The case of native and immigrant entrepreneurship in Prato

Regarding the issue of internationalization of enterprises and supply chains, one particularly interesting case is represented by the firms located in the area of the city of Prato in Tuscany, Italy, whose evolution (which in some respects is quite surprising given the available study models for Italian industrialization) has led some to speak of a “black swan” phenomenon (Milanesi et al., 2016).

The Prato area is the site of the development of one of Italy’s largest industrial districts (Becattini, 1990; Dei Ottati, 1994), which is specialized in the production of semi-finished woollen textile goods (fabrics and yarns). The term “industrial district” refers “to a particular form of socio-economic organization in which small and medium-sized businesses, most often specialized in a particular production sector and related activities, tend to cluster together in a given area . . . there is a notable level of exchange (market) relations among these businesses, but exchange typically takes place between persons belonging to the same social group, whose members share implicit rules of reciprocal cooperation (community)” (Dei Ottati, 2016, p. 56).

In the specific case of Prato, the history of the industrial district is linked to local entrepreneurship that has benefitted from extensive immigration from other regions of Italy. Thus, the district grew to considerable size in the late 1900s, culminating in Prato becoming one of the largest textile-producing areas in the world (Becattini, 2000). At the time, the area was the destination of many immigrants, for the most part from other Italian regions, and was characterized by a high capacity to integrate the new arrivals into the socio-economic fabric of the local system.

With the growing phenomenon of immigration from other countries, in recent decades Italy has also witnessed a substantial growth in the immigration of people and immigrant entrepreneurs. In particular, in recent years a considerable number of enterprises have been established by Chinese immigrants in Italian industrial clusters and in major metropolitan area. This, in an overall backdrop of the spread of such entrepreneurship throughout Europe (Baldassar et al., 2015) and a general transformation of its industrial districts (De Marchi and Grandinetti, 2014; Di Maria and Micelli, 2006). The Prato area has experienced extensive immigration of Chinese nationals, mainly with origin from the municipality of Whenzhou in Zhejiang, with the first arrivals in the late 1980s and a rapidly increasing influx during the subsequent decade, accompanied in parallel by a growing number of immigrant Chinese firms active in the apparel sector in Prato (Colombi, 2002; Guercini, 1999, 2002; Dei Ottati, 2009). The economics literature has devoted an extensive body of work to the case of Prato for the last 10 to 15 years, when the growth of Chinese entrepreneurship in the apparel industry was co-occurring with the contraction of the textile manufacturing activities conducted in the traditional industrial district (Dei Ottati, 2016).

Data from the Prato Chamber of Commerce from the late 1990s already reported a community of about 9,000 registered Chinese legal aliens and over a thousand enterprises, of which about 80% were in the clothing business, figures that more than doubled over the subsequent 10 years. During the 1990s the immigrant firms represented mostly sub-contracting suppliers for the apparel industry, and could at that time count on certain advantages with respect to native firms in similar positions as subcontractors, namely, lower labour costs and very rapid response times (Guercini, 2002). Their Italian client enterprises at this stage were ready-fashion knitwear and clothing manufacturers that in some cases grew during these years through the creation of brands and new distribution policies (Guercini, 2001). At the time, clothing firms

(both native and immigrant) had a relatively marginal role in comparison to Prato’s native textile firms, from whom some would acquire fabrics, though in limited quantities because the main final firms in the textile district worked mainly for a national and international clientele represented by enterprises in programmed fashion and large international department stores, with sourcing needs that were different from fast fashion stores (Guercini, 2004).

Though this was the situation in the 1990s, the following decade opened up a wholly new stage of development, during which some of the immigrant clothing firms acquired the capacity to complete the entire apparel manufacturing cycle (Guercini et al., 2013; Dei Ottati, 2016). This was a very important transition from a global value chain point of view, since local apparel immigrant firms in Prato became “full-package suppliers” (Gereffi, 1999). In some cases, their clients closed down, while in others, they gave up the manufacturing stages and invested increasingly in branding and distribution. The old Chinese subcontractors, or at least some of them, became final manufacturers, and other Chinese firms became subcontractors for other immigrant clothing firms. At the same time, a part of the Italian native apparel firms (a minority in comparison with the native textile firms) were externalizing manufacturing focusing on design, marketing and especially retailing their (new) brands; another part of the Italian apparel manufacturers were pushed out from the market by competition with local immigrant firms, or moved toward the upper segment of clothing manufacturing services, working with national and global luxury brands as main customers. In this stage, they had already integrated some of their client firms’ resources, including native human resources (Ceccagno, 2004). Their advantage over their former client enterprises stemmed partly from what they learned from the host country, partly from easy access to both the supply market in their country of origin and the resources of the host country (services, “made in”), aspects that together have equipped them with distinctive capacities in global supply chains (Guercini et al., 2013).

At the same time that Chinese enterprises were on the rise, the Italian-owned textile enterprises of the Prato district were in dire straits, and their number progressively fell significantly after 2001, and then even more precipitously afterwards, with a consequent decrease in the exportation of textile products. The recent evolution of the immigrant and native data on entrepreneurship in the Prato confirms the trends already mentioned, which are accentuated in the last decade (see Table 8.1). Nevertheless, it is important to claim that natives’

Table 8.1 Native and immigrant firms in textile and clothing in the local Prato area (2002-14) (a) Native and immigrant firms in the province of Prato1

Firms by origin of the entrepreneur

2002

2010

2011

2012

2013

2014

2014/2002

Immigrant

2,194

7,028

6,954

7,139

7,477

7,801

+255%

- Chinese

1,537

4,808

4,700

4,803

5,023

5,230

+240%

- Others

657

2,245

2,254

2,336

2,454

2,571

+291%

Mix of immigrant-immigrant

13

25

27

26

26

21

+61%

Mix of immigrant-native (national)

465

458

432

436

438

447

-4%

Native (national)

23,707

21,876

21,756

21,466

21,239

20,707

-13%

- Native/immigrant

10,8

3,1

3,1

3,0

2,8

2,7

-75%

- Native/immigrant Chinese

15,4

4,5

4,6

4,5

4,2

4,0

-74%

Total

26,379

29,387

29,169

29,067

29,180

28,976

+10%

1 The figure is at December 31 of each year, firms in the “active”.

Source: Author’s elaboration on data of Chamber of Commerce of Prato

(b) Clothing industry and textile industry - Native and immigrant firms in the province of Prato1

Firms by origin of the entrepreneur

2002

2010

2011

2012

2013

2014

2014/2002

Total (foreigners and natives)

- textile firms

4,454

2,448

2,353

2,274

2,256

2,212

-50%

- clothing firms

1,910

4,029

4,003

3,928

3,963

3,984

+109%

Chinese (immigrant and mixes)2

- textile firms

45

243

242

264

320

339

+653%

- clothing firms Natives (national)3

1,131

3,364

3,165

3,200

3,255

3,304

+192%

- textile firms

4,396

2,143

2,056

1,947

1,874

1,815

-59%

- clothing firms

767

630

804

696

676

643

-16%

Share of Italian native in textile

98,7%

87,5%

87,4%

85,6%

83,1%

82,1%

-17%

Share of Chinese in

clothing

59,2%

83,5%

79,1%

81,5%

82,1%

82,9%

+40%

  • 1 The figure is at December 31 of each year, firms in the “active”.
  • 2 The data about “Chinese textile” and “Chinese clothing” firms includes the firms with Chinese in the mix immigrant-immigrant and in the mix immigrant-native including Chinese (national).
  • 3 The data about the “native” is calculated as the total minus the total with foreigners (immigrants and mixed).

Source: Author’s elaboration on data of Chamber of Commerce of Prato.

(c) Fashion firms in the area of Prato1

Fashion industries in

2002

2010

2011

2012

2013

2014

2014/

the Prato area

2002

- Textiles

7,276

3,143

3,027

2,918

2,876

2,815

-61%

- Clothing

2,529

4,476

4,438

4,347

4,371

4,379

+73%

- Leather goods and shoes

Nd

422

474

530

539

557

+32%[1]

Total

9,805

8,041

7,939

7,795

7,786

7,751

2

140 Guercini

Table 8.1 Continued

(d) Number of textile and clothing firms (immigrant Chinese and native Italians) in the province of Prato by year

Source: Author’s elaboration on data of Chamber of Commerce of Prato.

Table 8.2 Evolution of the positions covered by native and immigrant local firms of Prato in their global value chain

(a) Components covered in the fast fashion value chain by the Chinese immigrant firms1

(b) Components covered in the textile value chain by the Italian native firms1

(c) upgrading of the position of the Chinese immigrant local firm in the fast fashion global value chain with “relational” governance type2

The boxes in dotted line correspond to the parts of the supply chain less frequently covered.

The grey background marks the Chinese immigrant actors in the value chain

Source: Author’s elaboration and adaptation from Gereffi et al. (2005).

The case of Prato highlights the local level liabilities that may confront enterprises. In particular, significant learning processes occurred (primarily) in the former Chinese subcontractors for the Italian ready-fashion and knitwear firms (Table 8.2.a). This enabled the Chinese enterprises to grow from their original status as subcontractors to one of OEM enterprises, and hence direct suppliers to brand-name enterprises and distributors. Obviously, not all the Chinese enterprises were able to enhance their positions downstream and become final firms. Many remained as subcontractors, often transitioning from serving italian firms to serving the Chinese ones that had made the “leap”, and switching from transactions across the two communities to collaborations and transactions within the immigrant community (Dei Ottati, 2016).

The learning processes activated by some of the former Italian clients of the fast-fashion supply chains in China clearly seem to have been inadequate (actually, for the most part they were lacking altogether). The Prato textile firms operated in supply chains where only few firms managed to implement downstream integration in the production of manufactured clothing articles by exploiting the capacities of Chinese enterprises. Naturally, there are a number of reasons such a process did not come about. In particular, while the local native enterprises produced primarily textiles for the manufacture of apparel based on the programmed fashion business model, the strong points of the Prato immigrant firms were precisely their competencies in the manufacture of apparel according to the fast-fashion model (Milanesi et al., 2016). Such strong points included rapid production times and proximity to European consumer markets. Actually, this lack of learning on the part of native firms was not absolute, as some of these enterprises began more or less successful operations in China, first resource seeking, then market seeking.

The second stage (in the last decade) is characterized by limited interaction between native and immigrant entrepreneurship in comparison to the first stage. The Chinese immigrant firms in the early years had as customers Italian and international clothing companies that outsourced sewing and later the entire manufacturing. In some cases the Chinese suppliers replaced failed Italian native apparel producers. There is no doubt that the enterprises in the two groups did utilize the resources of the other, though they did it mainly through transactions and/or asymmetrical learning.

Apart from the lack of familiarity, the immigrant and native firms also had to face discrimination hazards (Eden and Miller, 2001). Particularly in the first stage these problems likely affected the immigrant firms almost exclusively, though in the 2000s, with the progressive growth of the Chinese firms’ influence and power, it became more and more likely that native enterprises also had to face discrimination, and hence suffered the consequences of the lack of relationships and collaboration between the two communities, and the existence of two parallel districts with different and separate positions in their global value chain (GVC) (Table 8.3).

The growth of the immigrant firms, associated with the rise of fast fashion (Guercini, 2001; Barnes and Lea-Greenwood, 2010), has now entered a new, “mature” stage, as the Prato Chinese community has given rise to many Chinese second-generation entrepreneurs. In addition, their positions with respect to the China market in comparison to the host country market have changed over these decades. The immigrant community can moreover count on a network of relationships with the Chinese diaspora in many other countries, including China, France and Southeast Asia (Baldassar et al., 2015). For this reason, the growth of demand in the Chinese market and the evolution of international scenarios seem to have recently opened up new prospects for the relations between immigrant and native entrepreneurship. These regard the possibility for the immigrant Chinese firms to play a

Local liabilities in clusters and GVCs 143

Table 8.3 Overview of Prato Italian-native and Chinese-immigrant clusters in the GVC

Prato Italian native district

Prato Chinese immigrant district

Product ID Position in the GVC

Fabric, yarns and other textiles Design and production of semifinished products for national and global apparel producers and retailers

Fast-fashion clothing and accessories Production and design of finished goods mainly for national and European fast- fashion retailers and producers

GVC key actors

Branded apparel manufacturer and retailers (department stores) in luxury and the high and medium fashion segment

Fast-fashion retailer and producer in the medium positioned segment (including branded) and unbranded low-cost segment

ID Export propensity

Very high propensity to export - 59.5% turnover (€1.622 billion in textile export on a turnover of €2.728 billion in 2014), mainly to Europe and North America

Very high propensity to export - 58.9% (€862 million in apparel and accessories export on a turnover of €1.464 billion in 2014), mainly to European countries

ID # of firms/ employees

2,458 firms with about 20,000 employees at the end of 2014

3,643 firms with about 18,000 employees at the end of 2014

ID Local firms

Mainly OBMs and OEMs of textiles (semi-finished products), textile design, phase suppliers and specialized suppliers for local and global customers, including textiles finishing

OEMs of clothing for fast-fashion retailers and designers, and mainly stage suppliers for local producers (sewing, ironing etc.); more recently, OBMs of fast-fashion products and import-export trading

ID Supporting industries

Textile machinery and components; finishing industry; logistics and commercial professional services (textile trading, logistics)

Semi-finished textiles and accessories trade and production; commercial professional services (trading, design, logistics)

ID Local institutions

Textile business associations (industry, artisans), technical institutes of higher education, cultural associations, close relationships with local institutions such as municipalities, Chamber of Commerce, and universities

Cultural association of Chinese immigrants, present in local textile and clothing business associations (mainly artisans), and local and trans-local Guanxi; some/few relationships with local institutions such as municipalities, Chamber of Commerce, and universities

ID Major recent transformations

Progressive reduction in the number of enterprises, employees and turnover. The role of exports is still important. The crisis has not led to concentration, as it involves large companies as well as small ones. Some have expanded into integrated production of clothing and accessories. The largest textile firm has a turnover of just over €50 million.

The number of companies, employees and the turnover volume grew rapidly until the end of the last decade. Businesses have gone from simple phase suppliers to OEMs and in some cases OBMs. Some companies have invested in the creation of brands. There are cases of diversification into other sectors, including non-manufacturing (trade, agriculture)

Source: Author’s elaboration.

crucial role in the export chains of Italian products in various sectors of the Chinese market, with a further increase in the complexity and diversification of their business models. This also makes their continued presence in Italy “sustainable”, in that second-generation Chinese-Italians have developed strong ties to Italy (zhang and zhang, 2016).

During interviews with Chinese immigrant entrepreneurs conducted within the framework of our research, some new types of relationships between native and immigrant entrepreneurship emerged. These are no longer limited to simple transactions and include not only greater integration between the clothing business enterprises in the two communities (first example), but also establishing a business for the production and marketing in China of Italian agricultural products, and the commercial real estate plans of a well- known immigrant Chinese entrepreneur to build, together with Italian partners, showrooms in China for the presentation of products “Made in Italy” (second example). These two examples correspond to actually emerging cases of interaction between native and immigrant entrepreneurship in Prato, but the number of cases is not high.

  • [1] 1 The “Prato area” is larger than the Province of Prato and corresponds to the area of the “industrial district ofPrato”, including territory of the municipalities of Cantagallo, Carmignano, Montemurlo, Poggio a Caiano, Prato,Vaiano, Vernio, Agliana, Montale, Quarrata, Calenzano, Campi Bisenzio. The figure is at December 31 of eachyear; the data or 2002 is in part different because of a different classification of “textiles” and “clothing” firms; forexample, the knitwear firms, 1,126 in 2002, 514 in 2010 and 441 in 2014, in 2002 where classified in the “textiles”and in 2010-2014 were classified in “clothing”.
 
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