover, relationships with actors in the global value chain can aid both the native as well as the immigrant business, even in the presence of local liabilities (Dei Ottati, 2016). However, when faced with change, the separation between the enterprises reduces the possibilities for learning and development within the local setting. A potential way to overcome such local liability is by strengthening the interaction capacities of both the native and immigrant enterprises (Guercini and Runfola, 2015).

The chapter takes a general approach, developing a number of concepts that are not specific to any individual enterprise, value chain or industrial district. However, methodologically it is based for the most part on nearly 20 years’ experience studying Chinese immigrant entrepreneurship in the Prato industrial cluster, a fashion production area located near Florence known as one of Italy’s largest and most important industrial district (Becattini, 1990; Dei Ottati, 1994; Guercini, 2004).

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