______________________________________________________________ 5.1 INTRODUCTION Italy has one of the world’s longest uninterrupted experiences in the area of clusters. In the local parlance they are referred to as industrial districts (IDs) while some more recent variations thereof as local production systems (LPS). Historically Italian clusters have developed spontaneously usually in rather labour-intensive specialisations and within a context of dense personal ties around family owned firms and institutions. This strong local embeddedness, combined with a strong, and often international, entrepreneurial outlook as well as strengths in design have been some of the key ingredients of their survival and success. The development of Italian clusters has also been mirrored in the scholarship interested in the dynamics of localised industrial development. In the 1970s and 80s a model of economic development, candidly referred to as ‘third Italy’, based on SME clusters with flexible patterns of specialisation and production (see Bianchi 1998 for a review), was hailed as a viable alternative to Fordist mass production (Piore and Sabel 1984). Nevertheless, during the last 15 years the Italian economy has performed rather poorly, with GDP growth ratios below those of the larger EU economies like Germany, the UK, and France. Likewise, Italian productivity levels have not increased during that period, and growing global competition from emerging markets has put additional pressure on traditional (labourintensive) Italian products like footwear and textiles/clothing. Furthermore, since the introduction of the Euro, devaluation is no longer possible, a policy widely used by Italian monetary authorities in the past to redress problems of domestic...
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