Enterprise and entrepreneurship were not the product of the industrial revolution. The theory is not new but nevertheless is rarely applied. It is possibly a question of appeal, yet the legend of the revolution which, from England, changed production systems (and therefore the world) through the division of work and steam still survives. Previously at most retailers and bankers, artisans and artists followed the widespread idea of the “mother” industrial revolution of modern entrepreneurship, definitely not people who could rightfully call themselves entrepreneurs.

Yet apparently this is not the case. This at least is the theory of Mark Casson (from the Department of Economics of Reading University) and Catherine Casson (from the School of History and Cultures of Birmingham University). The two researchers have put forward, in their newly published The History of Entrepreneurship: Medieval Origins of a Modern Phenomenon, the idea that the origin of entrepreneurship and corporate culture has to be dated much earlier than the industrial revolution.

In other words the modern enterprise was allegedly born in the medieval age between 1250 and 1500, when the modern state was created. A theory which also appeals, turning back the hands of history. Between 1250 and 1500, they tell us, churches, shopkeepers and members of the royal courts were all engaged in activities which demonstrated entrepreneurial features of innovation, risk-taking and judgement. Exactly that which, still today, any entrepreneur worthy of the name does.

In order to “prove” the theory the article includes some examples such as those of the activities of the Prior of Tynemouth and the career of the wool merchant William de la Pole. Not leading figures, and possibly because of this more important for the history of economics and corporate culture, who with their activities, their decisions in the management of a convent and a textile trade company, represented, like many others, the forerunners of modern entrepreneurship.

The two British authors conclude: “by focusing on individuals rather than firms, it is possible to push back the study of entrepreneurship beyond the Industrial Revolution and early-modern trade to a period that witnessed the origins of the modern state”. As if to say the enterprise, its culture and its mode of operation are the result not only of major historical events but also and above all the accumulation of single actions, minute facts, grains of production wisdom which gradually take shape.

The history of entrepreneurship: Medieval Origins of a Modern Phenomenon

Mark Casson, Catherine Casson

Business History, February 2014

For an economy to grow, you need to create a setting that enables new business to arise and to thrive, as business is the only way to create jobs and wealth. This simple principle is often found in economic writings, but it can also be seen in daily life. It is, however, also held back by a series of obstacles and restrictions—whether bureaucratic, political, or cultural—that go against business and enterprise as a driver of the economy, the effects of which both meet the needs of the business owner and have a positive impact on the community in which the business plays a leading role. Naturally, no one sees a business as being above the law, a sort of self-serving anarchist within our society. In fact, any good culture of enterprise recognises the values and functioning of the marketplace, a setting which needs to be well regulated, transparent and efficient. What is needed, if anything, for economic development and for enterprise to be able to fulfil its “social functions” (as defined in the Italian Constitution) is that there not be any obstacles that inhibit the key dynamics of business itself, such as the hurdle of excessive bureaucracy.

A document recently published by Confindustria’s research centre (concerning a study by Loredana Scaperrotta) calls for less bureaucracy in Italy in order to return to growth, claiming that even a 1% increase in the efficiency of public administration would result in an increase in per capita GDP of 0.9% and to growth in international investment, which would have a positive impact on employment. The overall message is clear. We need to eliminate the bottlenecks of bureaucracy, because the complex web of too many rules, along with lengthy, uncertain response times and the unsustainable costs of the public and political machine, are holding back development particularly for the most dynamic of Italian businesses.

To understand this better, let’s look at the competitive landscape. According to the World Economic Forum’s 2013-2014 Global Competitiveness Index, Italy is in 49th place out of the 148 nations considered. This is far too low considering that Germany is in 4th place, the US in 5th, the UK in 10th, France in 21st, and even the fragile economy of Spain is in front of Italy in 35th place. The real problem is that we’re falling even lower, having slipped back seven places since last year due to political instability, which is increasing uncertainty, eroding confidence and blocking or slowing reforms, such as, ironically, the reform to combat excess bureaucracy. Other rankings point to Italy’s struggles, as well. The World Competitiveness Index of the International Institute for Management Development has Italy in 44th place, four lower than last year, whereas our European competitors have remained stable (with Germany in 9th place). The Doing Business 2014 study places Italy in 65th place out of 189 nations and, again, far behind our main competitors.

And why? According to Confindustria, public inefficiency is resulting in low levels of competitiveness. Public inefficiency means complex, inefficient bureaucracy (and related high levels of corruption); excessive, contradictory laws (and resulting legislative uncertainty); a slow justice system (particularly in the civil and administrative courts); and both taxes that weigh too heavily on businesses and employment, and fiscal legislation that is very complicated to follow. With the constant changes in laws and regulations, businesses are unable to make reliable fiscal forecasts or to act based on credible financial plans, so it is not by chance that Italy is at the back of the pack in terms of international investment, which is having a negative impact on economic growth, on employment, and on research and innovation.

The World Bank notes that this high fiscal burden on business and the crushing weight of bureaucracy are the highest priorities that Italy must correct. Confindustria estimates that a business spends an average of 269 hours each year on administrative duties to make 15 payments that sap away 65.8% of its profits. Too many authorisations are needed to start a business, to expand a factory, to put a new product on the market, or to file a patent. It takes too long (with Italy’s slow, inefficient justice system only benefiting the dishonest) to collect a debt, to defend a contractual obligation, to combat unfair competitive practices, or to settle a labour dispute. In short, businesses are imprisoned in the “traps and snares” that the governor of the Bank of Italy, Guido Carli, was already pointing to in the 1970s and which have, unfortunately, remained firmly in place despite reforms to simplify bureaucracy (e.g. the Bassanini laws) or even the recent anti-bureaucracy measures of the Monti and Letta governments.

And it’s only getting worse. Based on the Promo PA 2013 report, Confindustria notes that small and micro-businesses spent an average of 30.2 man-days seeing to bureaucratic obligations, up from 28 hours the previous year.

“Eliminate red tape” is the order of the day: fewer, clearer laws; fewer steps in bureaucratic procedures; controls that are more to the point and less formally schematic; transparency. It’s about making radical policy decisions in order to break through conservatism against reforms and to promote those areas of public administration that act with a keen sense for the rules and for the functioning of government (which are a minority, but are of great value), and it’s about bringing profound change to a culture of bureaucracy that looks more to form in procedures and to formal accuracy than to the efficiency of those procedures and the efficacy of the related acts. From this point of view, open dialog between culture of enterprise (and so accountability and results) and the culture of public administration could be of great use.

Smart manufacturing exists, and it can be found even in Italy, although it can be difficult. The road to smart manufacturing is arduous and complex, perhaps even a bit painful, but it really does exist, and it can be found in companies that, over time, have been able to transform themselves and that, to some extent, represent paradigms of progress and are showing us the way forward. As such, it’s important to understand their stories, in part because they reflect the story of Italy’s industrial transformation— the crisis of representation, the unknown of associationism, a new culture of enterprise taking shape.

Giuseppe Berta, an economist and economic historian, has provided us with a few examples of smart manufacturing and has looked into both its causes and its effects. His “Produzione intelligente. Un viaggio nelle nuove fabbriche” (Smart production. A journey through the new factories) is a book of Italian industrial economics, but it is also a collection of success stories that can be replicated. It is not, however, a mere series of stories of enterprise (which would already be interesting in and of itself). There’s something more, a detailed analysis of what has been happening in Italy in recent years, of the theoretical context that could explain it and, above all, of what needs to be done in order for Italian industry as a whole to truly begin to thrive again. 

Berta begins by asking why it is still necessary in this day and age to talk about factories in Italy, before moving on to tell the stories of Pomigliano d’Arco, of Ilva, of Dalmine, of Pirelli, and of the new Maserati facilities, as well as the stories of virtual unknowns such as the Saet Group (Caselle), Prima Industrie (Collegno) and ProToCube (Turin). The author then goes even further to say that, while the way to succeed in manufacturing has changed, so has the way of representing the interests of industry and of the workforce.

Berta continues by explaining the “autumn of representation”, starting with the factory itself and then looking at Italy’s industry confederation, Confindustria, along with other industry associations and the trade unions, before coming to describe the sort of industry policy that is needed in order to return to a path of growth and development. As Berta concludes, this new approach to industry closely unites all stages of the product cycle, from design to serving the market, in a sequence that is to be constantly repeated in a unified approach.

Produzione intelligente. Un viaggio nella nuove fabbriche

Giuseppe Berta

Einaudi, February 2014 

John Labatt from London, Ontario, was a humble beer brewer who was to become a popular case study, the story of a man who sought fortune over the border, who thought, at first, that he was succeeding only to find that he had failed. Labatt’s story is not one to be taken lightly. It is a true story that has much to teach today’s entrepreneurs who may be tempted to take on foreign markets, knowing they make a great product only to find that they may not be the greatest at planning.

Most recently, it was Matthew Bellamy to tell the story of this Canadian brewery for the Canadian Historical Review. The Labatt brewery of London, Ontario, just 200 kilometres from the Canada–United States border, was the first Canadian brewery to attempt a strategic expansion into the United States. Bellamy examines the reasons why he did this and analyses both the “push” and “pull” factors that led to his business decisions. But underlying it all, Bellamy, too, finds that it was an entrepreneurial spirit that first drove Labatt to seek fortune abroad, but he failed, according to the study, to calculate just how important structure would be in dealing with the fiercer, broader competition in the US, and in Chicago in particular. According to Bellamy, therefore, while entrepreneurial factors triggered this move abroad, it was the structural factors within the organisation that halted this expansion into a new market.

Bellamy tells the story of a business at the end of the 19th century and, more importantly, gives us an example of keen economic analysis that shows how complex and difficult it can be to plan for and execute operations in a foreign land— something that is becoming a necessity, but which is still a challenge for many organisations. Bellamy has written a real page turner that tells us of sound intuitions and justified mistakes more than a century after the fact, making for a story that reads much like a best-selling adventure novel.

John Labatt Blows In and Out of the Windy City: A Case Study in Entrepreneurship and Business Failure, 1889–1896

Matthew Bellamy

Canadian Historical Review

University of Toronto Press

Volume 95, Number 1 / March 2014

A brilliant Italian economist, Lucrezia Reichlin, is one of the candidates for deputy governor of the Bank of England, according to a story that ran in Corriere della Sera a few days ago, even before Reichlin’s name started circulating around the Italian Ministry of the Economy and the new Renzi Government. Italian Government aside, this is good news regardless of how it ends up, because the governor of this prestigious British institution, Mark Carney, values merit (not nationality) and so will give due consideration to a woman of such experience and expertise. Indeed, reports say that there are three other women on the list of candidates for deputy governor, and Reichlin teaches at the London Business School, is on the board of directors of Unicredit, was once director-general of research for the ECB, and is a commentator for well-respected newspapers. Her innovative blend of technical/financial skills and feminine wisdom make for a valuable combination and backs up a rising trend of recent times, with a woman, Janet Ellen, leading the Federal Reserve, an other, Bodil Andersen, leading the Bank of Denmark, and yet another, Christine Lagarde, heading up the IMF after having also served as France’s Minister of the Economy. In the worlds of both finance and enterprise, the presence of women (think, too, of such names as Emma Marcegaglia at the head of BusinessEurope, the European association of national business federations, after having led the Italian federation, Confindustria, or Susanna Camusso at the helm of the Italian trade union CGIL) can lead to radical change in the underlying culture of the business world and to a new and better sensitivity to the issues of both individuals and communities. In these times in which we are seeing an end to the perverse trilogy of business, speculation and greed in the wake of an increasing emphasis on a “fair economy”, women will help to enrich the landscape of strategies and decisions and give rise to a more approachable culture of enterprise, but also to greater return on investment. Indeed, a recent study by Rothenstein Kass, the US advisory firm, has noted that investment funds run by women during these years of the Great Crisis posted above-average levels of profit (4.6% more than funds run by men). Why? Because women study the markets more deeply, evaluate investments more carefully and with greater deliberation, take risks after more careful consideration, and seek to immediately correct any mistakes they should make. In a recent article in Corriere della Sera (on 17 February), Ennio Caretto quoted Whitney Tilson, managing partner of the hedge fund Kase Capital Management, who said, “Preventing women from working in the financial markets is like preventing the tallest athletes from playing basketball.”

If we shift our attention from the top flights of finance and institutions and onto Italian enterprise and government, we see that this trend of taking advantage of the unique skills and qualities of women is taking hold here as well, as confirmed by the figures from a study by OCAP, SDA Bocconi’s observatory on change in public administration, which were published in Corriere della Sera (on 16 February) and which show that women in the top ranks of the national ministries accounted for 43% of the total in 2012 (vs. 34.5% in 2007), as well as 39.5% in local government (35% in 2007) and 36.3% in regional government (30.1% in 2007), for an average growth rate of 25% over the six years. This is a profound shift, and probably a good change in culture, for a public sector which still suffers from underlying negative trends (e.g. legislative formalism, a love of procedural complexity, little or no emphasis on the efficiency or efficacy of measures implemented or even on their formal validity) that are scarcely in line with the needs of an open, dynamic and competitive economy or with the growing needs of quality in public services. Now, the end of the era of the old-fashioned bureaucrat and an increase in the accountability of public officials could do much to drive change.

Things are changing in the business world, too. In 2008, a study by ManagerItalia showed that there was a total of 14,550 female managers, as compared to 104,564 men, i.e. a female population of just 12.2%. In 2012, the situation has improved to 16,853 women and 99,342 men, for an increase to 14.5%. Here, too, the shift was facilitated by the Great Crisis, with the number of men falling by 5,222 while the number of women increased by just 2,303. Generational change also played a part, with competent, competitive women—backed by good university educations (and university professors will confirm that women make the best students)—were there to take advantage.

Rules on mandatory female quotas on the boards of publicly listed enterprises has also been an important driver of this trend towards greater female presence in positions of responsibility, and the increasingly common trend of “diversity management” has facilitated this change as well. The clear results of these processes confirm the validity of this strategy. The shift is being seen more in large organisations than in small ones, and more in the service industry than in manufacturing, but the “glass ceiling” of the 1980s that kept women from progressing in their careers has been cracked wide open and will soon be torn down completely for the good of all.

A business succeeds when everyone within the organisation is working together. It’s not enough, of course, to have a corporate culture that fosters growth. It’s not enough to emphasise that all too popular concept of “teamwork” and “being a team player”. It also takes favourable external factors, carefully calculated strategy, and a product that is truly great because of what it actually is, not for what it appears to be. But making sure that everyone is rowing in the same direction is also an important part, particularly in small and medium enterprise. 

Matthias T. Meifert has edited a book based on a similar idea. “Strategic Human Resource Development: A Journey in Eight Stages” is based on the observation that strategic planning has gone from being restricted to large corporations to being a necessity for small and medium enterprise as well. But Meifert then wonders what even the most convincing strategic concept is good for if those who work for the company are either unwilling on unable to put it into practice. 

As such, true development of human resources would appear to be an important tool in the growth of a business. It’s necessary, in other words, to “develop people” and to do so, as Meifert says, not only for the work to be done today, but also for the challenges that are to come. This may sound fairly obvious, but putting it into practice in the day-to-day activities of a business is no easy task.  

The work then describes the practical aspects of this approach in eight stages of human resources development, along with the various critical factors and a great many practical recommendations. The journey starts with the identification of the best strategy for developing human resources before moving on to the methods of controlling that development. We then learn more about the skills needed by management and how to measure management’s performance, as well as about the methods for identifying the various talents that are needed and for retaining and developing the best management. The book concludes with a look at the culture of enterprise that management needs in order to develop the right human resources for the growth of the company.

It’s no easy journey, but it is certainly one of the few that can enable businesses to look confidently to the future.  Meifert opens the work with a quote often attributed to Albert Einstein: “Make things as simple as possible – but not simpler.” 

Strategic Human Resource Development: A Journey in Eight Stages (Management for Professionals)

Matthias T. Meifert 

Springer, 2013, e-book

It’s called “business etiquette”, and it is a specific way of looking at business and, above all, an approach to conducting business meetings, negotiations, and preliminary activities. Etiquette is both form and substance, a method in production and a strategy of negotiation. Outside certain sensationalist literature, today business etiquette is still relevant and can help us to understand the culture of enterprise in its country of origin.

Joanna Zator-Peljan, at the Poznan University College of Business, has sought to shed light on certain manifestations of business etiquette in order to understand their nature and differences and to provide practical advice backed by a base of theory. The study, published in the Global Management Journal, analyses and compares the approaches to business and business meetings in Poland, Germany, France and China and comes up with a picture of their respective cultures of enterprise and a valid guidebook to help approach the markets in these four countries. Containing a series of practical examples, this work is more than just a handbook on behaviour in that it points to a methodology, i.e. the main characteristics and pillars on which to act in enterprise— outward signposts pointing to a number of characteristic traits of each culture of enterprise.

As Zator-Peljan explains, Poles, Germans and the Chinese see “conservative” dress as being crucial in business meetings, whereas in France high-quality clothing is what is expected. There are also rules on exchanging business cards. In Poland and Germany, there is a clear tendency to focus on a given topic and to come to the meeting prepared and attentive. In France, on the other hand, they tend also to hold meetings based on emotional factors and to conduct meetings that may be unorganised and at times even unending. The Chinese select a member of senior management as the spokesperson for a team, while the rest of the group remains silent. Another complex matter to keep in mind is the ritual of pre- and post-meeting chit-chat. Depending on the person you are speaking with, you may need to talk about family, politics, the government, or culture.

As Zator-Peljan concludes, “The globalized business world offers a variety of business cooperation possibilities. […] The decisive aspects of successful intercultural negotiations are not only certain contract conditions,” but also aspects related to directly to business etiquette, which thus becomes an important part of the culture of enterprise in play.

Business Etiquette in Poland, Germany, France and China: an Intercultural Approach

Joanna Zator-Peljan, Poznan University College of Business, Poland

Global Management Journal , Vol. 5, No. 1, 2/2013

New creative activities within the Pirelli Foundation’s Educational programme are now available online. Along with the more traditional themes of manufacturing and work, the Pirelli Foundation, in collaboration with HangarBicocca, is also offering learning workshops that examine the relationship between art and science, creativity and rationality.

From a tour of HangarBicocca to the exhibition of works by Micol Assaël, an artist who has always had a fascination for electrical and other physical phenomena, and whose works are real experiments that call into play the visitors’ skills of perception, the children will learn about scientific research from a more creative, more personal point of view. In some cases they will go on a tour of the Pirelli chemistry laboratory.

The euro as a currency is too strong and is weighing on business competitiveness, particularly in weaker nations such as Italy, France, Spain and Portugal. At least this is the view that has been making the rounds in political and economic circles, backed by shock slogans for the weak-minded in an attempt to find easy scapegoats for a crisis that, unfortunately, continues to show its effects on the economy. And it’s a view that must be acknowledged in order to respond with actual facts—as is to be done as part of any good, pragmatic culture of enterprise—to waves of anti-Europe sentiment, which is what could actually put the Italian economy at great risk.

An overview of the risks was printed on the front page of Il Sole24Ore (on 5 February) in an article by Davide Colombo, who wrote that abandoning the euro would lead to both an immediate shift in spreads and consequent unsustainability of Italy’s public debt, as well as trigger double-digit inflation and an enormous increase in energy costs. In such a context, he wrote, devaluation would not be enough to relaunch exports or boost GDP, given that global value chains have already discounted the competitive advantage of each individual nation.

To better understand this, we should look at what factors businesses actually rely on in order to remain competitive. As Marco Fortis, vice-president of the Edison Foundation, explained as part of an analysis of “Italy’s new manufacturing” (which was the topic of an interesting Aspen-Assolombarda conference held last 27 January in Milan), in the export race Italy lost 29% market share in manufactured products from 1999 to 2012. This was the same as the loss seen in the US, but much less than the declines posted in the UK (-45%), France (-39%) and Japan (-33%). Germany performed the best of all (losing just 6%), but all things considered, Italy held its own just fine. Italian manufacturing is struggling because of the crisis on the domestic market (due, above all, to the significant austerity policies), but in exports we continue to grow, having posted a positive manufacturing balance in 2012 of USD 113 billion and an even stronger USD 130 billion in 2013, with this growth being expected to continue. In many industry segments, we export more than Germany, and—even more interesting—Italy is in second place, behind China, in number of non-food products, posting a positive trade balance even greater than that of Germany. In other words, Italian exports are on the rise even in highly innovative areas, such as in automation and specialist engineering. Of the four segments that most characterize Italian exports, automation is going even stronger than interior design, fashion or food and beverages.

Furthermore, our exports are going well particularly in areas of high value added and in the segments that feature the highest levels of innovation. The numbers? The traditional industry segments (textiles/clothing/leather goods, furniture, jewellery, non-metalliferous minerals) accounted for 70% of the manufacturing trade surplus in 1996 (before the euro), but only 35% in 2012 with the euro. In other words, the makeup of Italian export success has shifted radically towards more innovative products and to segments with greater value added and greater competitive potential.

So going back to the Italian lira with this type of manufacturing industry would be a disaster for both competitiveness and exports.

The research unit of Confindustria has added other elements to document how the effect of a weaker currency would not help either exports or GDP. The first concerns the rise of the global value chain, the new configuration of the traditional supply chain. Italian industry thrives on transformation and so imports semi-finished goods (which account for as much as 60% of all imports). A weaker currency would increase costs and reduce the margins of businesses that transform these goods into finished products. Secondly, there would be the rapid rise in energy costs, which are already a significant burden on Italian enterprise (and one of the factors with the greatest negative impact on Italian competitiveness). Thirdly, we would see an increase in the cost of credit, which would especially penalise small and medium enterprise. In short, there may indeed be some theoretical benefit—in terms of price—of a weaker currency for businesses that export, but it would be quickly offset, nullified or turned on its head by the this dramatic increase in costs.

And that’s the fundamental issue. Italian industry competes globally based on quality, not on price. After the arrival of the euro, we learned to overcome the distortions caused by the bad habit of competitiveness based on a weaker currency and found our niche in “medium high-tech” (which the president of Assolombarda, Gianfelice Rocca, pointed to as the cornerstone of excellence in Italian manufacturing). The “pocket-sized multinationals” and a large part of the 4,600 mid-sized to large-scale corporations surveyed by Mediobanca, and which represent the core of Italy’s “industrial pride”, have succeeded over the years thanks to innovation and quality, and this is Italy’s strength which is to be defended.

So to remain competitive, we don’t need demagogic ramblings about the end of the euro and a return to the lira, but rather sound decisions in industrial policy, both in Italy and at the highest ranks of the EU. Anything less is a path to ruin.

Generous. Creative. Proud. Self-centred. These are the common characteristics of the main characters in Impresa impossibile (Impossible enterprise), a recently published book of just over a hundred pages. They are the characteristics of all entrepreneurs, along with a passion for challenge and the hard-headedness it takes to make it through even the hardest of times, and the stories of eight such entrepreneurs and their businesses—stories that give us a sense of optimism and faith in the future—are the subject of this book.  Corrado Formigli—a journalist that not everyone may agree with, but who has a gift for writing clearly—has encapsulated in these few pages a portrait of Italy and its businesses that, despite it all, are managing to succeed. This isn’t a book of theory with just a few case studies here and there, but rather a book of business stories that, in the end, admits that it contains no solutions to the current crisis, but that perhaps there may at least be hints of solutions to be found in the examples it presents.

Impresa impossibile is collection of stories of men who call themselves “entrepreneurs”, but who differ from one another in various ways and are similar in many others, and who are united by a vision of the enterprise as a social entity, a commitment to the community, a calculated gamble, and an unbridled passion.

The book opens with Rizoma in Gallarate (a company specialised in motorcycle accessories) and closes with Loccioni, a company based in Marche and specialised in automated measurement and control systems. In between, there are the stories of famous names like Alessi, Mutti and Venchi, as well as the less famous such as Blackshape (airplanes), Era Ora (restaurants) and Bruzziches (handbags).  In each of these stories, Formigli explores more than just financial performance to look, in particular, at the more human aspects: the entrepreneur himself, the entrepreneur and his employees, and the business seen as a member of society and not as a machine.

What we get is an unexpected, yet realistic portrait of an Italy that is not made of a specific category of products, but of a method, and which rests on the perseverance and skill of its people. 

Impresa impossibile. Storie di italiani che hanno combattuto e vinto la crisi (Impossible enterprise. Stories of Italians who battled with and beat the crisis)

Corrado Formigli

Mondadori, January 2014.