Production relocation and suppliers resilience in the Italian manufacturing industry: does upgrading help to survive structural shocks?

Authors: Jacopo Canello*, University of Groningen, Nicoletta Giudice, No affiliation
Topics: Economic Geography, Global Change
Keywords: subcontracting, upgrading, manufacturing, resilience
Session Type: Paper
Day: 4/5/2019
Start / End Time: 3:05 PM / 4:45 PM
Room: Empire Room, Omni, West
Presentation File: No File Uploaded


Production internationalization activities generate both opportunities and challenges for global subcontracting networks, stimulating knowledge spillovers and upgrading processes in host regions, but also threatening the survival of subcontractors in the areas where the internationalizing firms are located. When displacement effects occur as a consequence of relocation decisions of local contracting firms, domestic subcontracting networks tend to be negatively affected: such phenomena can trigger industry shakeouts and generate relevant social and economic consequences. However, production internationalization activities can also stimulate upgrading processes, forcing suppliers to connect to new subcontracting networks or transform their organizational structure to adapt to the structural shock. This view brings a new perspective on the upgrading process of suppliers: rather than being solely interpreted as a consequence of the governance structure of production networks, these phenomena can also be seen as the consequence of resilient strategies to exogenous shocks such as production internationalization activities. Using an innovative firm-level database, this paper evaluates the extent to which upgrading has occurred in the Italian manufacturing sector, focusing on two sectors (clothing and footwear production) which have been significantly affected by offshoring and offshore outsourcing activities in the recent past. The empirical investigation aims to identify firm-level and regional factors which are more likely to be associated with resilient behaviors of the local subcontracting community.

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