Local liabilities and global value chains: some conclusions

The case of Prato highlights how the relations between native and immigrant entrepreneurship can affect (and be affected by) the evolution of (local, regional and) global value chains

(Gereffi et al., 2005). However, it also serves to demonstrate that any given enterprise’s position in the value chain is not stable, and the evolution of such a position can be interpreted in light of the manner in which the firm addresses LLs above and beyond external factors such as business evolution and competitive environment.

The local liabilities arising from globalization are an aspect to be considered attentively in studying global value chains, in that the presence of immigrant firms at the local level can open up new challenges and opportunities for native firms that cannot be understand by considering the local dimension alone. Learning processes, the separation between the native and immigrant communities, transactions aiming to access local and global resources, and the interactions between enterprises all contribute in complex ways to business networks and their evolution. The case of Prato’s native and immigrant firms offers a prime example of this.

Globalization does not produce only bridges between distant places, with enterprises developing capacities to address, as never before, the liabilities associated with the processes of internationalization. For a small enterprise, the separation between communities produces within the local setting a number of phenomena associated with “doing business abroad”, such as “foreignness” and “outsidership”, which we have examined herein under the term “local liabilities” (LLs). The presence of LLs hinders the emergence at the local level of those external effects that figure crucially in the Italian industrial district model, thereby contributing to altering the correspondence between the theoretically hypothesized conditions and the actual reality.

In the case of the Prato industrial cluster, the evolution of the relationships between immigrant clothing firms and native textile firms is strictly linked to that of the changing global value chains to which they belong. Initially, the immigrant firms’ role was that of subcontractors for the local fast fashion industry, which underwent rapid growth during the 1990s. At the time, immigrant firms represented a valid response to the demands for reduced production times, proximity for logistics and cost containment. In this initial stage, immigrant firms provided the needed support to the local and regional value chain of the ready fashion and knitwear industries (Guercini, 2008), which were in competition with the global value chain that could exploit low-cost production in the emerging countries. The native textile firms of the Prato industrial district were instead important components in global supply chains, especially in programmed medium- and high-end fashion goods, destined for tough competition with products manufactured directly in the emerging countries, particularly China. The national knitwear and packaging enterprises did not form the “core” of the district’s activities, which were focused instead on textiles for the regional and global value chain of middle- to high-range attire and the luxury market (Gereffi, 1999).

In a subsequent stage the immigrant firms were able to replace their former clients by conducting the entire manufacturing cycle up to and including offering finished products for distribution. This was also a consequence of a change in the activities of their clients, who in some cases were engaged in disinvesting from manufacturing to invest in distribution activities in foreign markets (Guercini and Runfola, 2016; Runfola and Guercini, 2013). At the same time, the crisis in the textile and apparel market led to the closing of parts of these enterprises.

Even more recent times brought about further changes in business conditions: the increasing maturity of the fast fashion business and the generational exchange further stimulated interest on the part of the immigrant entrepreneurship in investing “downstream”, toward branding and distribution (vertical integration) or even in other business fields (diversification). For their part, Italian entrepreneurs are going through a transition phase in relation to the outcome of the crisis in the textile firms of the traditional industrial district. This phase, also linked to the advent of new generations, may provide the impetus to overcome the LLs, at least in part, by formulating hypotheses according to which, as has occurred in some cases, members of the two communities can exploit certain forms of integration to operate successfully in new global value chains.

The case of the immigrant and native firms in the Prato industrial district shows how things can change due to various factors that happen to act contemporaneously. The positions of the enterprises in local, regional and global value chains are not nearly as stable as they might appear through a static perspective. In a dynamic perspective, instead, enterprises’ positions can become contestable through asymmetrical processes of learning and the capacity to overcome conditions of outsidership, as well as due to changes in the relevant networks, the market setting and the environment in general. This is clearly of significant import to both single enterprises and local clusters, as the case of Prato underscores.

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