Globalization has brought about a sharp increase in the real and financial integration in the worldwide economy. In this closely knit context, the outsourcing of some of the productive and trade activities abroad has become the focal point of the policies followed by firms in order to face competition on international markets. The shift of manufacturers towards countries with lower labour costs was underlined by some experts at the beginning of the 1970s and especially involved countries with relatively high labour costs such as USA, Germany, Sweden, Denmark, U.K. (Adam, 1971; Finger 1976; 1977). Over the last decades the capacity of manufacturing firms to slice the production cycle without incurring high diseconomies has given large impetus to production globalisation and has driven firms in countries with salaries lower than those in the USA and North European countries, like Italy, to find lower production costs abroad. Additionally the participation of East European countries, Russia, and China to the international consumption market has provided an additional incentive to transfer the manufacturing processes abroad by locating outposts in areas close to markets with high sales potential.
To ‘measure’ the degree of internationalization of a firm is not an easy task: the usual measure is the value of the direct overseas investments made to set up a new company abroad or to purchase one already in existence. Italian overseas investments are modest, and Italian businesses seem to be lagging behind compared to other industrialised countries of a similar size and degree of development. Some scholars who have acquired information from the study of interindustrial trade flow (Schiattarella, 1999; Kaminski and Ng, 2001; Corò and Volpe, 2003) and from studies on individual companies have reached the conclusion that the process of internationalisation is much wider and detailed than what appears from data regarding direct investments. A conspicuous part offirms’ overseas activities is in fact based on intermediary procedures i.e. trade agreements and subcontracting, particularly important in the case of Italian SMEs (Bigarelli and Ginzburg, 2005). These forms of ‘light’ integration involve reduced capital flows and temporary commodity flows, as commodities are sent abroad in order to be processed and are subsequently re-imported. But intermediate commodity flows blend with the ‘normal’ transit of goods at Customs, they are not separately recorded, therefore they are difficult to identify. Because of this and not because ’light’ integration is unimportant, international trade experts have not really taken it into consideration (Bugamelli, Cipollone e Infante, 2000).
In Italy, the little analysis available seems to point out the traditional sectors and those characterised by important economies of scale as being less present in overseas markets and holding minor investments compared with the high-tech sectors. This result contrasts with anecdotal evidence according to which the delocalization of textile, clothing and footwear sectors is highly relevant (CEPS, 2005; Gomirato, 2004; Grandinetti, 2006; Graziani, 1998; 2001) but occurs in the mild forms mentioned before. For example, within traditional sectors there has been a steady and substantial increase of the number of firms that have established trade agreements with overseas partners (Bugamelli, Cipollone e Infante, 2000). A wide study regarding Italian manufacturers with more than 10 employees, for the period 2000-2003, revealsthe well know fact that the large majority of Italian firms export abroad (70% of the total) and the majority of them has kept up or started trade operations or overseas trade agreements with foreign correspondents, with a marked increase over the previous survey (Capitalia, 2005). Direct investment involves a limited number of businesses, while much more firms have set up technical collaboration agreements with overseas companies (Capitalia, 2005, tables D16bis and D30).
This paper aims at investigating the phenomenon of production outsourcing of the Veneto footwear and clothing industries. It is based on information available from a direct survey combined with individual budget data. The survey takes into account outsourcing carried out both through direct investments and subcontracting and partnership. The different processes are separate only with respect to their relevance calculated as part of the final product manufactured abroad. The decision to outsource part of the production abroad reflects in a positive variation in per capita value added and gross profits (EBITDA2). This analysis shows the importance of relocation on a global scale in order to give new competitivity to Veneto firms in a sector which in the 80s resorted to domestic subcontracting and in the 90s found competitive strength through the delocalization of production to countries with low labour costs.
