International relocation of production and the growth of services : the case of the "Made in Italy" industries

Abstract

This article first presents a “systemic” approach to the international relocation of production, one that looks at local production systems as a whole, rather than at the activities of a single transnational corporation. This approach is used as the basis for an assessment of the effects of the internationalrelocation of production on the local economy and specifically on the growth of service industries. The empirical application relates to “Made in Italy” industries (textiles, clothing and leather products). These have increasingly relocated parts of the production chain abroad over the past decade, with effects on the employment growth of those services that are located in the same local production system. The term “province” is chosen as a proxy for the latter and as the geographical unit of analysis in the empirical research. Overall, the empirical results show that the international relocation of production processes is associated with the growth of services. In particular, a high degree of internationalization is associated with a positive employment growth of the service sector as a whole and of its most traditional industries, such as trade, transport and financial services. However, a negative relationship has been found in the case of business services and, in particular, for the “science-based” industries (engineering, research and development, software industry).

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