The secret of Italy: the industrial districts

Italy is made up of industrial districts, areas where individual industrial sectors concentrate and create innovation. Technology, innovation, welfare and human capital are the four factors on which companies in the industrial districts have based their recovery, after the 2020 downturn, to make themselves ready for 2024 when demand is expected to return to growth at a faster pace. Intesa Sanpaolo’s study center conducted an analysis of the balance sheets of more than 90,000 enterprises. Among them, 22,302 enterprises belonging to 159 industrial districts showed greater resilience to the downturn experienced during the pandemic period than 68,377 non-district enterprises.

How Italy tried to overcome the pandemic crisis

District enterprises, in median terms, already in 2021 recorded a turnover 5.2 percent higher than 2019 levels, two percentage points higher than non-district areas. Profitability is also better: the EBITDA margin in the districts rose to 7.7 percent, three-tenths of a point higher than in 2019. Notably, the EBITDA margin grew the most among district companies with patents: it rose to 9.9 percent in 2021 from 9.1 percent in 2019. The difference is made by strategic positioning, strategic investments, and partnerships with lead firms. Among the latter, the case of the Fashion sector stands out. “In the Fashion System,” Intesa Sanpaolo notes, “firms strongly embedded in luxury supply chains in 2021 showed a significantly higher unit marginality than marginal or non-continuous suppliers (9.4 percent vs. 7 percent).

How firms in industrial districts have sought to respond to the energy crisis

High-intensity district areas have shown better readiness to solve problems arising from the rising cost of energy goods. Strategies have ranged from reducing consumption to initiating and enhancing self-production of energy. In median terms, a 57 percent increase in amounts paid by district enterprises to energy utilities emerges between 2019 and 2022. In addition, district enterprises that have installed at least one renewable energy generation system have higher margins (9.8 percent vs. 8.1 percent). Small and micro enterprises benefit the most.

Which are the best Italian industrial districts

In the top three places in the ranking of the best Italian districts for growth, exports, profits and financial strength are: the Sebino Bergamasco Rubber, Prosecco of Conegliano-Valdobbiadene and Wines and Spirits of Friuli. This is followed by Plastics of Treviso, Vicenza, and Padua, Goldsmiths of Valenza, Agricultural Machinery of Padua and Vicenza, Wines and Spirits of Brescia, and Mechatronics of Trento. Overall, the districts’ growth continued in 2022: exports reached a record153 billion euros, 25 billion more than in 2019 (+19.9 percent at current prices), while turnover, according to Intesa Sanpaolo estimates, increased by 16.7 percent in median terms. Inflation and the rising cost of raw materials was, in part, passed on to prices and affected unit margins which, however, declined by less than one percentage point partly due to process efficiencies, self-consumption, and government supports. Things should continue to go well in 2023-24: nominal sales growth should continue to outpace manufacturing, +3.3 percent versus +0.9 percent.

Collaboration and additional services agree

Companies in Italy’s industrial districts turn out younger and therefore more responsive to technological innovations, In addition, the transfer of know-how from one company to another is easier, almost natural, and this allows for a very modern outlook in business. 79% of companies in districts register patents.

There is also an active competition in providing services and additional fringe benefits to employees, but the fact of being part of specialized areas also allows these companies to contain the cost of this type of additional service.