Institutions, Politics, and the Corporate Economy

This article has shown that Italy’s industrial structure, in international comparison, is characterized by an overwhelming presence of SMEs in terms of employment and, conversely, by a limited weight of large fi rms. SMEs are concentrated mostly in the “made-in-Italy” industries. Conversely, the weakness of big business led Italy to cover a smaller share of the high-tech and large-scale sectors than the other advanced economies. This peculiar industrial structure seems to be the outcome of a long-term evolution of Italian capitalism, which has been only partially modifi ed by two novelties that occurred in recent years: the rise of MSEs and the increased weight of foreign-owned firms. Italy’s peculiar industrial structure is only in part the result of entrepreneurial failures of big business and of the dynamism of small entrepreneurs, as institutions were a key factor in determining the contrasting performances of big businesses and small fims. Formal institutions were unsatisfactory in all the areas in which big business could be supported: technological leadership, internationalization, human capital, and corporate fi nance. As a result, Italian large firms grew protected in the domestic market, strong and in a monopolistic position at home but relatively small and weak in the international markets. Conversely, after World War II, formal institutions fostered the small fi rm sector through a variety of measures: artisanship policy, subsidized credit to SMEs, banking and labor market regulation, and insolvency legislation. Such an anti-private big business stance of formal institutions is largely the consequence of the deeper infl uence of informal institutions, in particular the failed hegemony of big business and corporate values on the Italian society and the consequent disconnection of the corporate elite from the political elite throughout most, if not all, of Italy’s post-unifi cation history. Thus, the weakness of large companies in Italy is also the consequence of the fact that, differently from other advanced industrial nations such as the United States, Italy failed to create a modern industrial democracy characterized by the leadership of big business and corporate values.