The only way to grow? Italian business groups in historical perspective

The evolution of Italian capitalism during the 20th century has been characterized by the presence of different forms of enterprise which have typified different phases of the country’s economic growth process. Considering a set of dimensions such as size, performance, legal forms, types of ownership and governance, Colli and Vasta (2010) identified seven different forms of enterprise: 1) big business; 2) state-owned enterprises; 3) foreign-controlled companies; 4) medium-sized firms; 5) small firms operating in local production system; 6) municipalized firms, which provide services within an administrative county or a homogeneous geographical areas; 7) co-operative firms which – originally proposed as an alternative to capitalist corporation and characterized by a peculiar governance structure – has assumed a growing importance in the Italian economy in the last three decades. Some of these forms of enterprise are strictly specific to the Italian case: small firms, co-operatives and municipalized companies correspond, in their diffusion, form and structure, to the particular set of social and institutional conditions which characterized 20th century Italy. Conversely, for other forms, such as big business and foreign-controlled firms, the Italian case is not particularly different from that of the other industrialized nations, at least in term of specialization and market concentration. However, Italian big business remained sharply different from its American and European counterparts as regards the degree of internationalization, the ownership and organizational structures, and the governance practices. A pervasive presence of business groups is a common trait to all the forms of enterprise we have identified in Italian capitalism. However, we argue that business groups are not a static component of the Italian industrial landscape. The rationale for their existence constantly changes over time according to the technological and institutional changes. Thus, this paper, by enlarging the focus of a previous article (Colli and Vasta, forthcoming) to various forms of enterprises, analyze, on one hand, the dynamics of business group formation and, on another hand, the different logics which emerge within all different forms of enterprise. Moreover, it provides a “new” taxonomy of groups’ typologies and discusses the reasons at the origin of the choice of the group as a governance mechanism alternative to the multidivisional form and, more generally, to the Anglo-Saxon capitalism model. Finally, we argue that the business group as a governance system looks particularly flexible, adapting itself to different ownership and market conditions. In absence of obstacles of legal or fiscal nature, this flexibility is probably the main reason for its resilience. The persistence of business groups in the Italian economy confirms that this peculiar form of business organization is neither limited to the less developed countries, nor simply a "second-best" substitute of the multidivisional form diffused in the liberal market economies.