Innovation in industrial districts: Evidence from Italy

The aim of this paper is to show that Italian manufacturing firms belonging to Marshallian industrial districts carry out a higher innovative effort than is usually acknowledged. The empirical analysis makes use of a panel of 1,218 district and non-district firms belonging to traditional sectors. Data refers to the years 1992 and 1995. We have estimated an augmented Cobb–Douglas production function. The estimates make it possible to empirically identify three different determinants of firms’ productivity: (i) the intentional innovative activity; (ii) the ‘‘district effect’’; and (iii) the joint district and innovation effect. The results show that firms’ membership in industrial districts and product innovations are key factors in explaining the productivity of firms working in traditional Italian sectors