Credit constraints in Italian industrial districts

Italy is characterized by strong differences both in the productive and in the financial structure. Small and medium firms tend to concentrate in the so called 'Marshallian industrial district', whose productive system has been thoroughly studied but whose financial features are partially overlooked. This paper aims at investigating how the location of a firm in an industrial district affects its ability to resort to external finance, mostly bank loans. The econometric analysis on a panel of 1700 firms over the 1989–1995 period shows that firms located inside industrial districts have an advantage in terms of financial relations with the banking system: both the cost of credit and the probability to face financial constraints are lower. Nevertheless, the cyclical pattern of this advantage is not in favour of district firms: following the tightening of monetary policy, increases in interest rates on bank loans are proportionally higher for firms inside the district; furthermore, also the advantage consisting in an easier access to credit market disappears after the 1992–1993 recession.