Sociology and Economic Development Policy: The Case of Industrial District Promotion

Staber, Udo, Canadian Journal of Sociology

* Research for this paper was supported by a grant from the Social Sciences and Humanities Research Council of Canada. I am grateful to Jurgen Grote, Will van den Hoonaard, Charles Snow, and the CJS reviewers for their comments on earlier drafts of this paper. The usual disclaimer applies.

Abstract: Criticism of the limited public policy relevance of sociological research has led to urgent calls for more policy-oriented knowledge. I discuss the promotion of industrial districts for economic development as an area where sociologists could play a prominent role in public discourse. I argue that industrial districts are primarily social, not technical, systems, and propose that sociologists pay closer attention to the institutional processes by which interfirm structures are created and transformed.

Resume: La critique de la pertinence limitee de la politique gouvernementale sur la recherche sociologique a cree un besoin urgent d'une connaissance davantage axee sur les politiques. J'aborde la promotion des districts industriels pour le developpement economique comme un secteur ou les sociologues pourraient jouer un role predominant par rapport au debat public. Je soutiens que les districts industriels sont principalement des systemes sociaux, et non techniques, et propose que les sociologues accordent une attention accrue aux procedes institutionnels par lesquels les structures interentreprises sont creees et transformees.

Introduction

Not too long ago Giddens (1987:44) predicted that "there will be a deepening involvement of sociology with the formation of practical social policies or reforms." He based this prediction on the assertion that government policies which are informed by a view of the omniscience of markets will not be very durable. Economic institutions do not emerge automatically in response to economic needs, but are constructed by individuals whose actions are both facilitated and constrained by the social networks in which they are embedded (Granovetter, 1985; Giddens, 1987; Hirsch et al., 1987). Many of the protective institutions which have been constructed to manage the ill effects of markets are now under attack in Western societies, as governments are relying more on markets to stimulate economic growth. But the history of industrialization has shown that individuals will tolerate only a certain degree of insecurity and uncertainty before they seek protection from the market through institutional arrangements (Polanyi, 1944). Despite the rise of market models, there are urgent calls for novel institutional structures that can help to ease the pain of adjustment to social and economic change. It is here that sociology, as a science of institutions, can make a significant contribution and help solve some of the practical problems of "postmodernity" (Beck, 1992; Huber, 1995).

In this paper, I discuss an area of inquiry and policy action where sociologists could play a prominent role: the promotion of industrial districts for regional economic development. Because industrial districts have gained prominence among regional planners and industrial strategists, sometimes even to the point where they are considered a canonical model for economic development, they require a careful assessment of their potentials and limitations. Careful scrutiny is all the more necessary because of the tendency of policy practitioners, aided by economic development consultants, to overgeneralize the district approach and to apply it in a paradigmatic and context-independent fashion, despite occasional admonitions from sociologists that institutional solutions for industrial districts are highly place-specific and that the existing set of clearly successful districts is quite limited (Masi, 1991; Zeitlin, 1992; Amin and Thrift, 1994). This policy view is unfortunate for it can lead to serious distortions in the application of what may in fact be an effective model of regional economic development, albeit only under specific circumstances, which are yet to be explored systematically.

I use the institutional perspective in sociology to explain the place-specificity of district development and success, and to explore the implications of this specificity for regional economic development policy. I begin with a discussion of the growing popularity of industrial districts as a model for economic development, and note several reasons why policy practitioners have made little use of sociological research findings. After outlining the social embeddedness of district structures as an area where sociologists can make significant contributions, I show how several core concepts of the institutional approach can be used to explain variations in the development and performance of industrial districts. The central argument here is that processes of institutionalization are more important than the presence of institutions per se (see also Saxenian, 1989, and Amin and Thrift, 1994). It is not that institutions are unimportant; the literature shows that successful districts tend to have a range of institutions (trade associations, training institutes, research centres, marketing cooperatives, etc.) in which firms can meet and exchange information (Pyke et al., 1990). But attention to institutional processes helps to clarify the fundamental problematique of district development and shows that districts are not primarily technical systems, as conceived by many policy practitioners.

The Promises of Industrial Districts

Industrial district is a term coined by the economist Alfred Marshall (1890) who described a particular social organization of resource exchange among local enterprises. The ideal-typical industrial district refers to a geographically concentrated community of mostly small firms which specialize in particular tasks and are linked both horizontally and vertically through a mix of cooperation and competition (Bagnasco, 1977; Brusco, 1982; Pyke et al., 1990; Bianchi, 1994). Interfirm relations in the district are embedded in local social structures and practices that support dense information exchange and constant innovation.

In the 1970s, a group of researchers identified several regions in Northern/Central Italy (the Third Italy) that had experienced significant economic growth during the preceding decade. They argued that the high economic growth rates and significant improvement of social conditions in these regions were causally related to the properties of Marshallian industrial districts and represented a specific form of social and economic development (Bagnasco, 1977; Brusco, 1982). Piore and Sabel's (1984) work on industrial restructuring brought the district model to the English-speaking audience and outlined its potential as a policy tool for regional development and industrial strategy.

By the early 1990s, governments in a growing number of countries and regions had come to look toward industrial districts as the "new growth centres of the world system" (Scott, 1988: 178), with a possibility for sustaining high wages and labour standards in the face of growing international competition. Promoting industrial districts had become a growth industry of sorts, as governments in less prosperous areas attempted to create the institutional conditions believed to facilitate endogenous regional development. In North America, current government programs include Oregon's Key Industries Development Initiative, Project California in Los Angeles County, Partnership for the Development of Biomedical Technologies in Rochester (New York), British Columbia's BC Trade, the Regional Industrial Networks Project in Northern Ontario, Quebec's Network Enterprise Approach, and a host of other less well known projects.

The general idea in each development project is to instrumentalize the alleged "progressive localism" and "industrial dynamism" of small, specialized businesses, in the hope that the right mix of cooperation and competition will generate self-sustaining economic growth. (1) Whether the social organization of industrial districts is capable of delivering on strategic promises is debatable on theoretical grounds. Debates revolve around the continued role of scale economies in mass markets (Sayer, 1989), contradictions in localized labour markets (Peck, 1992), and the insertion of local economic relations in global contexts (Amin and Thrift, 1992). The performance of industrial districts is also a question that has, so far, stimulated very few systematic and comparative studies (Signorini, 1994). The impact of development policies on the performance of districts is even less clear. Policy initiatives to create district structures have not been without criticism, from a variety of camps, including sociologists (e.g., Masi, 1989; Christopherson and Redfield, 1993; Curry, 1993; Harrison, 1994). But critical comments seem not to have deterred policy makers from acting as if the district approach to regional development is superior to other approaches that have been tried in the past.

There are several reasons why development practitioners have made little use of sociological research on industrial districts. One reason is that sociologists often attempt to build theories that have broad applicability, at aggregate levels of analysis and over the long term, while policy practitioners are more interested in situation-specific, micro-level, and immediate applications. The irony is that practitioners have tended to apply the district model as an ideal type, as if it had general applicability, despite warnings from researchers that the model is not perfect and will "not magically solve all developmental problems at one stroke" (ILO, 1991: 112) and that successes in one …

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Publication information: Article title: Sociology and Economic Development Policy: The Case of Industrial District Promotion. Contributors: Staber, Udo - Author. Journal title: Canadian Journal of Sociology. Volume: 23. Issue: 2-3 Publication date: Spring 1998. Page number: 239. © 1997 Canadian Journal of Sociology. COPYRIGHT 1998 Gale Group.

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