**1. Introduction**

236 Sociological Landscape – Theories, Realities and Trends

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Nowadays probably no social scientist would deny that the entrepreneur is a central figure in economics and plays a pivotal role in economic development. Yet, with some remarkable exceptions (such as Schumpeter) for a long time the study of entrepreneurship has been neglected in mainstream economics, as well as in sociology. Both in the history of sociology and economics the entrepreneur has been "a shadowy and elusive figure" (Cole, 1968, p.60), less studied than more impersonal structures, i.e. markets and firms. This absence is not difficult to explain. There has been little room for the entrepreneur in the abstract theory of the neoclassical model of the firm (Baumol, 1968, 1993); and, in contemporary sociology no serious attention has been devoted to considering the sociological relevance of this role beyond the influential insight of Weber. Economic anthropology has sporadically dealt with entrepreneurship, as post-war interest in development (Stewart, 1991), but has tended to focus on non Western or mainly rural societies (Barth,1963, 1967a,1967b; Belshaw, 1965; Geertz, 1963; Strathern, 1972; Greenfield et al.,1979). There have mainly been three ways in which anthropologists have shown interest in the study of entrepreneurship. Firstly, they have assessed the function of enterprise in the economies of small scale social groups or peasant societies. Consequently, they have studied entrepreneurs as individuals involved in the process of social and cultural change in their own social setting. What linked those two approaches was the implication that change would occur out of the expansion and growth of entrepreneurial activity. This made the entrepreneur's role significant from both the point of view of cultural change and that of economic development. Thirdly, anthropologists have begun to turn their interest to former agrarian societies which have been de-ruralized and modernized through processes of industrial decentralization and the development of local petty commodity production.

It is only recently that the topic in entrepreneurship has finally gained more constant interest across the social sciences. Its increasing popularity certainly benefited from the hegemonic expansion of neoliberal ideology worldwide (Harvey, 2005). The political–ideological dimensions of neoliberalism have more emphatically endorsed entrepreneurialism and a risk taking attitude to cope with the global restructuring of the capitalist economy, the dismantling of the welfare state and the downsizing of the workforce. The "re-discovery" of the

Small-Scale Entrepreneurship in Modern Italy –

from which they come into being.

(2004)

An Ethnographic Analysis of Social Embeddedness in the Access to Capital and Credit 239

there are two industrial districts (metalworking and furniture sectors) and, as a whole, the manufacturing industry includes some 10,000 factories - a density of 24 factories per square kilometer, with an average of 11 employees per firm. The presence of so many firms and consequently entrepreneurs in this area implies the existence of a peculiar socio-cultural milieu that favours capital accumulation and allows for the combination of resources to set up a business. In the attempt to illustrate this phenomenon I will employ the theoretical concept of embeddedness . By looking at various forms of credit and financial practices here I want to offer a concrete example of the firm's embeddedness in the social context in which it operates. The importance of the role of "non-economic factors" on the economy, such as interpersonal relations of trust and one's own reputation, is certainly evident in some economic approaches (Williamson, 1991), as well as in finance research, with studies showing that through the building of close ties with institutional creditors the availability of financing increases (Mitchell & Raghuram,1995, pp.3). The advantage of the anthropological approach over others stands in its ability to "use" these non-economic - yet economically relevant - factors, to situate entrepreneurial actions within an analytical framework that comprehends economic practices, such as the financial ones as well as other forms of exchange in this context, not in terms of individualized decision making behaviour, but in

Turning to a brief examination of embeddedness as a conceptual framework, I want to suggest a use that tries to preserve the original meaning proposed by Polanyi (1957) and to incorporate the new economic sociology approach theorized by Granovetter (1985). The concept of embeddedness according to Polanyi is a conceptual tool employed to understand the process of the human economy, "embedded and enmeshed in institutions, economic and noneconomic" (1957, p.250). That is to say that in a regional economy such as the Brianza, firms, families, and local banks are institutions embedded in forms of exchange that are both cultural and economic (profit making), and that this interaction of elements produces an idiosyncratic mix. Meanwhile for Granovetter embeddedness expresses the notion that social actors exist within relational, institutional, and cultural contexts and cannot be seen as atomized decision-makers maximizing their own utilities. He, therefore, extols from the concept the importance of network ties. That social networks are relevant may seem a platitude; yet, it is the nature of such relations that make Polanyi's embeddedness so interesting2. As I will show, the economy of the industrial district is entirely enmeshed within a specific local culture that highly regards the participation of the family in the enterprise, work reputation, friendship, a certain political leaning, membership in entrepreneurial associations, etc. In the end, embeddedness approaches regardless of their relevant nuances, "prioritize the different conditions within which social action takes place" (Ghezzi & Mingione, 2007, p.11). Drawing from this approach, I regard entrepreneurship as a social as well as an economic phenomenon, even more so in an industrial district. It must be inescapably viewed as enmeshed in different social, cultural and cognitive contexts. By the same token I argue that the search for, the access to, and the various forms of credit as capital investment to support local entrepreneurship cannot be separated from the culture

2 For a debate on the usage of the term "embeddedness" see Gemici (2008) as well as Krippner *et al*.

terms of existing, culturally rooted and meaningful local relationships.

entrepreneurial role in society has eventually spurred a renewed interest in sociological theory (Aldrich, 1999; Swedberg, 2000; Kim & Aldrich, 2005) and initiated several empirical studies especially on the proliferation of family businesses and small enterprises in large areas of Southern Europe, the Far East, and the developing countries. Similarly, the last twenty years of anthropological investigation of small scale industrialization in specific regional contexts has produced an extraordinary variety of data supporting the idea that the post-Fordist transition as well as the ongoing expansion of capitalist economies, in the process of destroying boundaries between societies and altering autochthonous traditions, have contributed to produce a complicated mosaic of local capitalisms (Blim, 1992, 1996; Benton, 1989; Gudeman, 1986; Kelly, 1992; Yanagisako, 2002; Smart & Smart, 2005; Narotzky & Smith, 2006). Some regions present deep historical roots of industrialization, others a shallower or lack of recent industrial history, but, on the whole, it seems that capitalism does not operate the same way everywhere. Such richness of local variation, the outcome of the interaction between cultures and economies, is an original and important anthropological contribution to the understanding of capitalism and small scale industrialization. Lauren Benton, for example, in her *Invisible Factories* (1989), has looked at the specific industrial development in a Spanish region (Valencian area), describing social relations of production, patterns of authority and division of labour in a regime of decentralized production where 'small' does not mean 'beautiful', and where the reality of social condition of labour is very different from the optimistic view promoted by neo-liberals. Another important contribution to this critique has been Michael Blim's *Made in Italy* (1990), a work on the emergence of small-scale industrialization in an Italian region (The Marches). Blim clearly suggests that this model of capitalism, which has become "the darling of neo-liberal development theory" (1990, p.3), offers a rather mixed view, with an always incumbent spectre of economic decline.

What has received little scholarly attention in all of these studies is the financial aspect that revolves around entrepreneurship: the practices of credit and money borrowing, for example, necessary to sustain entrepreneurial activities. There is actually an earlier (and limited) anthropological literature on this topic, investigating rotating credit systems, informal and formal firms of credit, but it is mainly focused on non-Western or peasant societies (Geertz, 1962; Firth & Yamey, 1964; Beals, 1970). The neglect of financial issues has been remedied in recent years both in economic sociology and anthropology with increasing research on banks and financial markets (Uzzi, 1999; Brewster Stearns & Mizruchi, 2005; Fisher & Downey, 2006), but more specific studies on various forms of capital investment are needed to understand how those wishing to become entrepreneurs or to further develop their business may access capital. This article furthers the discussion of this fundamental issue in entrepreneurship by discussing some cases in anthropological terms by drawing on ethnographic material I have collected in my on-going research on entrepreneurs, small size enterprises and family firms in Northern Italy.

Northern and Central Italy are punctuated by a large number of small firms variably clustered in localized or territorially based systems of specialized production: the so-called industrial districts. Entrepreneurship is widespread among the population. In the area where I have carried out my fieldwork research - the Brianza in Lombardy1 – for example,

<sup>1</sup> My fieldsite includes a group of 30 enterprises located in 5 small neighbouring municipalities roughly 30-40 km North of Milan, the capital of Lombardy. To protect the identity of my informants and their enterprises I have used fictitious names.

entrepreneurial role in society has eventually spurred a renewed interest in sociological theory (Aldrich, 1999; Swedberg, 2000; Kim & Aldrich, 2005) and initiated several empirical studies especially on the proliferation of family businesses and small enterprises in large areas of Southern Europe, the Far East, and the developing countries. Similarly, the last twenty years of anthropological investigation of small scale industrialization in specific regional contexts has produced an extraordinary variety of data supporting the idea that the post-Fordist transition as well as the ongoing expansion of capitalist economies, in the process of destroying boundaries between societies and altering autochthonous traditions, have contributed to produce a complicated mosaic of local capitalisms (Blim, 1992, 1996; Benton, 1989; Gudeman, 1986; Kelly, 1992; Yanagisako, 2002; Smart & Smart, 2005; Narotzky & Smith, 2006). Some regions present deep historical roots of industrialization, others a shallower or lack of recent industrial history, but, on the whole, it seems that capitalism does not operate the same way everywhere. Such richness of local variation, the outcome of the interaction between cultures and economies, is an original and important anthropological contribution to the understanding of capitalism and small scale industrialization. Lauren Benton, for example, in her *Invisible Factories* (1989), has looked at the specific industrial development in a Spanish region (Valencian area), describing social relations of production, patterns of authority and division of labour in a regime of decentralized production where 'small' does not mean 'beautiful', and where the reality of social condition of labour is very different from the optimistic view promoted by neo-liberals. Another important contribution to this critique has been Michael Blim's *Made in Italy* (1990), a work on the emergence of small-scale industrialization in an Italian region (The Marches). Blim clearly suggests that this model of capitalism, which has become "the darling of neo-liberal development theory" (1990, p.3),

offers a rather mixed view, with an always incumbent spectre of economic decline.

enterprises and family firms in Northern Italy.

enterprises I have used fictitious names.

What has received little scholarly attention in all of these studies is the financial aspect that revolves around entrepreneurship: the practices of credit and money borrowing, for example, necessary to sustain entrepreneurial activities. There is actually an earlier (and limited) anthropological literature on this topic, investigating rotating credit systems, informal and formal firms of credit, but it is mainly focused on non-Western or peasant societies (Geertz, 1962; Firth & Yamey, 1964; Beals, 1970). The neglect of financial issues has been remedied in recent years both in economic sociology and anthropology with increasing research on banks and financial markets (Uzzi, 1999; Brewster Stearns & Mizruchi, 2005; Fisher & Downey, 2006), but more specific studies on various forms of capital investment are needed to understand how those wishing to become entrepreneurs or to further develop their business may access capital. This article furthers the discussion of this fundamental issue in entrepreneurship by discussing some cases in anthropological terms by drawing on ethnographic material I have collected in my on-going research on entrepreneurs, small size

Northern and Central Italy are punctuated by a large number of small firms variably clustered in localized or territorially based systems of specialized production: the so-called industrial districts. Entrepreneurship is widespread among the population. In the area where I have carried out my fieldwork research - the Brianza in Lombardy1 – for example,

1 My fieldsite includes a group of 30 enterprises located in 5 small neighbouring municipalities roughly 30-40 km North of Milan, the capital of Lombardy. To protect the identity of my informants and their there are two industrial districts (metalworking and furniture sectors) and, as a whole, the manufacturing industry includes some 10,000 factories - a density of 24 factories per square kilometer, with an average of 11 employees per firm. The presence of so many firms and consequently entrepreneurs in this area implies the existence of a peculiar socio-cultural milieu that favours capital accumulation and allows for the combination of resources to set up a business. In the attempt to illustrate this phenomenon I will employ the theoretical concept of embeddedness . By looking at various forms of credit and financial practices here I want to offer a concrete example of the firm's embeddedness in the social context in which it operates. The importance of the role of "non-economic factors" on the economy, such as interpersonal relations of trust and one's own reputation, is certainly evident in some economic approaches (Williamson, 1991), as well as in finance research, with studies showing that through the building of close ties with institutional creditors the availability of financing increases (Mitchell & Raghuram,1995, pp.3). The advantage of the anthropological approach over others stands in its ability to "use" these non-economic - yet economically relevant - factors, to situate entrepreneurial actions within an analytical framework that comprehends economic practices, such as the financial ones as well as other forms of exchange in this context, not in terms of individualized decision making behaviour, but in terms of existing, culturally rooted and meaningful local relationships.

Turning to a brief examination of embeddedness as a conceptual framework, I want to suggest a use that tries to preserve the original meaning proposed by Polanyi (1957) and to incorporate the new economic sociology approach theorized by Granovetter (1985). The concept of embeddedness according to Polanyi is a conceptual tool employed to understand the process of the human economy, "embedded and enmeshed in institutions, economic and noneconomic" (1957, p.250). That is to say that in a regional economy such as the Brianza, firms, families, and local banks are institutions embedded in forms of exchange that are both cultural and economic (profit making), and that this interaction of elements produces an idiosyncratic mix. Meanwhile for Granovetter embeddedness expresses the notion that social actors exist within relational, institutional, and cultural contexts and cannot be seen as atomized decision-makers maximizing their own utilities. He, therefore, extols from the concept the importance of network ties. That social networks are relevant may seem a platitude; yet, it is the nature of such relations that make Polanyi's embeddedness so interesting2. As I will show, the economy of the industrial district is entirely enmeshed within a specific local culture that highly regards the participation of the family in the enterprise, work reputation, friendship, a certain political leaning, membership in entrepreneurial associations, etc. In the end, embeddedness approaches regardless of their relevant nuances, "prioritize the different conditions within which social action takes place" (Ghezzi & Mingione, 2007, p.11). Drawing from this approach, I regard entrepreneurship as a social as well as an economic phenomenon, even more so in an industrial district. It must be inescapably viewed as enmeshed in different social, cultural and cognitive contexts. By the same token I argue that the search for, the access to, and the various forms of credit as capital investment to support local entrepreneurship cannot be separated from the culture from which they come into being.

 2 For a debate on the usage of the term "embeddedness" see Gemici (2008) as well as Krippner *et al*. (2004)

Small-Scale Entrepreneurship in Modern Italy –

investments in shop floors and machinery.

fiscally and juridically as industrial firms.

replenishing it" (1987, p.9).

An Ethnographic Analysis of Social Embeddedness in the Access to Capital and Credit 241

While governments elsewhere celebrated its contradiction or encouraged its elimination, the Italians created a distinctive category of small capital and set about populating and

The Artisan Fund (*Artigiancassa*), a public national program of loans for artisan workshops4, and a variety of more recent regional programs, such as *confide* and *vaucher*, tailored to the specific needs of small businesses are clear evidence of the long standing interest that the Italian state has had in this matter. In contrast with Weiss' view of an active central state, Trigilia (1986; 1989) has put emphasis on the local dimension of the political context which, strengthened by a high level of ideological consensus - either Catholic (in Northern Italy) or Communist (in Central Italy) - has implemented local policies favouring small-scale industrialization to compensate for the shortcomings of the central political economy. He writes: "[...] This process was largely unplanned, though it was influenced by political decisions or, more frequently, non-decisions. In the absence of effective long-term economic policies at the central level, the growth of small firms has, in fact, been based on certain economic, social, political resources which were widely available in some local areas" (1989:174). According to Trigilia, the activity of Church institutions in the north east of Italy and of the Communist Party in the centre have contributed to creating and reproducing 'subcultures' that mediate successfully between social classes with potentially conflictual interests. Moreover, the dominant role enjoyed by the parties5 representing these 'crossclass subcultures' "may have contributed to increasing the stability and decision-making capacity of the local governments" (1989:189). The implementation of urban policies in support of small-scale industrialization is an example of this kind of local intervention. However, as Weiss would justly argue, these types of policies are not *per se* sufficient to stimulate development. A financial apparatus is also required to provide liquidity for

4 I use the words artisan and small entrepreneur, or "small firm", "small enterprise", "artisan firm", and "artisan workshop" interchangeably. However, a clarification of these terms is needed. In Italy 'artisan firm' is a legal classification (as stated by Law n. 443/1985) which encompasses a wide range of activities; basically most professions fall into such a category: a baker, a barber, a truck driver, an electrician, a mason, if self-employed, are artisans and have to register to the Chamber of Commerce, Industry, Artisan and Agriculture (CCIAA). In the case of manufacturing enterprises, Law n. 443/1985 an update version of the Artisan Statute introduced in 1956 (n. 860/1956) - may apply to plants with a maximum of 10 employees, when the work involves mass assembly, namely standardized production, provided that this is not completely automated; a maximum of 18 employees in firms not involving mass assembly, and a maximum of 32 employees in workshops of traditional productions such as tailoring, artistic productions and so forth. The recruitment of apprentices may raise the number of employees up to 12, 22 and 40, respectively. These dimensional limits are not applied to co-operatives. Law n. 443/1985 also provides a legal definition of the word artisan, defined as "the owner or co-owner of the firm personally involved in the work". The companies that exceed the dimensional limits as stated by the law are to be treated fiscally and juridically as industrial firms. As manufacturing technology becomes more affordable and available to an increasing number of small enterprises, it is more difficult to trace a neat line between the labour process in artisan workshops and small (industrial) factories. The companies that exceed the dimensional limits as stated by the law are to be treated

5 These were the Christian Democratic Party and the Communist Party. Since the early 1990s they have

disappeared from the political arena and have been replaced by different political parties.
