1. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible Manufacturing Networks of Emilia-Romagna Leading the Race to the Top in Global, High Performance Manufacturing Matt Hancock

2. September 21, 2015 Center for Labor & Community Research www.clcr.org Emilia-Romagna A region in northern Italy

3. September 21, 2015 Center for Labor & Community Research www.clcr.org A great place to live! Population: 4 million (1 million in the Capital city, Bologna) Unemployment Rate: 3.8% (compared to 7% in Italy and 9% in the European Union) Leading region in Europe for female employment The fifth richest region in Europe

4. September 21, 2015 Center for Labor & Community Research www.clcr.org A dynamic, high performance economy Gross Regional Product increased nearly 12% from 1997 – 2005 (compared to 10.8% nationally) Industrial GDP grew 6.6% in the same period (Piedmont and Veneto’s decreased 8.4% and 1.4% respectively) ER is responsible for 12% of Italy’s exports (with 6% of Italy’s population)

5. September 21, 2015 Center for Labor & Community Research www.clcr.org Global leadership Packaging Machinery Ceramics Automotive Biomedical Fashion & Textiles Wine, dairy, meats

6. September 21, 2015 Center for Labor & Community Research www.clcr.org Advanced technology Leader in Italy & Europe in innovation 93 hi-tech spin-offs in the last three years 1,500 engineers & researchers hired by private sector since 2003 Sunny, world’s smallest motor invented! New ‘hi-mech’ cluster

7. September 21, 2015 Center for Labor & Community Research www.clcr.org Secrets of their success! “The success of our development model has been our ability to marry the growth of networks of small firms with community development.” Duccio Campagnoli, Secretary of Productive Activities for the Region

8. September 21, 2015 Center for Labor & Community Research www.clcr.org How small is small? 400,000 companies in the region 1 business for every 10 residents 100,000 manufacturers Average firm size: 10 employees 99% of the firms have less than 250 employees

9. September 21, 2015 Center for Labor & Community Research www.clcr.org Networking is natural Manufacturers began aggressively networking following WWII in an informal manner Development of “industrial districts” or groups of geographically proximate firms operating in a particular sector or related sectors, each specialized in a particular phase of production

10. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible Network 1.0 Informal networking Also called “flexible specialization” No “lead firm” Firms owned by skilled workers with an entrepreneurial spirit Continuous improvement Older equipment No management structure in the firm

11. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible Network 1.0 End Users in Sector Typical Small Firm Other Small Firms

12. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible network 2.0 Emergence of “lead firms” in a cluster (OEMs) More heirarchical, vertical relationships Smaller suppliers still specialize and sell to different OEMs in the cluster and outside of the cluster Strategic partnerships Longer – even transnational - supply chains

13. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible network 2.0 Typical Small Firm OEM “Lead Firm” OEM “Lead Firm” 2 nd /1 st Tier Supplier Local suppliers Foreign suppliers (lower value-added) Other Suppliers

14. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible network 3.0 Emergence of formal, horizontal networks among suppliers Small firms capture more value Formal structure for temporary, project-based partnerships Creation of supplier-owned & controlled 1 st tier suppliers/OEMs Constant spin-off and integration into network as means to increase capacity

15. September 21, 2015 Center for Labor & Community Research www.clcr.org Flexible network 3.0 “System Integrator” & Incubator Specialized Supplier OEM End User

16. September 21, 2015 Center for Labor & Community Research www.clcr.org It takes a community Success is a synergy of – Effective policy to help small firms network, innovate & globalize – Business associations that provide value-added services – Business-labor-government partnership – World-class infrastructure – Social services as factors in productivity – Entrepreneurs’ commitment to quality, innovation, the community and the long-term

17. September 21, 2015 Center for Labor & Community Research www.clcr.org CNA – Small business association Region-wide federation of province-level organizations Offices in every neighborhood of the region CNA Bologna has 16,000 members 600 employees that provide value-added services to member companies

18. September 21, 2015 Center for Labor & Community Research www.clcr.org Regional Policy Policymakers are guided by expert research into economic clusters Social partnership is explicit Examples of effective policies – Sector & transversal service centers – Regional innovation centers – Tech-transfer through “networked labs” – Support for hiring engineers & researchers – Public-private venture capital fund for small business – Support for start-up costs associated with network creation

19. September 21, 2015 Center for Labor & Community Research www.clcr.org Conclusion “The success of our development model has been our ability to marry the growth of networks of small firms with community development.” Duccio Campagnoli, Secretary of Productive Activities for the Region