OUTSOURCING "PRINCE": MODELS OF SUPPLY CHAIN GOVERNANCE IN THE ITALIAN AUTOMOBILE DISTRICTS, THE

Industry and Innovation, Mar-Jun 2004 by Negrelli, Serafino

In Italy, the social consequences of the economic phenomenon now generally known as outsourcing have long been viewed negatively. Take, for example, the debate in the 1970s among economists and sociologists on productive decentralization, which was seen essentially as an anti-union employer strategy in response to the great strike wave of the autunno caldo, or "hot autumn" of 1909; or the widespread protests against the Fordist organization of labor in big firms (Negrelli 2000a). But in a country largely dominated by small enterprise and family capitalism, political institutions have also been very concerned with the social regulation of relationships between small and large firms. Most recently, in connection with the latest crisis at Fiat Auto, Labor Minister Roberto Maroni, a promoter of outsourcing reform, explicitly proposed extending social "shock absorbers" to small firms in the automotive components sector affected by decreasing demand from large enterprises.' This proposal was advanced with a certain polemical edge, underlining the fact that in the past only big firms had access to such provisions.2

These proposals, negotiations, agreements, and statements, often in direct conflict with each other, mask-perhaps not just in Italy-a much more important issue: does outsourcing represent a threat or an opportunity for firms, workers, and unions?

This paper will advance the hypothesis that the economic and social risks for the different individual and collective actors are lower when outsourcing is the subject of innovative forms of negotiated regulation. This is what happened, for example, in Italian industrial districts (Trigilia 1986; Beccattini 1987; Bagnasco 1999); and it is also true of the automobile supply chain in some other national cases studied in the comparative literature (Sako 1998; EIRO 2000; Enrietti et al. 2002; Negrelli 2004; Whitford and Zeitlin this issue). In all these cases, in fact, the goals of the different interests represented have been combined in an equitable manner for all the social actors involved; and both negotiated regulation and economic success have been the products of network forms of organization-substantially different from the pure forms of market and hierarchy. Sociological analysis has pointed to the diffusion, prevalence and functionality of the network form as empirical indicators that challenge the traditional economic interpretation of organizations (Granovetter 1985). But this literature has also warned against placing too much emphasis on the networks' functionality and has drawn attention to problems arising from their governance (Podolny and Page 1998), such as those which emerge from the comparative analysis of outsourcing processes in the Italian automotive regions of Piedmont and Basilicata presented below.

Sociological reflection on outsourcing takes one of two major positions: there are those who interpret this phenomenon as a resurgence of market forces, epitomized by Bonazzi's (2001) image of "the market inside the factory"; and those who interpret it as a new and irreversible trend towards "specialization", an extension of the Durkheimian social division of labor (Whitford and Zeitlin this issue). In the sociology of work and industrial relations, this debate goes back to the literature on productive decentralization as a managerial response to the workers' struggles of the late 1960s in Italy and Europe (Crouch and Pizzomo 1977), as well as to the literature on "flexibility", which was often divided both between supporters and skeptics of its irreversibility, and between those who saw it as a constraint or as an opportunity for workers and unions (Regini 1988).

Empirical evidence in support of both hypotheses is widely available. Most important are the results of comparative research on contracts and worker safety; on the effects of labor flexibility on work conditions and trade union rights (European Foundation 2000, 2002); and on the re-organization of component manufacture between upper-tier firms, where unions are more prevalent, and those in the lower tiers, where the risks for workers are greater (EIRO 2000). There is also a large literature on industrial relations and human resource management in small and medium-sized firms. These studies show that although "small is not always beautiful", neither are small firms always "black holes" (Guest 1995; Bordogna and Pedersini 2001). In any case, it is restrictive to limit oneself to such general observations without taking note of the relative presence or absence of forms of harmonization and social regulation, such as whether or not the firm belongs to an industrial group, a productive district, an outsourcing network, etc. For example, the deferment to collective bargaining for the application and management of labor flexibility in firms, as provided for by Italian law since the 1980s, has reduced the risks of the "precariousness trap" evident in countries with more limited social regulation (European Foundation 2000, 2002; Negrelli 2000b).