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close this bookIndustrial Development through Small-Firm Cooperation: Theory and Practice (ILO, 1992, 80 p.)
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View the documentPreface
Open this folder and view contents1. Some organizational principles for a dynamic small-firm industrial sector
Open this folder and view contents2. Creating an institutional framework
Open this folder and view contents3. Concluding remarks
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The object of this short monograph is to draw on research and ideas from recent sectoral and local development studies in order to propose elements that could form part of an appropriate institutional framework for upgrading industrial sectors - particularly in the manufacturing sphere, such as those producing clothing, ceramics, machinery or furniture. The explicit purpose is to consider how industrial sectors, in both developing and advanced industrial countries, might be made internationally competitive by strategies that seek to enhance productivity, quality, design, innovation, flexibility and fast response, making full use of endogenous resources, skills and entrepreneurial capabilities, and relying particularly on the combined potential of independent small firms. This approach contrasts with those that put strong emphasis on promoting vertical integration and large-firm, mass production capabilities or those that simply seek to target isolated examples of small firms perceived as having growth potential, or again those that would try to encourage development on a basis of low quality, low technology and cheap labour.

The notion of "industrial sector" employed here is somewhat broader than in conventional usage in that activities are included which, while oriented towards the same product family, might in statistical treatment often be categorized under different sectors. Thus, for example, a chemical works manufacturing treatments for leather tanning and firms involved in selling tanned leather skins are part of the same sector in this schema; as are a manufacturer of textile machinery used for weaving woollen cloth and an actual weaver of cloth.

Such industrial sectors can be conceived of as being either dispersed as networks over a large area or concentrated in an identifiable local or regional territory. While much of what is said in this study is relevant to both situations, conditions of territorial conglomeration and regional organization are most conducive to the strategy being advocated.

The study is divided into three chapters. Chapter 1 concentrates on a more theoretical - economic and sociological - understanding of organizational principles that could be involved in the development of small-firm industrial sectors, and for this purpose an ideal model is described. This model draws upon recent research on small-firm, single-sector, industrial networks, and local or regional conglomerations in many countries. The method of formulation has been to take from these studies specific ingredients or principles that appear to have been particularly helpful for development. Some cases have more of the features described in the model than others, and conditions, including labour conditions, vary. By taking the most effective aspects, however, and combining them into a single model, it is possible to describe a prototype for guiding sectoral development on a basis of efficiency, growth and equitable labour standards. One purpose has been to highlight the interdependencies of the various principles or ingredients involved, that is to say, to highlight the systematic way in which a whole range of appropriate institutions and mechanisms can together have a combined effect much more powerful than the simple sum of individual parts.

The cases of small-firm, single-sector development which have provided the insights for this model are many, but a few examples can be mentioned here; a number of others are discussed in the chapters that follow:

In the Bologna area of Italy it is said that in 1988 there were 4,414 metalworking businesses operating in close proximity, employing 62,501 people (Ricoveri et al., 1991). The metalworking area's output currently focuses on boilers, tools, motor-vehicle parts, electronic equipment, medical equipment and automatic industrial machinery. Other sectoral concentrations in northern Italy include woollen textiles in Prato, ceramics in Sassuolo, knitwear in Carpi, leather goods in Santa Croce sull'Arno, and silks in Como.

Around Tegalwangi, in Indonesia, about 400 (mostly small) firms producing rattan products employ over 6,800 people (Smyth, 1991).

Kumasi, in Ghana, is the site of over 40,000 craftsmen working in small metalworking and engineering shops (Schmitz, 1990).

The West Jutland area of Denmark is well known for its small-firm furniture and knitting sectors. In the latter case, several hundred small firms are located in the Herning, Hammerum and Ikast area (Kristensen, 1992).

Sakaki, in Japan, is the site of several hundred, mostly metalworking, small firms known for their very high use of the latest computerized technology (Friedman, 1988).1

1Other works drawn on include research on small firm industrial sectors in France (Ganne, 1989); Germany (Herrigel, 1990); the United States (Storper, 1989); Spain (Benton, 1992); Canada (Julien, 1992); Cyprus (Murray, 1992); India (Schmitz, 1990); Italy (Sforzi, 1990); and other countries.

The general model described in Chapter 1 serves as a backdrop for Chapter 2. Here the focus moves from more abstract conceptual questions to practical considerations of how practitioners interested in upgrading industrial sectors and in policy intervention could proceed. Drawing on experience in a number of countries, the focus is placed on the development roles of various institutions. Thus, the roles of employers' organizations and trade unions, local and regional governments, educational bodies, service centres and other institutions are discussed.

Chapter 3 provides a brief summary of some of the conditions conducive to introducing an upgrading strategy, reviews the key institutions involved and suggests procedures for introducing the necessary policy changes.

Most of the studies and reports produced by or for the Industrial Activities Programme of the ILO necessarily deal with specific industrial sectors, as they are prepared for the established or regular sectoral committees and meetings which are organized around individual industries. This monograph complements that work by describing an innovative approach to industrial development which, while being sectorally organized, is multisectoral in scope. It makes a useful bridge to work previously carried out by the International Institute for Labour Studies (IILS)2 where ongoing discussion on the subject of "industrial districts" has provided a valuable source of ideas and experience for this consideration of industrial sectors.

2See F. Pyke et al. (eds): Industrial districts and inter-firm cooperation in Italy (Geneva, IILS, 1990); F. Pyke and W. Sengenberger (eds): Industrial districts and local economic regeneration (Geneva, IILS, 1992).

Roger Short and Jon McLin of the Industrial Activities Branch collaborated with Frank Pyke in the preparation of the study.

G. Stoikov,
Industrial Activities Branch.