Co-operation and competition in production and exchange: the “district” form of industrial organization and development

This paper considers the role of co-operation and competition in production and exchange—and the “district” form of industrial organization and development. It examines Alfred Marshall’s theory of industrial districts—localized groups of small firms and their suppliers that were at the heart of Britain’s industrial development. However, with the emergence and growth of very large and successful vertically integrated firms—and as the conventional wisdom evolved to view large size as the next stage in industrial evolution—the small firm sector was progressively marginalized. In this process, Marshall’s dynamic and evolutionary approach to industrial organization was abandoned. However, the discovery of competitively successful agglomerations of small firms in Italy during the 1960s served as the motivation for construction of a new theory of the “Marshallian” industrial district, pioneered by Giacomo Becattini and Sebastiano Brusco. The success of these modern industrial districts in securing inter-firm co-operation and channelling their joint efforts towards quality upgrading and product and process innovation, at a time when large firms and the “Fordist” mass production model were generally in decline, brought them to the attention of the international research and policy community. Since then, the literature on this form of industrial organization has proliferated; and Marshall’s methodology and theory has proven remarkably resilient in explaining the dynamic, non-equilibrium processes involved in their development, evolution and performance over time.