A new phoenix?: modern putting-out in the Modena knitwear industry

Administrative Science Quarterly, March, 1995 by Mark Lazerson

The putting-out, or domestic system of production, symbolizes the transition from traditional handicraft production to modern manufacturing (Weber, 1981: 153). Before factories were centralized, merchants put out raw materials to formerly independent craftsmen and to subsistence farmers and their families, who then transformed them into goods either at home or in nearby sheds (Heaton, 1936: 341; Weber, 1981: 118-119). Once all of the separate tasks were completed, merchants or their agents collected the items and sold them. In most cases, the putting-out workers owned their tools, determined the length and intensity of their workday, and had few or no employees. This system of putting-out, which assigned fragmented tasks to workers of different skills paid at differential rates, presaged the modern division of labor and the factory (Landes, 1969, 1986: 595).

As a precursor to the industrial revolution, putting-out was expected to disappear once centralized manufacturing processes matured. Marx (1977: 591, 600) accurately foresaw that putting-out would become "an external department of the factory," yet he erred in assuming that increased technological development and state-imposed limits on the length of the workday eventually would make it "go to the wall" (Marx, 1977: 605). According to economic liberals, putting-out suffered from endemic poor workmanship, pervasive theft, and spasmodic coordination; its demise was assured by the supposed superior technology and organization of the modern factory (Landes, 1969: 118; Bythell, 1978). Even today, institutional economists persist in labeling decentralized manufacturing as organizationally inefficient, a system that both encourages unmonitored workers to shirk and imposes unnecessary expenses or so-called transaction costs, incurred through the movement of goods and services across many firm boundaries (Alchian and Demsetz, 1971; Williamson, 1980). It also undermines quality control (North, 1981: 168-169). Neo-Marxists, perversely, concur with many of these judgments. Capitalists, they say, abandoned putting-out because it failed to extract sufficient surplus from their workers (Marglin, 1976).

Despite these condemnations, modern putting-out has reemerged in some advanced industrialized societies as a new phoenix of late capitalism. One such place examined here is the Italian knitwear industry, centered in the province of Modena, a rich agro-industrial area of north-central Italy in the Emilia-Romagna region. In Modena, modern putting-out offers superior organizational properties to large-scale industrial organization. Putting-out in Modena is directed by knitwear manufacturers, who increasingly concentrate on financing and purchasing raw materials, coordinating production, and designing and selling garments. Although known in the trade as manufacturers, they actually do little manufacturing. Rather, the vast majority rely on external networks of independent, mostly small, artisanal firms to produce the garments.

In what follows I will show that putting-out today represents an attractive alternative to the centralized factory under certain technological, market, institutional, and social conditions. In terms of technology, the production process allows for spatial and temporal separation among discrete work stations. Similarly, the semifinished goods that must be moved from one putting-out firm to the next do not require special and costly shipping arrangements, as do highly fragile or perishable items. In terms of market constraints, putting-out offers advantages in terms of quick response times when products are highly differentiated and there are rapid changes in consumer tastes. These factors often reduce the level at which economies of scale are achieved. Institutional determinants in the form of state regulatory policies that offer small enterprises labor-cost and fiscal advantages are also important. Last, traditions of local community cooperation reduce certain transaction costs associated with decentralized production, and extended families permit economies in combining some production and reproduction activities.

I refer to the system of putting-out in Modena as modern to distinguish it from historical putting-out, which was broadly characterized by general technological backwardness and labor exploitation. Modena's putting-out system represents the modern rationality of an advanced industrial economy: Its use of technology and the division of labor equals that of the most modern clothing factories. Modena's putting-out is also closely linked with social wealth and plenty. Today, this production system has helped catapult Italy to first place as the world's largest knitwear clothing exporter by value (Zeitlin, 1992; United Nations, 1993: 775-776). My research indicates that in a modern industrial context, putting-out offers efficient solutions as defined by market criteria.

THE RESEARCH FRAMEWORK

To understand the organizational structure of the Modena knitwear industry, I have visited 44 firms, comprising 16 manufacturers and 28 subcontractor-artisans over the last several years. In the aggregate, these firms covered every phase of production. I used open-ended questionnaires to interview the firms' principals. On several occasions I passed entire days accompanying knitwear employers during their visits to contractors and subcontractors. I also interviewed eight homeworkers in their homes. Except for three firms located in adjoining provinces, the entire interview sample came from the province of Modena. The National Confederation of Artisans (CNA) assisted me in arranging most of the interviews with subcontractors. The Industrial Association of Modena (Confindustria) and the Association of Small Entrepreneurs (API) introduced me to about half of the manufacturers I interviewed. Some of the homeworkers were located through the Modena Labor Confederation (CGIL). Other interviews were arranged through personal contacts, in which I used a snowball approach: Each respondent was asked to introduce me to a new respondent, until I was no longer uncovering new information (Glaser and Strauss, 1967). By using a variety of sampling methods and enlisting the assistance of different trade associations and trade unions, I believe I have eliminated any likelihood of respondent-selection bias. Data from the interviews were supplemented by repeated discussions with industry and union representatives, principally from the National Confederation of Artisans (CNA) and the Modena Labor Council, and statistical information obtained from government, union, and industry sources. Data gathered for the 1991 national census were computed and provided to me in 1993 by the Office of Statistics of the Commune di Modena because the official national census data will not be available until late 1995. I also obtained data collected in April 1988 by the Camera del Lavoro di Modena. The first section of the paper defines and differentiates historical and modern putting-out and describes the organizational characteristics and evolution of Modena's knitwear industry. In the second and third sections I evaluate the criticisms made of putting-out in terms of transaction cost analysis and labor exploitation in light of the Modena experience. In the final section of the paper, I conclude by postulating the institutional, social, and political conditions under which an economically progressive model of putting-out production is most likely to arise and point to other places besides Modena where similar developments exist.