The International Evolution of Italian and Chinese Districts: What Role for Lead Firms?

There is a growing amount of literature studying the role of the so-called lead firms in shaping the international openness of local production systems. A comparison between the Italian and the Chinese experience seems worth undertaking not only on this issue, but also on the internationalization strategies followed by small and medium enterprises (SMEs). As far as Italy is concerned, some recent contributions studied the development of industrial districts in the last decade, not only to understand the role lead firms played locally, but also to catch the consequences of their opening-up internationally. A part of this scholarship recalled the relevance of the two well-known traditional main elements featuring the district, namely the interaction between two major sub-systems: a community of people and a population of firms. In particular, some authors, amongst them Ramazzotti (forthcoming), stressed how a range of circumstances lead to inconsistencies between the rationales of these two sub-systems. Specifically, he argued that “the emergence of lead firms substitute the industrial district as they pick coordinating instances and cost scrapping as a choice that bypasses quality enhancement and undermine the industrial district as a system”. If it is the case, it is also true that ‘lead’ firms have often acted as meta-bodies in the internationalization of small and medium enterprises (SMEs) belonging to the district. In other words, the quest for a competitive positioning in the global arena leads larger firms to exploit not only internal economies of scale, but also those economies of scale arising from the traditional milieu, which is now not merely detectable in a bounded geographical area, but mostly along phases of an internationally fragmented value chain. In this evolutionary process, a prominent role, not only within the district, but also all along the chain, is played by those medium-sized firms that are formally located in a district and are able, to some extent, to pull smaller domestic firms towards a virtuous path of internationalization (Becattini & Rullani, 1993). Although we acknowledge that the scholarship paid attention to the influences of lead firms on Chinese local systems of SMEs, so far we recorded no relevant contribution on the role of lead firms in the international evolution of local production systems. In order to better understand the mechanism behind such a process, we structure the present paper along two paths. On the one hand, we present a critical survey of the literature dealing with the role of lead firms in China and we compare it with the Italian experience. This section provides a first assessment of the differences (or similarities) in the influence of larger firms on the texture of SMEs and on the characteristics of the social cohesion that lies underneath (Ramazzotti, forthcoming). On the other hand, we shall analyze the international evolutionary paths followed by district SMEs. In particular, on the basis of the relevant literature, we hypothesize that Italian and Chinese SMEs internationalize according to different approaches. Indeed, in the former case we highlight that firms may move abroad because they follow the lead company, that act as a meta-national body. In the latter case, we suggest that SMEs are committed to exports and/or FDIs linked to a thick and wide web of ethnic networks (Rauch, 2001). These are based on factors such as embeddedness (Granovetter, 1985) and social capital as well as other cultural determinants, namely guānxì, jiātíng and liǎn/miànzǐ.