Bridging the divide: firms and institutional variety in Italy

The underperformance of Italy’s macroeconomy is common knowledge, yet empirical evidence has shown that a high quality segment of Italian export oriented firms has outperformed international competitors although the country lacks practically all attributes of a coordinated market economy. This thesis shows that the ability of firms to produce high quality goods in Italy is linked to the practice of "capital skill asset pooling" within a novel model of production organisation, "disintegrated hierarchy". "Capital-skill asset pooling" follows from the vertical disintegration of production functions across firms and entails the sharing of production assets between firms governed by heterogeneous institutional frameworks. Through the comparisons of firm-level case studies across three industries, the thesis shows that two simultaneous conditions are necessary for "capitalskill asset pooling" to develop: 1) the presence of lead firms endowed with patient capital, and 2) the presence small suppliers endowed with firm-, industry- and product-specific skills. This finding complements the Varieties of Capitalism literature by showing that firms can produce high or diversified quality goods in the absence of the necessary institutional preconditions by developing functional substitutes to coordinated market economy assets through "capital-skill asset pooling".