Liabilities in prato's industrial district: An analysis of italian and chinese firm failures

Abstract

Liabilities affect a firm's competitiveness. Currently, firms face increasingly fierce competition as they operate in a period of deep financial and economic recession. The industrial districts in developed countries are experiencing profound transformations because of globalization and because of competition from developing countries and local immigrant firms. This chapter examines the liabilities faced by the firms in Prato's industrial district, by analyzing the failure rates of Italian and Chinese firms. This chapter aims to contextualize the concept of liabilities in the organizational ecology theory, to propose a quantitative approach to their investigation. The chapter contributes to existing studies by considering the different liabilities a firm has to overcome to survive in an organizational population. We adopt an organizational ecology approach to study multi-population failures in Prato's industrial district in the period 1990-2012. We construct a model of the failures of Chinese and Italian firms to investigate their evolution across time. The results emphasize the importance of the position that firms hold in strategic networks, particularly at international levels (global value chains). The firms' strategic position is important against the background of the production and the social relations in the industrial district.