Carlo Pietrobelli [email protected] 1 Carlo Pietrobelli Roberta Rabellotti Working Paper Cepal -Desarrollo Productivo No.13

Carlo Pietrobelli [email protected] www.pietrobelli.tk

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Carlo Pietrobelli

Roberta Rabellotti

Working Paper Cepal -Desarrollo Productivo No.13 www.eclac.org/cgi-bin/getProd.asp?xml=/publicaciones/xml/4/11094/P11094.

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Business Development Service Centres in Italy: An empirical analysis of three regional

experiences: Emilia Romagna, Lombardia and Veneto

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The notion of “Business Development Service” (BDS) is quickly gaining popularity

Similar concepts: industrial extension services, support services, advisory services, business services.

real services, to indicate their impact on structural features of company behavior, and competitiveness

the provision of these services may transfer knowledge and technology, and facilitate learning, thereby modifying in a structural, non-transitory way their organization of production and their relation with the market (Bellini, 2000).

BDS in developing countries: promotion of a wide range of business skills, even of a simpler and routinary kind.


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Make vs. Buy: in-house costs vs. transaction costs;

need of a flexible organisation, focusing on strategic activities

rising technological and organisational complexity; binding international technical and quality standards.

localized nature of knowledge creation and utilisation, and the need for user-producer interactions explain the existence of local providers of BDS.

Why a Market for BDS ?Why a Market for BDS ?Why a Demand for BDS Centres ?Why a Demand for BDS Centres ?


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Market failures in information and innovation

Dynamic considerations: public sector may help underwriting the risks associated with technical uncertainties, and the costs of aggregating and creating markets, that private agents would not be ready to bear otherwise.

BDS tend to have positive externalities of consumption: Thye may induce imitative mechanisms

The Rationale for Subsidising Service Promotion The Rationale for Subsidising Service Promotion


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Analysis of the experience of BDS Centres in three Northern Italian regions

Evaluation of their performance and contribution to the regions’ industrial, and SME, development

Implications for public policies

Lessons for Latin America.

Objective of the paperObjective of the paper


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In 1988 first “census” (Nomisma): 75 BDS centres, mainly in Northern Italy (40%); only 24% in the South.

In 1997 (Ceris-CNR): 161 institutions supplying technological services to firms (including business innovation centres, science parks, business incubators, national research agencies): but only 80 proper BDS centres.

In 2000 (Agitec) 691 institutions supporting and contributing to technological innovation; proper BDS centres are 90.

The Universe of BDS Centres in ItalyThe Universe of BDS Centres in Italy


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Table 2.1. BDS Centres supplying technological services (No.)

Region I nside

districts Outside districts

Total

Valle d’Aosta - 1 1 Piemonte 4 - 4 Lombardia 11 4 15

Veneto 3 6 10 Trentino A.A. - - -

Friuli V.G. 1 2 3 Emilia-

Romagna 7 4 11

Toscana 11 5 16 Marche 4 1 5 Umbria 1 - 1 Lazio 1 1 2 Molise - 1 1

Abruzzo - 1 1 Campania - 4 4

Puglia - 2 2 Basilicata - - - Calabria - 2 2 Sicilia - 1 1

Sardegna - 1 1 Total 42 38 80

Source: Calabrese, Cariola, Rolfo (2001)


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Fieldwork from January to June 2001.

Questionnaire to a sample of 30 BDS centres and in-depth interviews with key informants

Current sample selected from the largest list of BDS centres available

Selection on the basis of the definition of a BDS Centre as an institution which can be private, public or mixed and which offers also technological services. It should also target SMEs, develop and transfer applied research and technology, and offer services directly usable by the enterprises.

The MethodologyThe Methodology


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Why these regions?Why these regions?

Tab. 4.1 I ndustrial Employment, Regions and I taly, 1998 (Thousands and %)

Regions I ndustrial Employment

% of I taly % Ind./ Tot

LOMBARDI A 1,552 24.0 41.4

VENETO 778 12.0 42.0

EMI LI A ROMAGNA

594 9.2 35.0

I TALY 6,470 100.0 32.0 Source: ISTAT – Confindustria - IPI (2000).

Large Industrial Employment (and Production)


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Why these regions?Why these regions?

Remarkable (Manufacturing) Export Dynamism

Tab. 4.3 Exports by Sector, Regions and I taly, 1998 (million Euro and % )

Regions Exports % of I taly

Total Exports Lombardia 62.86 29.0

Veneto 30.04 13.9

E. Romagna 25.54 11.8

I taly 216.84 100.0

Metalworking Lombardia 28.06 36.3

Veneto 10.64 13.8

E. Romagna 11.04 14.3

I taly 77.29 100.0 Source: ISTAT – Confindustria - IPI (2000).


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Table 4.4 Numeros de DI segun las distintas definiciones

SLT ID segun ISTAT

ID identificados por Regiones

Emilia Romagna 48 16 N/ A

Lombardia 70 42 21

Veneto 48 34 19

I taly 784 199 -

Dense Localization of Industrial DistrictsDense Localization of Industrial Districts


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Geographical Distribution of the Sample Geographical Distribution of the Sample Reflects the Presence of Ind. DistrictsReflects the Presence of Ind. Districts

Table 5.1 – Geographical distribution ofthe sample

No. ofcentres

%

Emilia Romagna 11 36.7Lombardia 12 40.0

Veneto 7 23.3Total 30 100.0


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Laboratory tests & quality certification centers: 9 centres (30% of the sample). 5 of them devote at least 70% of their human resources to supply laboratory tests and quality certification;

Territorial development centers: 10 centres (33%) located in areas that are not sector specialised. All supply a variety of services;

District development centers: 7 centres (23%) with a clear sector specialisation. All supply a variety of services

Innovative technological centers: 3 centres (10%): at least 65% of their human resources devoted to provide this type of services.

Training centres: only one centre devoting to training 70% of its human resources.

What are they? A classification of BDS centersWhat are they? A classification of BDS centers


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Table 5.56 – BDS centres: an ex-post classification Laboratory

tests & quality certification

Territorial development

District development

I nnovative technological

services

Main initiative Public-private Fully public Public-private Public-private

Majority of equity Private Public Private Private

Sector specialisation Yes No Yes No

Average No. of clients 1,155 710 213 223

Main location of clients National Local Local Regional

Main type of clients SMEs SMEs SMEs SMEs

Average turnover (Euro mill.) 2.5 2.6 1.2 1.5

Average public subsidy 13 % 47 % 31 % 39 %

Average revenue from sale 75 % 40 % 57 % 61 %

Average No. of employees 40 24 16 19

Share of technicians > 50% < 50% < 50% < 50%

Share of employees with a university degree

< 50% > 50% < 50% > 50%

I nternal training Yes Yes Little Yes

Avg No. of external linkages 6.22 8.10 7.71 9.67

I nternational collaborations Yes Little Yes Yes

Self-evaluation Yes Yes Yes Yes

Centres’ Certification Yes No No No


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Avg. number of customers of BDS centres depends on the type of services supplied: with standardised services the number of clients can be very high (e.g. laboratory tests and quality certification); with customised services, they have a smaller number of clients;

Small firms are their main customers;

They have mainly local or regional customers

They make a great deal of efforts to collaborate with their clients in the definition of their activity and in their self-evaluation;

Active promotion of their services.

Stylized facts on Centres’ ClientsStylized facts on Centres’ Clients


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Stylized facts on Centres’ ClientsStylized facts on Centres’ Clients

Table 5.29 – Areas of collaboration with customers

BDSC-firm collaboration in: No. ofcentres

% of totalsample

Policy design 14 48.3

Choice of services to supply 15 51.7

Decision of how to supply services 16 55.2

Pricing of services 2 3.5

Evaluation of centre performance 13 44.8

Most Centres (76%) collaborate with their clients in several ways


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A large variety of services: very heterogeneous phenomenon;

Laboratory tests and quality certification the most profitable;

Public initiative and majority of public equity characterise centres aimed at territorial development;

Instead, the private sector is more involved in the creation of sector-specific centres, and especially in centres located in industrial districts;

Wide agreement on the need to subsidise the price of some services in order to stimulate firms’ demand.

Stylized facts on Centres’ ServicesStylized facts on Centres’ Services


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Table 5.13 – Number of centres supplying each serviceClasses No. % Services n° %

a. Design 12 40.0 I nformation on new trends in design 8 26.6

b. Marketing 15 50.0 Market research 8 26.6

c. Technology and 27 90.0 I nformation on new technologies 17 56.6

Applied R&D of new techn.s (hw + sw) 15 51.7

Laboratory tests 16 53.3

Production

Quality certification 15 50.0

d. Training 27 90.0 Managerial training 17 56.6

Technical training 21 70.0

e. Business 15 50.0 I nvestment plans 8 26.6

Management Financial assistance 11 36.6

f. Other services 12 40.0 12 41.4


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Identify cause-effect relationships

Attach a monetary value to changes within firms and agencies

Extreme diversity of services provided

Short-run effects (easier to quantify) may be less important than long-run effects

What time-frame should the evaluation cover? (political cycles)

Quality of evaluation studies often constrained by poor demand for high quality independent evaluations.

Evaluation of the BDS Centres

Difficulties in the Evaluation


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relevance - to objectives and to in-country (in-region) needs

efficiency - in providing inputs promptly and at least cost

effectiveness - in achieving planned outputs and immediate results

impact - on high-level objectives to which the results should contribute

sustainability - over time, usually after the inputs have all been provided and external support stops

CRITERIA for an Evaluation (EC)


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VARIABLES for an EvaluationTable 6.1 Variables for an Evaluation of Centres’ Performance:

Effectiveness, Efficiency and Sustainability

# Variable

Effectiveness 1 No. of clients

2 Repeated Clients (% )

3 Collaboration with firms (yes/ no)

4 No. of overall collaborations

5 Collaborations with international BDS Centres

6 Outreach (no. of serviced firms in an area/ no. of firms in the same area)

Efficiency 7 Self-evaluation (yes/ no)

8 Cost per client firm (.000 EUR)

9 Turnover per employee (.000 EUR)

10 No. of Clients / employee ratio

Sustainability 11 % of services sold to client firms

12 Self-sufficiency index

13 Pursuing objective of self-sufficiency (high/ low priority)


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Table 6.2 Effectiveness: Alternative Measures 1 2 3 4 5 6

Categories of Centres

No. Clients

(Mean)

% Repeated Clients

Collaboration with

firms*

No. of Collaborations

(Mean)

Collaboration with

international Centres*

Outreach

Labs & Certification

1,155.3 35.8 0.78 6.2 0.67 0.53

Territorial Development

710.4 55.7 0.56 8.1 0.40 N/ A

District

213.3 57.5 0.86 7.7 0.57 0.34

R&D & I nnovat. Serv.

295.0 22.5 1.00 9.7 1.00 N/ A

Training N/ A 40.0 1.00 9.0 1.00 N/ A

* Yes=1, No=0; the mean value for each categories of centres is reported.


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Table 6.3 Efficiency: Alternative Measures7 8 9 10

Categories ofCentres

Selfevaluation(yes/ no)

Cost perclient-firm(.000 EUR)

Turnover /employee

(.000 EUR)

Client/ employee

Labs &Certification

0.67 5.5 145.2 32.60

TerritorialDevelopment

0.70 9.6 260.9 29.01

District 0.57 11.2 279.4 16.42

R&D andInnov. Serv.

0.67 14.0 198.3 14.75

Training 0 N/ A 181.3 N/ A


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Table 6.4 Sustainability: Alternative Measures11 12 13

Categories of Centres % ofservices sold

to clientfirms

Self-sufficiency

I ndex

High priority toobjective of

self-sufficiency*

Labs & Certification 75.3 0.63 0.2

Territorial Development 39.6 -1.66 0.2

District 57.5 0.15 0.4

R&D and Innov.Serv. 61.0 -0.07 0.3

Training 33.0 -1.03 1.0* Yes=1, No=0; the mean value for each categories of centres is reported.

Should a financially sustainable Centre be considered a “success”? Some authors argue that by targeting self-sufficiency, BDS centres may end up neglecting the more innovative services...


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0

5

10

15

20

25

30

0 1000 2000 3000 4000 5000

N°of client

Cos

t pe

r cl

ient

Lab. tests & qualitycertif.

Territorial dev.

District centres

Innovat. tech. centres

Centres’ Efficiency


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Centres’ Efficiency (and Economies of Scale)

Labs. & Quality Certification Centres

0246810121416

0 1000 2000 3000 4000 5000

N° of clients

Cost

per

clie

nt

Territorial Development Centres

0

5

10

15

20

25

30

0 500 1000 1500 2000

N° of clientsC

ost

per

clie

nt


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the specific features of each case should be contemplated, such as:

The Centre’s specific objectives, which may differ

The local context, and whether a market for BDS exists or should be created

Stage of industrial development and historical considerations

Budget constraint considerations, often tighter in developing countries

Words of WARNING after an evaluation


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Wide heterogeneity of the BDS centres in terms of size, specialisation, original initiative, turnover composition, dependence on public subsidies and linkages with firms and other institutions

Five categories identified

This variety is the coherent manifestation of the economic environment from which they originated, in a context characterised by a notable absence of a national policy in this field: not established within a national policy framework.

They are rather the result of very decentralised, bottom-up approaches, and of the collaboration among regional and local public institutions, very often jointly with the private sector: the expression of local specific needs.

CONCLUSIONS (1/2)


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Strengths

local availability of specialised services is definitely one of the competitive assets.

Financial self-sufficiency. As they supply services demanded by firms, these in turn consider them useful and are therefore often willing to pay a price

Weaknesses

they play a limited role to promote technologic innovation and management changes in the firms serviced: the really innovative firms do not search for assistance in their innovation efforts from BDS centres

Most of them do not help in creating new dynamic competitive advantages.

In sum, different from the ideal pattern of BDS centres acting as co-ordinators of networks of innovative specialised institutions

CONCLUSIONS (2/2)


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BDS centres clearly have a role in supporting the development of a supply of services whenever this is inadequate.

However, the market may do a lot without public subsidies, which should rather focus on specialised functions, considering the specific features and the historical itinerary of each region.

The capability of BDS centres to provide services demanded by firms depends on their embeddedness in the local business environment. Three key conditions:

* a deep involvement of the private sector in both the Centre creation and operation;

* a specific sector specialisation, and * a location close to potential customers.

The density of their presence matters (path-dependent nature of local industrial development)

IMPLICATIONS for Latin America (1/2)


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Localisation close to local enterprises needs to go together with reaching out distant service providers.

BDS centres need to stimulate demand of new services from firms. Anticipate tacit needs and convince firms of their relevance.

BDS Centres as “network-facilitators” insofar as local institutions exist.

Instead, where industry is still incipient a Centre is often bound to operate on its own. This requires a different strategy: (1) improve its management and technical skills, (2) improve the quality of the services provided, (3) Once established its presence in the local economy, (4) create linkages.

Evaluation is difficult but necessary. It should be repeated on a regular basis

IMPLICATIONS for Latin America (2/2)


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L’INTERNAZIONALIZZAZIONE DELLE PMI: STRUMENTI NORMATIVIL’INTERNAZIONALIZZAZIONE DELLE PMI: STRUMENTI NORMATIVIL’INTERNAZIONALIZZAZIONE DELLE PMI: STRUMENTI NORMATIVIL’INTERNAZIONALIZZAZIONE DELLE PMI: STRUMENTI NORMATIVI

Ricerca di nuovi Ricerca di nuovi mercatimercati Ricerca di nuovi Ricerca di nuovi mercatimercati

L. 227/77 (Ossola) Finanziamenti agevolati all’esportazione e Assicurazione del Credito L. 394/81 Finanziamento dei programmi di Penetrazione commerciale all’estero L. 83/89 Interventi di sostegno per i Consorzi fra PMI L. 304/90 Finanziamento per la Partecipazione a gare internazionali L. 212/92 Collaborazione con i Peco

Creazione di Società Creazione di Società MisteMiste Creazione di Società Creazione di Società MisteMiste L. 49/87 (art. 7) Credito agevolato per investimenti nei Pvs

L. 100/90 Interventi per la promozione della partecipazione a joint venture all’estero (Istituzione della Simest)

L. 19/91 Istituzione della Finest

Programmi comunitari (Ecip e Jop) oltre a partecipazione anche studi di fattibilità (facility 2) e addestramento del personale (facility 4)

Documents

Carlo Pietrobelli [email protected] 1 Carlo Pietrobelli Roberta Rabellotti Working Paper Cepal -Desarrollo Productivo No.13