Evolution of Italian Enterprises in the 20th Century

316 Pages·2006·2.642 MB·English

by  Renato Giannetti (auth.), Prof. Renato Giannetti, Prof. Michelangelo Vasta (eds.)

Evolution of Italian Enterprises
in the 20th Century
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Renato Giannetti · Michelangelo Vasta
(Editors)
Evolution of Italian
Enterprises in the
20th Century
With 21 Figures and 99 Tables
Physica-Verlag
A Springer Company
Series Editors
Werner A. Müller
Martina Bihn
Editors
Prof. Renato Giannetti Prof. Michelangelo Vasta
Università di Firenze Università di Siena
Dipartimento di Studi Storici Dipartimento di Economia
e Geografici Politica
Via San Gallo 10 Piazza San Francesco 7
50129 Firenze 53100 Siena
Italy Italy
E-mail: [email protected] E-mail: [email protected]
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Preface
The research which has given rise to this volume concerns the nature of Italian in-
dustrial capitalism, a theme which has attracted much attention in Italy among
economists and economic historians, but is not well represented in international
comparisons, due to language problems as well as to the difficulty of categorizing
it. Indeed, the few who have tried to include Italy in a comparative framework end
up generally with a negative view, as a result of the distance of the Italian case
from the classical ones - Britain first and then US. However, since at least Ger-
schenkron it should be clear that there is no single model of capitalism, but sev-
eral, sharing basic components like investment and technology, but differing insti-
tutionally and also organizationally.
The line taken by the group of researchers, coordinated by Renato Giannetti
and Michelangelo Vasta, contributing to this volume is that of dissecting Italian
capitalism in its inner features, to examine strengths and weaknesses without pre-
conceptions, using existing tools of analysis, but trying to resort to new ones ca-
pable of revealing more original dimensions.
Indeed, Italy, after having been leader of the modern market economy between
the XII and the XVI centuries, plunged into a decline and belatedly faced industri-
alization as a follower, though a special one, exempt from a number of features
characterizing underdeveloped countries: it kept good trade relations with Europe,
especially for the export of silk; it had Universities and Academies; it boasted a
cultivated elite, who shaped the new Kingdom institutionally after Unification
(1861) according to the most advanced models of the time1. The process of catch-
ing up was somewhat slow at the beginning, but by the turn of the XIX century
was well in place and continued in the XX century, unabated by two World Wars
and the Great crisis, becoming particularly rapid in the post-Second World War
period and slowing down considerably only in the past decade. This catching up is
well portrayed in this volume by the sectoral distribution of the first 200 manufac-
turing firms analyzed in Chap. 5 by Vasta, a distribution that started from a tradi-
tional pattern of the disproportionate presence of textiles and moved by the end of
the century to a pattern similar to that of the US.
However, the sectoral convergence hides profound differences in the organiza-
tion of Italian enterprises, with no evidence so far of such differences evolving
over time. We have an example here of path dependence, that throws light on the
limits of the Gerschenkronian theorization. The exclusive attention by Gerschenk-
ron on take-off, which according to him can be based on different factors due to
the process of substitution, has tended to hide the fact that differences are often
there to stay well after take-off and a turn is likely to be produced only when such
differences become a stumbling block to the continuation of growth, not however
without major difficulties.

1 The interested reader could follow the development of all these arguments in V. Zamagni,
The economic history of Italy 1860-1990, Oxford, Clarendon Press, 1993.
VI Preface
It is precisely on the illustration of the peculiarities of Italian enterprises that
the essays appearing in this volume insist, making use of new datasets. The most
important of these datasets, Imita.db (see Appendix), derives from the digitaliza-
tion of a publication collecting basic data on Italian joint stock companies which
was issued between 1911 and 1984 (there are other sources that can be linked to
the present one for the following period). It was possible through successive inter-
University research projects to digitalize all available data from that publication
for 8 benchmark years and the balance sheets data for all the years of the period
for a universe of companies ranging from 787 in 1911, 3,072 in 1921 to 11,783 in
1972, covering some 90 per cent of the capitalization of all joint stock companies
at each date. All the large and medium size companies are included, while the tail
of small companies, already quite substantial in our dataset, was at all times far
thicker, given the exclusion from the publication that has been digitalized of the
very small joint stock companies and of companies that were not incorporated (all
small). From this dataset it was possible to extract the first 200 corporations active
in manufacturing, for the purpose of including Italy within the Chandlerian com-
parative analysis developed in Scale and Scope for US, Great Britain and Ger-
many (see Chap. 5 by Vasta).
The second source is less new, being made up of the industrial censuses admin-
istered in Italy since 1911. However, in the present volume the original data have
been processed for the period 1911-2001 with the aim of standardizing them along
the lines previously laid2, but with the ATECO-ISTAT 1991 classification, to al-
low for diachronic comparisons without the distortions produced by changes in
classification from one census to the next. The results are commented in Chap. 2
by Giovanni Federico. Finally, an effort to collect more qualitative data on the
largest enterprises was accomplished through the creation of file cards with entries
to be filled from material made available by existing company histories. As many
as 142 of these cards were compiled and the conclusions deriving from this origi-
nal, though numerically limited, data bank are discussed in Chap. 8 devoted to
strategies by Federico and Pier Angelo Toninelli. The method is available for the
inclusion of other company cases in the future.
The presentation of the three main sources on which the essays of this volume
are constructed is already enlightening about its originality: not many countries
have comparable datasets on the evolution of enterprises encompassing almost a
century. But the elaborations made in the book on such basis are also valuable, as
they make use of the most up to date statistical techniques and of categories and
concepts developed by business history at the international level. Of the innova-
tive conclusions reached, I will bind myself to comment here only on the most dis-
tinctive ones, with the hope of stimulating the readers to resort to Chaps.
The first main conclusion points to an established feature of the Italian produc-
tive system and can be found spelled out in the Chap. 3 by Giannetti and Vasta:
the level of concentration of the Italian manufacturing system is low, as a result of

2 See V. Zamagni, “A Century of change: trends in the composition of the Italian labour
force 1881-1981”, Historical Social Research, 44, 1987: 36-97, republished in G. Federico
(ed.), The economic development of Italy since 1870, Aldershot, Elgar, 1994: 210-271.
Preface VII
the joint effect of low sectoral concentration levels (at the exception of rubber and
means of transport) and of the modest weight that sectors with higher concentra-
tion have on the aggregate. It is not however possible to conclude from this that
we are in presence of nearly perfect competitive markets, because often the low
concentration index is produced by the existence of a large number of very small
enterprises together with one or few large corporations. In this case we have im-
perfect monopoly or oligopoly markets, where the small enterprises live in the
shadow of the large ones. But there is more to be said. As the very innovative
Chap. 6 by Leonardo Bargigli and Vasta shows, Italian capitalism is highly collu-
sive. The exploitation of the dataset of members of the boards of directors points
quite clearly to the existence of extensive interlocking directorates, with some key
figures performing the role of big linkers within the system. These big linkers
have been individually characterized in the Chap. 9 by Alberto Rinaldi, who has
selected the first 20 directors most present in boards in the benchmark years cov-
ered by the dataset. The networks built up through the interlocking directorates
encompass most of the Italian corporations (as can be seen in Table 6.2), leaving
only a few companies isolated, and they include also most of the small companies.
On the basis of this result, it is possible to rebuild concentration indices, calculated
normally at face value, and higher values are uniformly obtained (see Table 3.5):
the Italian corporate milieu is more compact than it superficially seems, because
of the existence of vast networking, through the building up of groups.
Very interesting is the confirmation that networks are built around the central
role of the financial sector (banks and insurance companies), showing multiple
links within and without, not only in the years of the universal banks3, but also
later, with links put in place by more banks than was usually maintained. After the
financial sector, the next central sector is electricity, before nationalization (that
took place in 1963), as a result of the electrical companies being public compa-
nies, namely companies the shares of which were held widely by other companies,
beside private individuals. Moreover, after the birth of state-owned corporations in
19334, networks include both private and state-owned corporations, without ap-
preciable differences. The grouping analysis developed by Bargigli and Vasta is a

3 Italy moved from a nearly specialized financial system to a universal banking system after
the banking crisis of the early 1890s and the foundation of the Bank of Italy in 1893. But
the solution of the 1929 crisis brought about a new state-owned long-term investment bank
(IMI founded in 1931) and a new banking bill (1936), which put an end to the universal
banking practice and inaugurated another version of the specialized banking system, where
all the long-term investment banks were state-owned and the former three major universal
banks were downgraded to short-term banks. This system remained in place up to the 1993
banking bill, when privatizations started and the universal banks were once again recalled
into existence.
4 Istituto per la Ricostruzione Industriale (IRI), born in January 1933 as a State holding to
rescueuniversal banks from the burden of joint stock companies shares in their hands, did
not change the legal status of the corporations acquired, which kept their private legal in-
corporation and sometimes remained quoted on the stock exchange, while most, but often
not all, of their shares became state-owned.
VIII Preface
preliminary approach, because the source does not allow going any further. What
would be needed is a dataset of the distribution of share ownership, similar to the
one built for the beginning of the 1990s by a Bank of Italy research project. In the
latter, it was possible among other things, to compare the percentage of capital of
the corporations quoted on the stock exchange that was in the hands of other cor-
porations, banks and insurance companies and of the State. The total reached in It-
aly was 62 per cent as against 66 per cent in Germany and 58 per cent in Japan,
but only 5 per cent in the US and 24 per cent in the UK5, where pension funds and
families held most of the shares.
Indeed, the analysis of groupings is likely to give more results in the future, as
it will be possible to complement its quantitative basis with qualitative informa-
tion on the nature of groups. There are in fact spurious groups, like the SIR led by
Nino Rovelli in the 1960s and 1970s, which was made up of more than 100 com-
panies kept legally separate for fiscal reasons, but forming a few technical and or-
ganizational units. There are classical groups, made up of companies controlled
by one single owner, but active in different though related fields, with administra-
tive autonomy and the presence of partners. There are conglomerates, under the
same holding (like Montedison, to quote a famous one) and there are alliances. In
the latter case, more than a group we could speak of a galaxy, where members ex-
change shares (usually minority blocks) and pursue common strategies, but own-
ership and control remain separate. There are two other forms of networking
widely present in Italy which could not be captured by the present data bank until
recently: industrial districts and cooperative enterprises. In the former case, we
are in presence of informal links among very small firms, specialized in each sin-
gle district in one line of production (shoes, jewelries, packaging machinery, ce-
ramic tiles, etc.)6. More recently, there have been stratification processes taking
place in most of the districts, with one or a few firms becoming larger and starting
the formation of groups. In the case of cooperatives, they too have undergone a
process of consolidation in the past 20 years, with the formation of groups. Both
cases, therefore, are tending to a homogenization with the group approach typical
of the Italian industrial milieu.
Another more well-known feature of Italian capitalism is its family control. It is
true that family control is often underrated in many countries, even in the US,
where there are very famous and successful cases in which big corporations (like
Microsoft) are still under the control of the founder, but in Italy managerial corpo-
rations are truly an exception, as Chap. 8 by Federico and Toninelli shows, and
this is certainly at the basis of the difficulties Italy shows in having enough trans-

5 F. Barca (ed.), Assetti proprietari e mercato delle imprese, vol. II, Bologna, Il Mulino,
1994: Table 5.11, 124.
6 Recent statistical analysis of the Italian industrial districts has fixed their number at
around 200, mostly located in the Centre-North of the country. See F. Pyke, G. Becattini
and W. Sengenberger (eds), Industrial districts and inter-firm cooperation in Italy, Geneva,
ILO, 1990; M. Bagella and L. Becchetti (eds), Evolutionary patterns of local industrial Sys-
tems. towards a cognitive approach to the industrial district, Aldershot, Ashgate, 2000.
Preface IX
national companies and also accounts for widespread intergenerational crises
(when the children of the founder are not capable of replacing him successfully).
In Chap. 7 by Vasta there is an answer to another question which so far could
never be addressed: how profitable was the investment in Italian industrial corpo-
rations? A glance at the ROE series confirms the well-known economic cycles
(see fig. 7.2): the slowdown before the First World War, the War peak, the 1921
fall, the slowdown in 1927 after the stabilization of the lira, the 1930 fall and the
strong recovery in the 1930s, the boom during the economic miracle up to the
middle of the 1960s, followed by a slowdown and then by a fall in the 1970s. But
the performance of ROE by sectors (see Table 7.2), or by type of product using
the Pavitt technological classification (see Table 7.6), or by corporate size (see
Table 7.8) is more interesting. An econometric test of profitability is also at-
tempted, which delivers a couple of firm conclusions: a positive relation exists be-
tween corporate size and profitability and between corporate age and profitability.
In the light of these results it becomes even more difficult to explain the prefer-
ence by Italian entrepreneurs for the small size on the basis of simple economic
logic. Other tests could be tried in the future. For example, an exercise I deem of
the utmost usefulness to improve the understanding of the Italian corporate milieu
is that of comparing profitability of the corporations quoted on the stock ex-
change7 with the profitability of the unquoted corporations. This could shed light
on the reasons for the lack of interest of Italian corporations in becoming quoted
on the stock exchange8.
A final distinctive feature that has been analyzed in both Chap. 4 by Giannetti
and Margherita Velucchi and Chap. 5 by Vasta is instability: the largest Italian en-
terprises tend to change size dramatically over time, when they do not disappear
altogether. In the period 1911-2001, only 8 of the first 200 enterprises in manufac-
turing have remained present in each benchmark year. This instability is con-
firmed by the survival analysis carried out in Chap. 4, suggesting to Giannetti and
Velucchi the creation of the nickname leaping frogs for those firms that have
shown such remarkable instability in performance. The identification of the leap-
ing frogs and their characterization through the use of additional sources is the ob-
ject of further research in progress, but it can already be anticipated that the two
World Wars, the intergenerational crises, the low technological content and the
industrial policies often unfriendly to large enterprises, when they were not under
State control9, are the candidate causes of the observed instability.
The unique contribution this book gives to the understanding of the character
and evolution of Italian industrial capitalism is best summarized as follows: Italian
industrial capitalism cannot be categorized with simple indicators like average size
of firm and concentration indices. There are formal and informal links among

7 Notoriously, a very small number, which has fluctuated until recently at around 200.
8 As is well-known, a very good reason comes from having a bank-oriented financial mar-
ket. This is another feature that ranks Italy together with Germany and Japan.
9 Among the eight Italian corporations listed in Fortune global 500 for 2004, six are former
state-owned enterprises (of which three are banks) and only two are established private en-
terprises (Assicurazioni Generali, an insurance company, and FIAT).