ABSTRACT
This chapter analyses how the conditions for efficiency in networks of firms have been satisfied in the Italian manufacturing industry and proposes a theoretical interpretation to explain them. It surveys some evidence showing that since 1970s production outsourcing was increasingly used in Italian manufacturing industry despite the high employment share of small firms. The chapter argues that a growth was characterised by the convergence between organizational patterns of vertical networks promoted by large firms and those characterising industrial districts. It proposes a theoretical framework to interpret this process. The chapter explains that an explanation of the growth of outsourcing is given by the informational advantages of decentralised networks of firms over the vertically integrated firm. In addition, information technology helps to increase the efficiency of network relationships with suppliers since electronic data interchange and industry-wide platforms have been shown to help buyers to reduce the costs of finding an appropriate supplier, monitoring subcontractors and co-ordinating ordering, scheduling and payment systems.
