Journal of Management and Governance 3: 339–360, 1999.

339
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.

Networks within Industrial Districts: Organising

Knowledge Creation and Transfer by Means of
Moderate Hierarchies

CRISTINA BOARI1 and ANDREA LIPPARINI2

1 Dipartimento Discipline Economico-Aziendali, Universitá degli Studi di Bologna, Piazza
Scaravilli, 1, 40126 Bologna, Italy (Phone: +39 051 258075; Fax: +39 051 258074; E-mail:
cboari@economia.unibo.it); 2 Dipartimento di Scienze dell’Economia e della Gestione Aziendale,
Universitá Cattolica S. Cuore, Largo Gemelli, 1 – 20123 Milan (Phone: +39 02 7234 2436; Fax:
+39 02 7234 2670; E-mail: andrea.lipparini@mi-unicatt.it)

Abstract. This paper furnishes evidence of innovative modes of organisation of inter-firm relation-
ships and knowledge management within industrial districts. With the aid of a district firm, we first
highlight the marked tendency among the largest companies to eschew an exclusively endogenous
innovative process. Next, we analyse how the leading firm can play an active role within a network by
assigning outside its boundaries tasks that were once undertaken in-house. This happens gradually
with the moderate hierarchisation of originally destructured network relationships. In its attempt
to organise innovative modes of design and manufacturing, without losing control and strategic
legitimisation, the leading firm elects a coordinating agent with direct responsibility over a selected
team of specialist suppliers.

1. Introduction
In the debate surrounding industrial districts, clusters of firms located in northern
and north-eastern Italy are considered models of economic efficiency, innovative
output, and high employment levels (Benko and Dunford, 1991; Pyke et al., 1990;
Sengenberger et al., 1990). It is widely accepted that in order to prosper, a district
should act as a catalyst in the formation of predominantly informal and flexible
networks of small and medium-sized enterprises (Goodman et al., 1989).
In practice, districts are experiencing various destabilising pressures: i. – the
“shopping” of long-established district firms by multinationals from other coun-
tries; ii. – growing international competition and the complexity and uncertainty
connected with the size of the niche markets; iii. – increased labour costs in the
district which, combined with improvements in systems of communication and the
reduction in transportation costs, makes it cost-effective to relocate a number of
production processes to other countries; iv. – the shortage of skilled manpower
and the concomitant increase in unemployment levels; and v. – the decline in the
business birth-rate/mortality ratio.