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Inter-firm Co-operation and Competition in Industrial Districts

The relationship between the presence of numerous firms in an industrial district and district flexibility may be more complicated than current conceptualizations imply, as these are dominated almost exclusively by the argument that district firms are embedded in local social structures and that integration encourages innovation. On the basis of arguments from neo-institutional and ecological theory, I distinguish between Third Italian districts which change mainly through collective learning in a relatively stable population of firms and Marshallian districts which change mainly through the competitive replacement of relatively inert firms. I explore this distinction empirically with data on the relationship between district size and firm mortality rates in a textile district in Baden-Württemberg, Germany, from 1946 to 1993.