Fourth capitalism: the real driver of Italian growth

Transcription

1 Fourth capitalism: the real driver of Italian growth Fulvio Coltorti, Director Emeritus, Mediobanca Research Area CUOA, meeting with supporting partners 3 July 2014

2 European manufacturing: who matters? Section 1

3 Manufacturing industry in Europe Value added for largest manufacturing countries at current prices in 2013 Section 1 Avg. size in 2011 (VA per firm in 000) 5,000 4,500 4,000 3,500 3,000 Switzerland Germany equal to Italy, France and Spain added together 2,500 2,000 Austria Germany 1,500 Netherlands UK 1, Sweden Poland Spain France ITALY 0 50, , , , , , , , , , ,000 Manufacturing value added in 2013 ( m) Source: compiled from Eurostat data 3

4 Italy vs European competitors: still at the bottom of the barrel strong impulse needed to bounce back Relative VA indicators calculated based on Eurostat data - VA as % of aggregated European competitors (France, Germany, UK and Spain) Q Q Q Q Q1 4

5 Geography of future growth Real GDP 2011 index = 100 Source: IMF World: 2.5%...3.4% p.a. Emerging: 4.9%...5.4% Emerging Asia: 6.4%...6.8% Sub-Saharan Africa: 5.4%...5.8% +1.4% % % Germany Italy Eurozone 5

6 Italy does not stand out because of its excess of small businesses, but because of the crisis and the decline of its large industries Section 2

7 Crisis and decline of large enterprise in Italy Percentage of GDP accounted for by leading Italian companies (based on Mediobanca and Istat data at current prices) 1.05 Wrong investments Lack of research Financial crises First restructuring Rescues and bailouts Robots; group organization Second restructuring Rescues and bailouts Lean production; relocations Technological decline Loss of market shares Relocations Value added by LE/Italian GDP 7

8 Dualism reversed: fewer and fewer large companies Istat Manufacturing industry census: firms with 1,000 staff and more ,877 3,631 3, ,503 2, No. of firms Avg. size (no. of staff) 8

9 Italy: four capitalisms 1 First large companies (late 1900s) 2 State capitalism (1933) 3 Industrial Districts ( ) 4 Medium-sized companies and others (1990s) 9

10 What has happened in the territories? Section 3

11 Manufacturing in the provinces: % shares of staff LE=Large Enterprise areas; LI=low industrialization areas; ID = districts areas LE LE LI ID Source: Becattini-Coltorti

12 District areas Source: Coltorti, Handbook of IDs, 2009 Dark/light green District areas and medium-sized firms Red Large enterprise Yellow Tertiary sector

13 Manufacturing: value added in 2011 Mediobanca Research Area estimates based on Mediobanca and Istat data Non-Italian LEs 12.4 Medium-large 12.6 Largest groups 6.1 Medium-sized 15.6 Fourth capitalism Medium-large, medium and small firms 50-60% Small

14 Methods of production change: end of Fordism Section 4

15 Lean production: the Apple ipad Breakdown of value generated by ipad 16GB, cost $499 (2009) Cost of acquiring input 25% Apple margin 25% Manufacturing: Asia Direct labour costs for suppliers 10% Costs of unknown origin 4% Japanese suppliers' margins 2% Taiwanese suppliers' margins 2% Korean suppliers' margins 7% Source: Linden, Dedrick, Kraemer, Rassweiler (Who captures value in the Apple ipad?; 2011) Plus margin for retail distribution if sold online or at own stores US non-apple suppliers' margins 2% Retail distribution and sale 23% LG and Samsung (display and memory chip) 15

16 Can one be competitive without being large? Section 5

17 District effect: trust, filières, networks, entrepreneurialism Districts are based on trust Industry is concentrated in places Places = communities of people, agglomerations of enterprises High degree of division of labour enables specialization Filières (short and long, to produce and acquire knowledge) Many SMEs compete and co-operate with each other Competition (= innovation, quality and appropriate production costs) There are local markets for goods and services Networks (informal and formal, short and long) The strengthening of relations and technical/behavioural codes on a local basis facilitates the circulation of information and reduces barriers to entry Turnover between entrepreneurs and integrated division of labour 17

18 How does the fourth capitalism work? 1. Competition engaged in on basis of systems of companies 2. Impact of production scale felt at system level (network of relations; external economies leveraged) 3. Reliance on territory which provides and regenerates the resources and on network of social relations 4. Companies specialize 5. Firms create niches in which they have a virtual monopoly, innovating continuously and avoiding the large multinationals practices External economies and product differentiation Carel: total sales 169m per annum 18

19 Fourth capitalism: governance Competition takes place on product market rather than at level of ownership structure Decisions taken by market of consumers, not by financial markets (institutional investors, banks, advisors, analysts, etc.) Company survives and prospers to the extent that it remains efficient Quest for beauty is fundamental NICE Oderzo (Treviso) 19

20 Medium-sized enterprises in ,528 medium-sized firms (3,463 considering groups) employees Annual total sales 15m- 330m Limited companies Independently-owned Source: Centro Studi Unioncamere 20

21 Size: growth trends Net changes, A total of 334 companies was excluded in 2008 following adoption of new parameters MSEs become large Small firms become MSEs 21

22 Medium-sized firms qualify districts Section 6

23 More medium-sized companies in Istat districts % of total staff 14% 34% 44% 8% (0-49) > 74.9% (0-49) 62.5%-74.9% (0-49) 50%-62.5% (0-49) < 50% Categories based on % presence of micro and small firms Micro 0-9 Small Medium-size I Medium-size II + LEs >250 % breakdown of total staff employed, 2001 Source: Coltorti (Handbook of IDs, 2009) 23

24 More staff in medium-sized firms in district areas Compiled from M. Bellandi & F. Coltorti, Distretti industriali e medium-sized companies, tra declino e traiettorie di sviluppo industriale in Italia, Artimino report , Bologna, Il Mulino (forthcoming); indexes 2001 = 100 no. of staff Total Medium-sized businesses 24

25 District areas between 2001 and 2011 Source: M. Bellandi & F. Coltorti, 2014 District crisis 3% District growth 3% District restructuring 22% MSE consolidation 72% 25

26 District areas with high concentration of medium-sized companies Source: M. Bellandi & F. Coltorti, op. cit KIS = Knowledge Intensive Services; LKIS = Low KIS No. of staff (000) Manufacturing staff Services: KIS Services: LKIS 26

27 Changes in value added by medium-sized companies Value added universe of medium-sized companies Mechanical engineering 8,232 5,804 Personal and households goods ,592 Chemicals & pharmaceuticals 2,498 2,422 Food and drinks 2,859 2,006 Paper, printing & Publishing 1, Metallurgical 1, Other industries Made in Italy turnover 62% (65.8% in 1996) Exports 40.4% (32.5% in 1996) in 1996 Change

28 International orientation Section 7

29 126 medium-sized/large >75% 175 medium-sized/large 41-74% 131 medium-sized/large 0-40% 651 medium-sized >75% 467 medium-sized 61-74% 628 medium-sized 41-60% 708 medium-sized 16-40% 504 medium-sized <15% 505 medium-sized zero% Fourth capitalism: the happy many Categories of firms based on % share of exports in 2012; Source: Mediobanca Research Area 432 medium-large firms 3,463 medium-sized companies Italy Elsewhere 29

30 Exports: size is NOT a conditio sine qua non No. of staff % Sales abroad Universe of medium-sized companies 2012: shares of exports and no. of staff 30

31 Growth drivers and brakes Section 8

32 The two drivers of value added: data by class of good Index number of value added based on current prices (2000 = 100; Istat database with estimates for ) Goods produced by large enterprise Goods produced by districts and fourth capitalism 32

33 The two drivers of value added: data by companies Index number of value added based on current prices; Mediobanca data for companies with production facilities in Italy Large groups Medium-sized companies 33

34 Medium-size enterprise in Europe: a comparison Section 9

35 Where? Medium Sized Enterprises in Europe (2013) 35

36 Medium-sized companies: size, productivity and CLUP Size increases left to right (staff); median values based on rolling sets of 200 observations Net VA per employee CLUP Source: Confindustria, R&S, Unioncamere, Medium-Sized Enterprises in Europe,

37 Medium-sized companies: productivity, wages and tax Germany Italy France Spain Net VA per employee ( '000) DE index no. = Unit labour cost ( '000) DE index no. = EBITDA as % of VA DE index no. = Tax rate* * Tax rate in Italy in 2012 Medium-sized firms 37.0% Large groups: 23.5% FY Confindustria R&S Mediobanca Unioncamere survey 37

38 Lots of it net worth, little of it working capital MSEs in Europe (2013) Data as at tangible net capital includes provisions set aside in medium/long term Assets , Loans Itay France Germany Spain Short-term debt Medium-term debt Tangible net worth Fixed assets Working capital Financial assets 38

39 If tax was less aggressive in Italy? % of firms by class of financial solidity Assuming tax rates equivalent to those for large groups (last ten years) Germany France Spain Italy Italy 2 Investment grade Intermediate Distressed Source: compiled by R&S based on R&S-Unioncamere scoring model 39

40 What to do to exit the crisis Section 10

41 Promote fourth capitalism in district areas Net flows of exports/imports in Euros by territories classified based on Becattini-Coltorti method (2004ff UA = Turin/Milan/Rome/Naples) mln 60,000 40,000 20, ,000-40,000-60, District areas Large enterprise areas Urban areas Remainder 41

42 Stimulate investments: Italy vs FR, DE and UK Gross fixed investments in manufacturing sector, relative values (% of Eurostat national accounting data based on current prices) % of France % of Germany % of UK 42

43 Italy vs Germany Data as at 2012 Italy Germany Italy vs Germany Population 59.4 m 81.7 m 73% Balance of exports-imports: districts + fourth capitalism/mittelstand 86.2bn 102.9bn 84% large groups 7.9bn 203.5bn 4% Attract investment from large foreign groups /win back those which have fled 43

44 Keys to success: focus on revenues, not costs 1) Quality of work force (measured via unit wage levels): companies which use low-cost staff are less productive than those which use a workforce which are more expensive when measured by unit cost but matched with the stock of capital per staff member and against high-quality production. A work force which is worth salary levels which are 1 higher produces, ceteris paribus, an increase of 1.4 in value terms in productivity 2) Inverse relationship between size and productivity: a winning strategy involves production specialization and a commercial policy geared towards creating and exploiting market niches, which are dominated through skill and innovative ability (confirmed by the data shown in the previous slides) 3) Knowledge Intensive Services (KIS): there is a need for companies which provide high knowledgeintensive services 4) Positive impact of managerial capabilities and infrastructure: the former is a product of training; the latter tends to differentiate between performance (e.g. deteriorating in Southern Italy) Source: econometric analysis based on data for medium-sized companies taken from Mediobanca-Unioncamere surveys produced in the last ten years (F. Coltorti and D.Venanzi, Produttività, competitività e territori delle medie imprese italiane ; in I nuovi distretti industriali. Rapporto di Artimino sullo sviluppo locale ; ed. by M. Bellandi and A. Caloffi, Bologna, Il Mulino (forthcoming). 44

45 Calabria Lazio Sardegna Molise Sicilia Basilicata Puglia Liguria Campania Toscana Abruzzo Piemonte + VdA Trentino AA Umbria Friuli VG Marche Emilia- Romagna Lombardia Veneto Indicators of attractiveness of fourth capitalism Compiled by Mediobanca Reearch Area Normalized average of 7 indexes calculated based on data for medium-sized companies Blue indicates territories identified by Giorgio Fuà in his North-East- Centre model (NEC)

46 Roll up our sleeves A proposal to recover use of resources which are currently wasted 46

47 Most important districtions: selected using KPIs Source: F. Coltorti & L. Mastromarino, Per un piano strategico a sostegno dei distretti (OND report, 2014) Q4 EBITDA/sales, % avg Q1 14.0% 13.0% 12.0% % 10.0% Q3 8.5% % 4.5% 2.5% 0.5% Chg. in sales, % 9.0% 8.0% 7.0% 6.0% % 4.0% -3.5% Q2 47

48 Strategic plan with pivotal companies Coltorti-Mastromarino methodological proposal: plan stages ACTIVITIES MAPPING DISTRICTS RESPONSIBILITY UNIONCAMERE DISTRICTS CLASSIFIED BY KPIs (SALES, EBITDA, VA) MISE/REGIONAL AUTHORITY/UNIONCAMERE DISTRICT COMMITTEE SET UP MISE/REGIONAL AUTHORITY DISTRICT STRATEGIC PLAN DRAWN UP (DSP) DISTRICT COMMITTEE AND PIVOTAL COMPANIES PSD APPROVED DISTRICT COMMITTEE, PIVOTAL COMPANIES, TRADE UNIONS, CATEGORY ASSOCIATIONS, LOCAL ADMINISTRATION START OF ACTIVITY AND MONITORING DISTRICT COMMITTEE/ REGIONAL AUTHORITY/MISE 48

49 Bibliography R&S and Mediobanca, various publications ( Mediobanca-Unioncamere, Le medie imprese industriali italiane ( G. Becattini-F. Coltorti, Aree di grande impresa ed aree distrettuali nello sviluppo post-bellico dell Italia (Rivista Italiana degli Economisti, 2004); Areas of large enterprise and industrial districts in the development of post-war Italy: a preliminary study (European Planning Studies 8, 2006) F. Coltorti, Medium-Sized Firms, Groups and Industrial Districts: an Italian Perspective ; in A Handbook of Industrial Districts, ed. by G. Becattini, M. Bellandi e L. De Propris; Edward Elgar 2009 Confindustria, R&S and Unioncamere, Medium-Sized Enterprises in Europe; 2013 ( F. Coltorti-G. Garofoli, Le medie imprese in Europa (Economia Italiana 1, 2011); Medium-Sized Enterprises in Europe (Review of Economic Conditions in Italy 1, 2011) F. Coltorti, R. Resciniti, A. Tunisini, R. Varaldo (eds), Mid-Sized Manufacturing Companies: The New Driver of Italian Competitiveness; Springer 2013 F. Coltorti, Italian Industry, Decline or Transformation? A Framework ; (European Planning Studies, 21, 2013) Osservatorio Nazionale Distretti Italiani, 2014 report ( M. Bellandi-F. Coltorti, Distretti industriali e medie imprese, tra declino e traiettorie di sviluppo industriale in Italia ; F. Coltorti-D. Venanzi, Produttività, competitività e territori delle medie imprese italiane ; in I nuovi distretti industriali, ed. by M. Bellandi and A. Caloffi, Il Mulino 2014 (forthcoming) F. Coltorti-L. Mastromarino, Per un piano strategico a sostegno dei distretti industriali; 2014 (forthcoming) 49

50 Mediobanca Research Area 50