Institutionalization of Inter-Firm Collaboration : Italy's "Network Contract" and its Policy Implications for Korea

In almost all the industrial sectors in Italy, small and medium-sized enterprises (SMEs) are well developed. Indigenous SMEs that have been rooted in the region for a long time make up the power and backbone of Italy’s regional industries. In particular, micro enterprises with fewer than 10 employees account for 95% of the total number of enterprises. Their employment and value added account for 47% and 30% of the total economy, respectively. Italian industries’ dependence on small businesses is very high compared to other European countries.However, problems arising from the SME-focused industrial structure emerged in the 2000s. As globalization has opened up markets and intensified global competition, many companies concentrated on exports and overseas outsourcing in order to overcome their smallness, but they failed to achieve clear results. In particular, jobs in traditional manufacturing industries such as textiles, clothing, and machinery have continued to decline (Kim et al., 2015).An industrial structure that is heavily reliant on SMEs can be a double-edged sword. Innovative small businesses are easy to hit niche markets with a variety of products. The simple decision-making system has the advantage of being able to respond flexibly to the rapidly changing market conditions of today. However, with a family-oriented, closed-minded corporate culture in place, it may be easy to lose sight of the innovative aspect. There is also a drawback that it is difficult to extend business opportunities by avoiding business risks in decision-making processes such as overseas investment, mergers and acquisitions. The Italian government, academia, and industry have raised concerns and criticism that their SMEs are showing lower competitiveness and market performance than other European countries, as well as emerging Asian countries.In recognition of this problem, the Italian government introduced a unique system of Network Contracts. Network Contracts are institutional devices that combine SMEs in small sizes to create economies of scale and innovation in many aspects of business. Korea is also operating a “Collaboration Support System” and a “Collaborative Project Approval System” to support cross-company cooperation according to the “Small and Medium Business Promotion Act”. However, since the culture of collaboration among companies is not well established in the industry, it has not led to concrete achievement