Competition and co-operation: toward understanding industrial districts¹

The central feature of the ‘industrial district’ is the balance between competition and co-operation among firms. This paper addresses the role of competition and co-operation in the organization of economic activity. We first compare Alfred Marshall's notion of industrial district and that of contemporary writers. We then discuss the limits of competition in the presence of such problems as asset specificity, measurement problems and externalities. We argue that under such circumstances industrial success depends on the effectiveness of collective institution-mediated co-operation. We further discuss various factors that might foster for hinder development of such institutions.