Footwear Clustering Efforts in Montebelluna and Timi- Soara

Footwear clustering efforts in Montebelluna and Timi- soara

European Cluster Mapping Project “Identifi- cation, analysis, and monitoring of business clusters in Europe”

Case study for the Commission of the Euro- pean Communities Enterprise and Industry Directorate-General*

This cluster case study and 14 other cluster case studies conducted under the same project are available at www.clusterobservatory.eu together with a synthetic analysis of the potential of 25 European clustering efforts for promoting innovation and competitiveness.

28/02/2008

*The opinions expressed are those of the authors, Competi- tiveness (www.competitiveness.com), and do not represent the Commission's official position. Footwear clustering efforts in Montebelluna and Timisoara

Table of contents

1. Objectives of the case studies...... 1 Addressing the European innovation gap ...... 1 Understanding if clustering efforts are helping to close the gap..... 1 Why the Footwear clustering efforts in Montebelluna and Timisoara can be a useful example ...... 2 2. Have the clustering efforts been a driver for innovation in the Montebelluna or Timisoara footwear industry?...... 3 Contribution to the development of lead markets ...... 3 Help in focusing R+D+I resources ...... 3 Improvement of human, financial and knowledge mobility ...... 4 3. Successes and failures of the clustering efforts in Montebelluna ...... 6 In defining the perimeter for the clustering effort...... 6 In setting the strategies to build a sustainable competitive advantage ...... 6 In managing the clustering efforts jointly...... 6 In applying the learning to the whole economy ...... 7 4. Learning from the footwear clustering process in Montebelluna ...... 8 Implications for the local and regional support institutions...... 8 Implications for the national and EU institutions...... 9 5. Appendix I: The clustering efforts in the footwear industry in Montebelluna and Timisoara ...... 10 A - The footwear industry ...... 10 B - The cluster in Montebelluna, Italy ...... 13 C - The challenges of the Montebelluna footwear cluster ...... 15 D - The Montebelluna clustering process with the link to Timisoara ...... 18 E - Present situation ...... 20 6. Bibliography...... 22

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania Footwear clustering efforts in Montebelluna and Timisoara

Table of figures

Figure 1 Distribution of value added in 2003 (EU25 = 100%) ...... 11 Figure 2 Distribution of employment in 2003 (EU25 = 100%) ...... 11 Figure 3 Statistical employment analysis (Source: European Cluster Observatory)...... 12 Figure 4 NUTS II map: Veneto and Timisoara ...... 13 Figure 5 Import penetration and export intensity in Italy, 1970-1994 ...... 15

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania Footwear clustering efforts in Montebelluna and Timisoara Objectives of the case studies

1. Objectives of the case studies

Under the 6th framework programme, the European Commission / DG Enterprise and Industry, has launched a range of projects related to clusters and innovation. One of them, under the Europe INNOVA programme, develops a comprehensive set of data and analysis around clusters, innovation, and related policies. In December 2006, the importance of these studies was reinforced by the Competitive- ness Council’s conclusions, which describe clustering as an area of priority where actions should take place in support of innovation.

Addressing the European innovation gap There have been many other efforts to address the European innovation gap, and it is difficult to summarize the actions needed and proposed in one paragraph, but the report “Creating an innovative Europe” commissioned to former Prime Minister of Finland, Esko Aho, by the Hampton Court Summit, gives a clear message of the actions required and how clustering efforts could help close that gap.

The report states in its summary: “Achieving an Innovative Europe requires a combination of a market for innovative goods and services, focussed resources, new financial structures and mobility of people, money and organisations. Together these constitute a paradigm shift going well beyond the narrow domain of R&D and innovation policy.”1

Understanding if clustering efforts are helping to close the gap The Aho report gives as well a perspective of how clustering efforts can help that paradigm shift:

“Clusters and, more generally, regional agglomerations are often at the core of innovative development. It is widely recognised that new firms thrive in the proximity with other companies, investors, educational institutions and research centres afforded by clusters particularly in the presence of world-class academic institutions. Mobility can be maxi-

1 http://ec.europa.eu/invest-in-research/action/2006_ahogroup_en.htm

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mised when there is a local labour market that allows regular flows of people from one situation to another, with accompanying diffusion of knowledge. As well as the greater opportunity range it is clear that barriers such as the need to move house or schooling for families are re- moved. However, it also emphasizes that minimising such barriers more generally will create a more functional society. It is important to ensure that clusters are defined in terms of the new market and knowledge relationships needed for emerging sectors to thrive. It is even counter-productive to reinforce traditional sectoral clusters as these may inhibit the necessary mobility. Firms in traditional sectors are far more likely to find innovative growth by forming new linkages and applying new technology to their existing products and services. This can be facilitated by opening the clusters to cooperation with and learning from other clusters in the same or other sectors.”2

Why the Footwear clustering efforts in Montebelluna and Timisoara can be a useful example The case studies of this European Cluster Mapping project place a special consideration to see if the clustering efforts analysed have helped move the companies towards new market and knowledge relationships or just to reinforce or defend acquired positions in traditional sectors.

The example of the Montebelluna footwear clustering effort allows us to see how the large and small companies have been able to learn from each other and specialize early on in the added-value processes. Additionally, after their combined analysis of the market evolution, the Montebelluna companies went through a massive outsourcing process to Timisoara in a coordinated way.

Perhaps even more importantly, when choosing from a variety of responses to globalisation, such as outsourcing, overseas invest- ment, quality upgrading, increased flexibility, etc., the private sector of Montebelluna proceeded without transforming the region into a “hollow district”.

2 http://ec.europa.eu/invest-in-research/action/2006_ahogroup_en.htm

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2. Have the clustering efforts been a driver for innovation in the Montebelluna or Timisoara footwear industry?

Contribution to the development of lead markets Due to various market changes, the so called “Montebelluna sport system” passed from 9,830 to 8,782 jobs during 1997-2001. Luckily enough, the process did not lead to the desertification of the Monte- belluna region, because only a part of the value chain was decentral- ized and the rest remained in the district.

But even with these good results, the Montebelluna clustering efforts concentrated on the optimization of shoes’ production processes and not in the creation of new business models or search for new markets – except in the sole case of Geox retailing system. In other words, the entrepreneurs of Montebelluna have not contributes to the development of new markets.

Help in focusing R+D+I resources During the needed industry restructuring process, the Italians shifted their know-how to more innovative phases and to governing exter- nally delocalised production activities. Despite of the actions over- taken to lower production costs, the ability of Italy to compete with other countries who exhibit superiority in terms of price3, highlights the importance of:

§ innovative design capability § flexibility and high quality in meeting orders § strong and flexible component industry § flexibility within and between companies in the value chain

The reorientation of the R&D resources in the creation and production processes has contributed to the success of the region in sport shoes, even though these resources have not fundamentally changed the focus of their activity.

3 Such as China, India and Brazil

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It is worth noting that, despite this development occurring without an explicit clustering strategy from government or an industry-wide body, the expansion of the product category has fostered a certain strategic advantage as both shoe and sports clothing manufacturers are able to share the same subcontractors and specialised suppliers such as designers, distributors and market agents.

Improvement of human, financial and knowledge mobility As has been highlighted by Majocchi (2000), some of the smaller Italian companies, once settled in Romania, found the way of expanding their production and became leader companies themselves: “Firms that relocate abroad are likely to move their relatively ineffi- cient production phases to another country, where costs are lower, thus becoming more efficient and expanding production and employment along other stages for which they have comparative advantage”.

Contrary to some expectations, the case of Montebelluna shows that the presence of multinational corporations is not necessarily detri- mental to the cluster form. In fact, the need to access information and to take advantage of a global division of production does not imply the end of the cluster form. On the contrary, clusters evolve towards a more open form where an eco-system of local and external companies interacts around product and process innovation4.

In this market-driven cluster, you may see a change towards better entrepreneurship culture, and a change from traditional sectoral business towards strategic interregional business organisation. This may very well happen without public interventions or structured governance efforts or cluster labelling5. In fact, the public administrations such as the municipality or the agencies have almost never inter-

4 The globalisation of production means the end of the self-contained cluster model rather than the end of clustering per se. The Montebelluna cluster has evolved from a geographic self- sufficient agglomeration to a dual network, with both advantages and new challenges to face. 5 Naturally, the Veneto region finances some service centres, local administration provide the infrastructure to industrial areas, and businessmen’s associations and Chambers of Commerce handle professional training, collective services (trade fairs, transportation etc.), and the public image of the territory.

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vened in the development of this concentration of footwear companies. The only known tentative was a failure.

This mobility and openness to the opportunity of developing activities across geographical borders has largely contributed to the positive results of Montebelluna clustering efforts.

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3. Successes and failures of the clustering efforts in Montebelluna

In defining the perimeter for the clustering effort The enlargement of the clustering efforts from Montebelluna, Italy as far as to Timisoara, Romania, has been benefited both regions. Un- der the market pressures, the Montebelluna entrepreneurs accepted to redefine and expand the perimeter of their activities. Such deci- sions were not really taken in a coordinated way, for example under advise of a cluster association. Instead, the followers simply re- peated what the business leaders were successfully doing.

In setting the strategies to build a sustainable competitive advantage The clustering efforts were not really synchronized but more due the cleverness of the leaders like Nordica or Tecnica, who were the first to experiment the shift to Romania. By outsourcing part of their production process in Timisoara, they could concentrate the creative processes in Montebelluna and maintain their business alive. The followers took advantage of the successful experience of the others, and all the surviving cluster companies took benefit from the created economies of scale that facilitated the increase in competitiveness.

This, today competencies are growing fast in Timisoara, creating direct competition to Montebelluna. In fact, the Timisoara companies are facing now the challenges related to sustainable competitiveness that the Montebelluna companies did in the past. Only, their competi- tors are now located even further to east and within other clusters.

In managing the clustering efforts jointly It is remarkable how the Montebelluna change process has been managed with a relatively low support from the local government. In fact, the only notable intervention took place in 1985 when the municipality of Montebelluna set up an association, Treviso Sportswear Society (STAS), to gather up the representatives of the sport companies and to provide them adapted services. Unfortunately, the initia- tive resulted in a failure as the scepticism of the actors forced finally

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the STAS to close in 1993, and the responsibility of public driven actions was transferred to the local shoes museum6, who seems today having a greater legitimacy for this purpose.

In other words, the “management” of the cluster is loose, which has in fact lead to success. No cluster association were needed to reinforce competitiveness of the Montebelluna footwear cluster.

In applying the learning to the whole economy In selecting a variety of sophisticated collaborative responses to the globalization of its industry, the footwear cluster in Montebelluna has managed to extend its geographic limits across the borders in Timi- soara, while developing a culture of shared learning among large and small firms that has enabled it to specialize early on in the added- value processes. Whereas the footwear industry has declined in many European and U.S. locations considered to be non-competitive on a cost basis, the Montebelluna cluster is prospering through its evolution into the major player in an arguably new industrial category of “sport system” wear.

The learning of Montebelluna clustering efforts have not beneficiated to other regions in Italy, where clustering efforts are still linked to national legislation, whereas the Timisoara Region seems to have taken a healthier approach to cluster support by letting the business lead the undertaken cluster initiatives.

6 Fondazione Museo dello Scarpone e della Calzatura Sportiva, which collects products, docu- ments and pictures linked to the history of local industry, offers also a series of functions that include stimulating the local economy, training, and the distribution of services aimed at providing a representation of the district institutions.

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4. Learning from the footwear clustering process in Montebelluna

Implications for the local and regional support institutions In order to encourage widespread awareness of the policies necessary for the development of the so called “local systems”, the Club of Italian Districts, established in 1994, which represents the principle sectors of Italian products7, aims at promoting:

§ relations with the decision-making centres of industrial politic at local and national levels § studies and research in the field of economy § links with institutional, economic, cultural and scientific opera- tors 28 industrial districts, with a total 30 thousand companies with over 250 thousand employees generating a global turnover of more than 22 billion euros, are currently associated with the Club, including “Montebelluna SportSystem”. The Club is lobbying for shifting radi- cally decisional power from central and regional levels to the local level.

Today, Montebelluna is home to a highly successful, high wage, collaborative cluster, serving the world market and focusing on design, brand building and high value production. This has occurred without public interventions or structured governance efforts or cluster labelling (notwithstanding the presence of traditional regional financing of infrastructure, and provision of training and trade fairs by business associations and chambers of commerce.)

Unfortunately, it seems that there are no national or regional horizon- tal policies that could encourage other sectors or cluster to apply the lessons of Montebelluna footwear cluster.

7 Wool textiles, taps and fittings, clothing, glasses, silk textiles, metalwork, furniture, food and fruit, cork, ski boots and sports footwear, leather goods and footwear, goldsmith

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Implications for the national and EU institutions As mentioned Mr Erkki Liikanen, responsible at the time for Enter- prise and the Information Society at the European Commission in 2003 during The World Footwear Congress Brussels, the European footwear industry is under pressure of growing expectations from society. Accordingly, environmental, consumer and health protection concerns are very high on the political agenda.

In March 2006, the “Montebelluna SportSystem” Club lobbying efforts did not prevent Peter Mendelson, European Commissioner for Trade, comment the European Parliament debate on competition and unfair trade related to European footwear from only consumer and retailer interests, not from European footwear industry’s competitiveness, point of view. For example, interestingly enough for the world famous Montebelluna sports system district, he proposed to exclude high- tech sports shoes, “which are no longer produced in significant num- bers in Europe”, from his action lines.

Whereas globalisation and economic change cannot be blocked, the only sustainable balance to the global competition is the creativity, innovation and commitment of Montebelluna companies themselves, as no appropriate help from (political) authorities is in sight.

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5. Appendix I: The clustering efforts in the footwear industry in Montebelluna and Timisoara

A - The footwear industry The textiles, clothing and leather industry is an important industrial sector in the EU. The sector includes four distinct sub-sectors: the production of textiles, the manufacture of clothing, the production of leather, and the manufacture of footwear.

The traditional handicraft profession of shoemaking has been largely superseded by industrial manufacture of footwear covering a wide variety of materials (textile, plastics, rubber or leather) and producing from different types of men’s, women’s and children’s footwear to more specialised products, like snowboard boots and protective footwear. This diversity of end products corresponds to a multitude of industrial processes, enterprises or market structures.

The European footwear industry, which has a longstanding tradition of leadership in terms of creativity, quality and innovation, con- sists of a large number of micro enterprises and SMEs, most of which are located in regions with little industrial diversity. During the past couple of years, the estimations in the European footwear industry have varied between 12,600 and 27,000 companies and about 260,000 to 361,000 related jobs.

The European footwear industry has followed a rather negative evolution since 1995: From 1995 to 2003, the production in the EU declined more than 36% as imports covered less than 50% of demand in 1995 and already 75% in 2003. Over the same period, the industry lost around 160,000 jobs as the EU external trade was negative for the whole footwear sector. One of the industrial strategies in the textile and clothing sector including the footwear industry was to face competition from low labour cost countries by relocating activities into the Euromed zone. In parallel, the European footwear industry

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has become the global leader in high quality footwear, despite severe market access constraints on a number of key markets8.

In 2003, within the overall EU 25 manufacturing industry, the footwear industry accounted for less than 1% of employment and generated an estimated overall turnover of 26,7 billion euro. Italy weights close to 50% of the total EU production. While the absolute figures appear fairly modest, the relative figures indicate that the footwear sector is a significant contributor to industrial production and employment in a number of countries such as Italy, Spain, Portugal, Slovakia, or Romania. See Figure 1 and Figure 2 below.

Figure 1 Distribution of value added in 2003 (EU25 = 100%)

Figure 2 Distribution of employment in 2003 (EU25 = 100%)

8 Even if European footwear remains a relatively highly protected industry, the EU footwear market is one of the most open markets in the world; there are significant tariff peaks or tariff quotas in the US, Japan, Russia, China and India as well as non-tariff barriers in Mexico and Argentina or export restrictions in India, Russia, Argentina, and Brazil.

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As the Figure 2 shows, Romania’s share in terms of employment is impressive, 30% of EU-25 footwear employment, ranking it 2nd be- hind Italy. As the country contributes far less in terms of value added, Romania represents a very high labour intensity in the European footwear industry.

The granularity of the clustering efforts is quite different form the size of a statistical cluster category or geographical NUTS-2 area used in the European Cluster Observatory, but it is interesting to attempt to link the Footwear clustering efforts in Montebelluna and Timisoara to their corresponding statistical cluster category and geographical areas where they have taken place. See the following table9.

STATE NUTS II Region Cluster Employees Size Specialisation Focus Stars Category Italy Veneto Footwear 10 641 2,44% 2,27 0,54% 2 Italy Veneto Sporting 5 034 2,37% 2,2 0,25% 2 Romania Vest Footwear 22 883 5,24% 16,15 3,83% 3

Figure 3 Statistical employment analysis (Source: European Cluster Observatory)

9 A word of caution is necessary to avoid extracting any conclusions from this table, other than that the statistical analysis captures the existence of employment in that area and location, and that further study is necessary.

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B - The cluster in Montebelluna, Italy Italy has an industrial structure that relies heavily on flexible net- works of SMEs. Today, Veneto, one of the 20 regions of Italy, although to a large degree agricultural, is one of the most industrial- ized regions of Italy, with high annual economic growth and a very dynamic economy. The economic boom and industrialization during the last decade of the 20th century has been called "The Nord-Est Miracle", because a large number of Venetian industries opened branches in Eastern European countries such as Romania, Bulgaria, Hungary and the Czech Republic. For example, due to the high presence of Venetian industries, the Romanian city of Timisoara10 is known as "The Newest Venetian Province".

Figure 4 NUTS II map: Veneto and Timisoara The Montebelluna administrative district area is located in the heart of the Veneto region, with Venice as its capital. The district’s area is relatively small (about 553 km²), and corresponds to a circle with a ray of about 13 kilometres which include both the historical part of the district and the “fringe area” of the adjacent external mu- nicipalities where new firms have been established. In 2007, Monte- belluna had an estimated population of 30,817 out the Veneto regional population exceeding 4,7 million.

10 With 336,089 inhabitants, Timisoara is one of the largest cities in Romania and a large economic and cultural center in the west of the country. Influential minorities of the multicultural city include: Hungarians, Germans, Serbs, Italians, Bulgarians, and Greeks. Timisoara is considered the 2nd most prosperous city in Romania after Bucharest, and there have been frequent debates on whether the so-called "Timisoara Model" could be applied to other cities. The city has traditions in garments, footwear, shoes, textile, agriculture, food industry, electronics and electrotechnics.

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Ever since 1970s, Montebelluna has been recognised even world- wide as “the capital of snow industry” because of its dominance in the ski boot production technologies. Montebelluna is an area of international concentration of special competencies, producing a large share of sports and leisure footwear11 and clothing in the world. De- spite of the declining number of local firms and jobs, the total out- put12 of the district passed from 1,03 Beuros in 1999 to 1,46 in 2001, showing a general trend of expansion and high performance of the area. It has become common to refer to this district as the “sportsystem” district of Montebelluna. In 2004, it counted some 386 companies (final firms, subcontractors and component suppliers13) and 7,600 jobs. About ¾ producing footwear and the rest clothing.

The world’s biggest shoe manufacturers for football, cycling, bas- ket, tennis, athletics and cross-country race are based in the area. It has an important share in the world production for technical mountain shoes, after ski boots, ski boots, motorbike footwear, and "in-line skates". It is possible to identify several sub-value chains14 although clothing firms and shoe producers frequently share the same subcontractors and specialised suppliers such as designers, distributors or market agents.

The Montebelluna district produces several world-wide known brands in different technical sport shoes niche markets for ski, trekkingand motorcycle boots, bicycle shoes and sport clothing, including:

§ leading ski boot producers like Nordica, Tecnica, Salomon § important trekking shoe producers like Lotto Sport Italia § main motorcycle shoes producers like Alpinestar § several technical sport shoe producers in niche markets § increasing number of companies following the boom of comfortable city / walking shoes like Geox and Stonefly

11 Almost all the largest footwear brands have been present at some point in Montebelluna either because they were created there (Tecnica, Nordica, Brixia, San Giorgo, Dolomite, Nordica, Risport, Icaro Olivieri) or because the multinationals decided to come there via acquisitions (HTM, Nike, Rossignol) or after local company acquisitions (Lotto, Lowa, Dolomite) 12 Including clothing (but not figures of the multinational Benetton) 13 Complementary industries include plastic, moulding and mechanical machinery. 14 A considerable number of SMEs form a series of linked industries consisting of doubling, assem- bly and installation companies, design firms, punch cutting companies, laces manufacturers, machinery producers, moulders and moulding companies, soles, shearing and uppers workshops.

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C - The challenges of the Montebelluna footwear cluster During the past decades, the Italian footwear firms have been ex- periencing a growing internationalisation process, through the relocation of production activities abroad and the numerous fusion and acquisition with large multinationals. The process which leads to the rather selective relocation was a combination of:

§ pressure on the production cost that was intensified by the globalisation and the apparition of new technologies, § the growing presence of a combination of large groups and local competences that forced / permitted both actors to learn from each other.

As the Figure 5 below shows, the Italian markets have been increasingly penetrated by imports since the mid-70s, but at the same time, its shares of the European production have increased since the 1980s, and the share of Italian footwear production devoted to ex- ports has risen.

Figure 5 Import penetration and export intensity in Italy, 1970-1994 For example, official data of export trends in the province of Treviso show that in 2001 the local firms exported about 430,292,000 euros towards Romania, taking into account supplying intermediate components for Romanian subcontracting firms or Romanian FDIs in the shoe and sport clothing segment. It corresponds to 35% of the total output produced in the Montebelluna district.

The whole European footwear industry is continuously in the front line of international competition, forced to adapt to the changing pro-

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duction and consumption patterns in the global economy. For all their ingenuity and excellence, Europe’s shoe makers are increasingly faced with an extraordinary challenge from low-cost countries.

After the fall of the Berlin wall in 1989, the east European countries provided an opportunity to increase European competitiveness through outsourcing, relocation and international subcontracting of simple and labour intensive phases like shoe assembling.

As between 2001 and 2006 profit margins were heavily squeezed to just over 1%, more than 40 000 footwear jobs were lost in Europe and more than 1000 footwear companies closed down. Not like others, during the past 30 years, Italy has been able to maintain employment in the whole footwear roughly at 1970 levels, but between 1979 and 2000, the number of shoe producers in the Montebelluna district declined from 511 to 304. Additionally, since trade in footwear with China was liberalised in 2005, European players have been facing a new phase of harsh competition from Asia, where cheap fi- nance, tax breaks, non-market land rents, improper asset valuation often lead even to dumping.

Montebelluna district as well as the whole European textiles, clothing and leather industry has faced the challenge of maintaining and im- proving its position in the market in the face of increasing international competition and advances in technology. This has obliged the actors to continuously modernise their products and processes.

In the 1960s-1970s, the introduction of ski shoes in plastic instead of leather started the first complete reorganisation of the production chain15 or alternatively diversification in leather shoes for other sports such as dance, cycling, motor biking16, tennis, etc.

In parallel, the Montebelluna companies faced fundamentally the challenge of “absorbing the external knowledge of the multinational and developing a new global knowledge”. Since the late 1970s, many leading international firms17, having already back then as their most important markets the EU countries, the US and Japan, located their R&D departments or started partnership/collaboration programmes with Montebelluna SMEs.

15 Like Nordica or Tecnica who then became the largest ski shoes producers 16 Like AlpineStar 17 Decathlon, Eindl, Mephisto, Raiche, Timberland, Fila, Ambro, Asics, Mitre, Umbro, Rossignol

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This process did not go smoothly due to, for example, company culture clash18. The Italian companies had as well to follow the evolution of the market, like the boom of the trekking shoes during the 1980s, the necessity to propose a complete range of sport equipments and not only the shoes – and later on the decline of winter sports. Finally, the markets forced the Montebelluna cluster go towards a shared learning process: the local SMEs to learn about lowering their costs by outsourcing labour intensive tasks, and the large multinationals learned about the most creative phases of the sports shoe niche product life19.

In the beginning of 1990s, the traditional, often family held, SMEs in the footwear district of Montebelluna were still either unable or even unwilling to grow and internationalize. At the best, they were ready to export, but not necessarily to become global players. Therefore, the entry of multinationals20 to the region during the 1990s was quite significant for the future of the economy in the region.

In a sector facing international competition, the challenges were to keep up with the changing end-consumer choices, based more and more on such qualitative issues as comfort, prestige, health conse- quences, or the sustainability of the production and distribution processes.

In addition they had to build bridges between local and multinational firms, not sharing the same business culture in production, innovation and marketing.

18 For example: Benetton who tried to integrate within its retailing systems the “sport products” of the Montebelluna district did not work through its brief acquisition of Nordica. The concept of selling a unique brand of sport equipment probably wasn’t adapted at that time even though today that trend seems to be emerging (Nike Town, Adidas shop, Fila…). After having lost a great deal of money, Benetton finally sold Nordica to Tecnica. 19 Product design, prototyping, R&D, specialised components production, design and fashion analysis, manufacturing low volume and high quality production, marketing and distribution 20 Almost all the largest footwear brands have been present at some point in Montebelluna either because they have been created there like Tecnica, Nordica, Brixia, San Giorgo, Dolomite, Nor- dica, Risport, Icaro Olivieri or because the multinationals decided to come there via acquisitions like HTM, owner of the Head brand (acquiring Risport, 1995), Nike (Icaro Olivieri, 1994), Rossignol (Risport, 1995) or even when Montebelluna entrepreneurs decided to purchased other company like Lotto in 1998 or when Tecnica purchased Lowa then Dolomite.

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D - The Montebelluna clustering process with the link to Timisoara Under different market pressures, the Montebelluna footwear cluster managed to overcome its challenges and also successfully increase their competitiveness with the help of a combination of factors:

§ Cleverness and the creativity of the local entrepreneurs: adop- tion of new technologies and organisational challenges, § Decentralization of some parts of the activity to Romania, per- mitting the expansion of the production and cost control § Counting on “the Montebelluna” brand, associated to creativity and quality on the grounds of 80 years of experience, § Deploying extra efforts in ameliorating style and design,

In a very short timescale starting from late 1980s, all the Montebel- luna footwear companies moved their production phase to the city of Timisoara21 in Romania, mainly because of long tradition in shoe- manufacturing22 and lower wages compared to other neighbouring countries and due to a cultural, especially linguistic affinity, that facilitated new investments and created a “second-home” environment.

After the fall of communism, Romania had suffered social, economic and political changes and created unique opportunities for the for- eign firms to develop international supply chains, mainly based on intensive-labour manufacturing processes. The changes, which are spreading on various spatial scales, affected the whole country, thus leading to the reorientation of movements and the emergence of new territorial dynamics. In addition to that, the city of Timisoara has an excellent accessibility, being connected with the rest of the country trough a large network of streets, railways and an international air- port.

21 Timisoara is situated in the Western part of Romania and has around 300,000 inhabitants. 22 Before the Italians came massively in, already more than 10,000 people were employed by the local footwear industry. As a result, in 2005 in Timisoara, there were 5,323 international firms of which 1,638 firms were owned by Italian entrepreneurs, mainly engaged in footwear production. In fact, there were more Italian than native firms (born from the privatization of former public enterprises).

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 18 Footwear clustering efforts in Montebelluna and Timisoara Appendix I: The clustering efforts in the footwear industry in Montebelluna and Timisoara

Most of the firms from Veneto de-located in Timisoara without an explicit co-ordination. These activities have proven to be more spon- taneous rather than specifically planned strategies. This move was more due to an imitation effect with firms that followed the successful example of leaders that moved abroad and got better results. There was also a “district effect” for the small firms that followed leader companies abroad in order to maintain their links and relations and also to exploit the reduction in uncertainty that comes from being part of a network.

Due to the fast delocalisation process, the Montebelluna cluster:

§ lost the more standardised tail of the manufacturing process, but § has kept well alive in Montebelluna the most valuable and creative phases of the sportswear value chain: product design, prototyping, R&D, specialised components production, design and fashion analysis, manufacturing low volume and high quality production, marketing and distribution.

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 19 Footwear clustering efforts in Montebelluna and Timisoara Appendix I: The clustering efforts in the footwear industry in Montebelluna and Timisoara

E - Present situation Industrial districts, the paradigmatic example of localised learning and endogenous growth, used to be characterised by the whole value chain being carried out locally in the districts. This is no longer the case in Montebelluna, due to industrial restructuring caused by increased global competition and the ICT revolution23 as well as stricter environmental regulations. The Montebelluna sports and leisure footwear cluster has evolved and expanded its reach to take advantage of the changes in the global environment: it has concentrated only the most knowledge and/or capital intensive phases of its activities (R&D, design, product development, marketing etc.) in Italy. In other words, supply chains, learning and innovation dynamics have been redefined and geographically spread. The cluster is creating innovative processes, products and services for evolving niche markets without almost any public sector help24.

It is difficult to evaluate directly the impact of the selective delocalisation processes on the Montebelluna district. What is clear though is that the passed processes have both necessitated and enhanced mobility, even though the district is still rich in manufacturing activities, specialised suppliers, designers and other activities connected with the value chain of the sport-system, and has therefore not become a “hollow district”. In fact, Montebelluna is an area of full employment, with the lowest unemployment rate25 in Italy.

§ Multinational firms which located part of their innovation-related activities close to existing innovation and production actors of Montebelluna were open to engage in international partnership and subcontracting relationships with the local companies. § The entry of multinationals inside the cluster has contributed to elevate the level of competitiveness among local firms, accelerating an exit process among the less competitive.

23 Multinationals have a sound usage of ICT finalised to internal processes optimization (effective- ness) and efficiency and internal knowledge assets valorisation and sharing within the organiza- tion. SME have up to now used ICT on specific segments leaning on the local relationships network to better manage productive processes and to innovate their own business. 24 Collaboration with local university in industrial design results to developing new talents 25 1.8-2.0% of the active population

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 20 Footwear clustering efforts in Montebelluna and Timisoara Appendix I: The clustering efforts in the footwear industry in Montebelluna and Timisoara

§ The construction of international supply chains, mainly organ- ised through Romanian firms, has clearly exerted a big impact on subcontracting in Montebelluna and on the firm population of the district. Final firms in the district are now only less than 170, but the number of local subcontracting firms is still significant, and the decline of activity has been mainly concentrated in the so called “tomaifici” (producers of uppers). § The statistical trend of Montebelluna employment shows only a relatively small decline, and at the same time, for 8,782 employees that are working in Montebelluna there are about 60,000 workers in the external belt of subcontracting activities, decentralised mainly in eastern countries. In fact, the Montebel- luna association of entrepreneurs has defined Timisoara as the 8th province of the Veneto region. § The process of Montebelluna district restructuring has not ended up with long term and unemployable manpower. On the contrary: globalisation has this time enriched the district with the necessary market labour flexibility, without counting that many small local owners of subcontracting firms, which sud- denly lost their “outsourced” orders and have opened up new workshops in Romania, or work in the district as supercontrol- lers of the quality of Romanian subcontractors. § The flexibility showed by the entrepreneurs of the Montebelluna industrial cluster is a model that has since then been followed by many other industries and that allows the actors to respond quickly to market a technological change.

Today, Montebelluna is home to a very successful, high wage cluster, serving the world market and focusing on design, brand building and high value production.

The cluster of Timisoara in Romania has faced the same challenges related to international commerce as the Montebelluna cluster in It- aly, even though they differ in terms of birth model, generated by different triggering events:

§ In Italy, clusters followed (although not exclusively) a spread model: from a big population of artisans emerged slightly bigger and more innovative firms progressively networking each other. § In Romania, clusters exhibit a more concentrated pattern of delivery: the small nucleated from few large conglomerates, which acted as “trigger firms”.

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 21 Footwear clustering efforts in Montebelluna and Timisoara Bibliography

6. Bibliography

Advanced Institute of Management (AIM) Research: “Challenging Clusters. The Prospects and Pitfalls of Clustering for Innovation and Economic Development”. Summary Report from an AIM Management Research Forum in Cooperation with the Welsh Economy Research Unit. June 2005.

Belussi, Asheim: “Industrial districts and globalisation: Learning and innovation in local and global production systems”. Paper presented at the Conference on Clusters, Industrial Districts and Firms: the Challenge of Globalization. Modena, Italy. September 2003.

Brenton Paul, Pinna Anna Maria, Vancauteren Marc / Centre for European Policy Studies: “Adjustment to Globalisation: A Study of the Footwear Industry in Europe”. Preliminary study presented for the 40th Congress of the European Regional Science Association, Barce- lona 2000.

European Commission / DG Enterprise and Industry: “Economic and competitiveness analysis of the footwear sector in the EU 25”. Comm/Entr/I4 – Stampni. September 2005.

European Foundation for the Improvement of Living and Working Conditions: “Textiles and leather in Europe: the end of an era or a new beginning?”. Dublin Ireland, 2004.

http://ec.europa.eu/commission_barroso/mandelson/speeches_articl es/sppm086_en.htm

Ionescu Carmen Elena / CCI of Romania: “Romania country report”. National cluster policy assessment in Romania for the European Cluster Mapping Project conducted under Europe Innova programme during 2006-2008. May 2007.

Isbasoiu George-Marian: “Industrial Clusters and Regional Develop- ment. The Case of Timisoara and Montebelluna” First Draft Paper prepared for the ERIK Network Conference, Brussels. May 2007.

Sammarra, Belussi: “Evolution and relocation in fashion-led Italian districts: Evidence from two case-studies”. Marco Fanno Working Paper N.23. July 2006.

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 22 Footwear clustering efforts in Montebelluna and Timisoara Bibliography

Santolamazza Roberto / Treviso Tecnologia: “eKM Dicamo - Knowl- edge management for the Industrial Design in the Montebelluna Sportsystem Cluster – Italy”. Presentation at ESoCE-Net Industrial Forum. Rome, Italy. December 2005.

Veneto Banca and Museo dello Scarpone: “Asolo and Montebelluna, world centre of sports footwear”. OSEM 2000 Report. Montebelluna, Italy 2001.

Whitford Josh: “Globalization and the Italian Industrial Districts” Presentation.

www.clusterobservatory.eu

www.distretti.org

www.montebellunadistrict.com (available only in Italian)

28 February 2008 Europe Innova Cluster Mapping- Footwear Italy- Romania 23