Thesis (M.C.P.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2002.Includes bibliographical references (leaves 135-139).Over the past two decades, small firms have become the main targets of policies aimed at promoting economic growth and employment in developing countries. Various projects, programs, and public policies have focused on small and micro-enterprises, as part of a more encompassing social-policy strategy of reducing poverty and unemployment. Moreover, the brilliant economic performance, over the last three decades, of small businesses in central and northeastern Italy and in other regions in Europe has showed that small and micro-enterprises can also promote 'serious' industrial and economic development. Despite this growing interest, the current debates on small business development are not completely satisfactory with respect to two instances. On the one hand, the conception of small firm assistance in terms of 'welfare' and social-policy interventions focuses on the inability of small businesses to bear the costs of formalization and observing tax, environmental, and labor standards. In order to generate employment and revenues for the poor, small businesses have to be protected, subsidized, and exempted from the labor, fiscal, and environmental legislations. On the other hand, the literature on industrial clusters and small businesses in Italy and Europe often confines itself to descriptive models of the present functioning of the clusters, and derives best-practice lessons for small businesses development that are frozen in time and space, since they ignore the development trajectories of successful small business clusters and industries. Unfortunately, this strand of the literature is usually silent on how small businesses and dynamic industrial clusters moved from a situation of low-productivity, low compliance with the regulations, and high degree of informality and achieved international competitiveness. This paper contributes to the discovery of alternative trajectories of successful small business development, by exploring how small firms in Emilia Romagna (Italy) actually grew into formality, respected labor and regulatory standards, and became internationally competitive. This study analyzes how artisan associations have supported the rise of a dynamic small-scale industry in Emilia Romagna in the aftermath of the Second World War. A central argument of this paper is that the deliberate, proactive, and persistent support of the CNA, the dominant artisan association in Emilia Romagna with a strong leftist political identity, lies at the heart of the brilliant economic performance of the Emilian small and artisan firms. The association provided political representation and, both production-targeted and administrative services to the artisan firms during a period of great political instability, economic stagnation, and social unrest. Overall, the CNA pursued a three-pronged approach to small business development. First, it provided political representation to an otherwise silent and individualist social group, such as self-employed workers and the artisans. This enabled small entrepreneurs to influence policy decisions affecting their activities and, more importantly, to pool resources so as to widen market opportunities and improve competitiveness. Second, the association buffered the impact on small businesses of the fiscal, accounting, and labor legislations. It did so both by mediating with the public authorities the interpretation and the enforcement of these regulations, and, more importantly, by providing administrative (accounting, payroll, fiscal counseling) services and production-targeted (producers' consortia, industrial sites, innovation centers) activities which enabled small businesses to comply with the formal regulations. Third, the CNA promoted the introduction of a formal system of industrial relations also for the artisan sector, thus favoring the institution of formalized labor relationships between small businesses and the labor unions. As a result of this three-pronged strategy, three developmental processes have emerged over time: the process of formalization of small businesses, the progressive upgrading and rationalization of the management of the firms, and the positive influence of solid industrial relations in both preventing the diffusion of a lowest-cost competitive strategy and fostering the respect of labor standards among small firms. In sum, the multipronged, proactive, and persistent activity of the CNA has enabled and supported over time the Emilian artisan firms to pursue the so-called 'high-road' to small business development.by Alberto M. Criscuolo.M.C.P
