Handbook on the Economics and Theory of the Firm
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Handbook on the Economics and Theory of the Firm

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.
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Chapter 27: Small Firms and Industrial Districts

Marco Bellandi and Lisa De Propris


Marco Bellandi and Lisa De Propris 27.1 INTRODUCTION Industrial districts (IDs) are dense centres of life and work, characterized by one or a few related localized industries tightly intertwined with the local society and the local institutional set-up (Becattini et al., 2009b). The agglomeration of firms, and thereby industries, in specific places when it coincides with the concentration and integration of related specializations, may generate positive external economies. The persistent variety of localized industries illustrates the widespread importance of such advantages over times and across places. Nevertheless, the same variety suggests that the ‘agglomeration of firms’ is not a sufficient condition to guarantee sustainable beneficial effects. Instead, it requires a complex mechanism that involves a broad set of local public and private agents. IDs illustrate, in general terms, that sustainable competitive strengths and collective advantages are associated with the overlap of an industrial agglomeration with a local society. In particular, this overlap has an autonomous meaning when local socialcultural and institutional relations exceed the possibility of control by a few powerful economic agents, and ensure an aggregate stability and a sense of identity. Drawing on their localized strengths, IDs are adapting to confront the open space of the current global networks. This mechanism is exemplified at best by IDs that are characterized by the evolving populations of locally embedded small-sized firms together with a local society. In line with this, we would argue that IDs thrive on small firms, namely they grow thanks to the dynamism and interaction of small...

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