The Governance of Industrial Districts: Effects on Performance and Financial Distress of Firms. Evidence from Italy

The study offers evidence about the influence of the governance quality of industrial districts (IDs) on performance and financial distress risks of firms belonging to IDs. By adopting a qualitative approach, the analysis was applied to 20 case studies of Italian IDs belonging to the Fashion and Mechanical industries (included within the National Observatory of Italian Districts). The investigation suggests that in the districts characterized by good governance and cooperative strategies the firms achieve better performances and improve their competitiveness. These conditions may facilitate the firms belonging to such districts in terms of lower borrowing costs, greater availability of credit, lower risk of financial distress and, therefore, fewer bankruptcies. Therefore, the study suggests that the district governance should be included as a further qualitative strategic variable in district firms’ financial distress prediction models and in the rating attribution processes by the banking system (or by specialized rating agencies).