More than three years after the outbreak of the crisis which engulfed the world economy, Italian businesses have shown that they have, on the whole, withstood the impact of the economic and financial tsunami. The country remains the fifth-ranking global manufacturing power and the second in Europe after Germany, running counter to the trend that has seen a progressive reduction in the market shares of traditional industrial economies – the US and Japan in particular.
In this regard, the participants at this National Conference noted that the exceptional resilience shown by Italian industry is in part the outcome of a long process of restructuring that has radically transformed the sectoral composition of supply in favor of high added-value and high innovative-potential business activities. The Italian production model, it was underlined, has been clearly affirmed, with a large part of Italy’s comparative advantages being attributable to the efforts of its industrial districts and the firms that make up the country’s so-called “fourth capitalism”.
Nevertheless, it was acknowledged that certain critical issues still persist. Indeed, during this long process of transformation, the gross operating margin of business has fallen significantly from 33% to 18%. In addition, many small- and medium-sized Italian enterprises have struggled to steer their own course through the difficult straits of internationalization and the conquest of new markets, both of which are necessary if they are to ensure their survival in an ever more fiercely competitive climate. This is even more the case as the cost of labor becomes less and less a pivotal factor in deciding to focus on the global market and prevailing business models no longer depend on “pure” exports. Today, globalization of the economy has taken the course of the cultivation of new and multiple production bases, which requires a tangible physical presence in the relevant territories and inevitably rewards businesses that are larger in scale.
Gaining ground in these areas and further strengthening Italian industry thus calls for a new phase of development to be ushered in, based on increasing the size of businesses and improving the quality of their products, but also on improving the systemic framework in which businesses operate. The participants suggested that a good place to start would be the introduction of a new industrial policy that does away with traditional direct incentives, which have a distorting effect, in favor of a model that steers and guides growth by identifying the most promising sectors and setting out the strategies needed to turn them into drivers of development and agglomeration. There is also a need to streamline and expedite the delivery of public services to businesses, including an overhaul of assistance and support mechanisms for enterprises tackling international markets, and the removal of artificial regulatory barriers that discourage growth in the size of businesses. The participants emphasized, however, that an easing of the tax burden currently borne by Italian manufacturers, whilst desirable, needs to be considered in light of other factors, such as its effect on the sustainability of the country’s public finances.
It was conceded, however, that some of the more significant changes need to take place within businesses themselves, such as in their ownership, governance and organizational structures, as well as in their management cultures. A priority issue to be addressed is the level of capitalization of Italian firms, which is currently well below the European average, representing a constraint on their capacity for investment and expansion. Small- and medium-sized Italian businesses, which are generally family-run, often harbor strong resistance to the injection of new equity, which they see as veiled bids for control or as a front for pernicious short-term tactics (such as so-called “squeeze-outs”).
New approaches are therefore needed to encourage an innovative and open-minded attitude towards the injection of new capital into Italian firms, by mobilizing an extraordinary resource that Italy has at its disposal, namely: savings. The participants felt that the traditional role the Italian banking system has played in supporting businesses and the sector’s resilience throughout the crisis should be acknowledged, though it was stressed that the Basel III accord, as it currently stands, could prove to be more disadvantageous for Italy. The option of listing on the stock market – a road less-travelled by Italian businesses than by their European counterparts – should be viewed more as offering opportunities. However, small- and medium-sized Italian enterprises could especially benefit from injections of risk capital in all its various forms, from venture capital to private equity. It was observed that whilst these mechanisms were certainly abused prior to the crisis, they rarely correspond to their publicly-perceived association with voracious speculation. Growth in the use of such instruments should thus be encouraged within the context of finance that is not an end unto itself, taking into account the great potential that the public and private partnerships currently taking shape in the country represent, a case in point being the Italian Investment Fund for Small- and Medium-sized Enterprises.