World Development, Vol. 23, No. 1, pp.

9-28, 1995
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Small Shoemakers and Fordist Giants:

Tale of a Supercluster

HUBERT SCHMlTZ*
Institute of Development Studies, University of Sussex, U.K.

Summary. -This paperinvestigatesa success storyfrom a country in crisis:the shoe industryof the Sinos
Valley in Brazil. The main questionis to what extent the industrialdistrictmodel capturesthe realityof the
Sinos Valley. In many ways it does. The sectoraland geographicalconcentrationof shoe manufactumrsis
formidable.Even more strikingis the depthof the local economy which includes almost the entirerangeof
supply industriesand producerservices. Collective action has also been significantin the development of
the cluster but has changed over time; initially it was based on a common socioculturalidentity, then it
crumbledand its recentreturnis based on an economic rationale.Where model and reality differ most is in
the strong presence of large firms. Most of these large firms, however, were small two decades ago. The
inclusion of export agents is crucial to uuderstandthe radical transformationof this industrial cluster in a
span of two decades.Indeed, some of the most interesting conclusions emerge t?om tracing changes over

1. INTRODUCTION inputs for the industry, markets its output or renders

This paper investigates a success story from a coun-
try in crisis. For Brazil, the 1980s were a “lost decade”
and the 1990s are not proving much better. Stagnation
and decline has not, however, affected all sectors; one
of the exceptions is the country’s leather shoe industry
which has grown rapidly, primarily by exporting.
During 197&90, Brazil raised its share of world
leather shoe exports from 0.5 to 12.3%. This made it
the third largest exporter after Italy and South Korea
(UNIDO, 1992). The yearly growth rate of exports
(pairs of leather shoes) during these 20 years was
24.1%, higher than that of South Korea or Taiwan.
Brazil has, however, been less successful in exporting
sports footwear.
Within Brazil, the fastest growing shoe industry has
been that of the southernmost state, Rio Grande do
Sul, most of it concentrated in the Sinos Valley. This
paper focuses on that Valley and asks what lessons for
industrial organization can be drawn from this success
story. The above is a very open-ended question and
them are various ways one could set about the investi-
gation. This paper addresses questions which arise out
of the recent industrial district debate, which seems
particularly relevant because it deals with sectoral and
geographical concentrations of local firms. The Sinos
Valley is an impressive concentration of local firms. It
includes over 400 shoe firms, most of them specializ-
ing in women’s shoes. Around these shoe producers a
range of other firms has emerged which produces
special services.
*This is the revised version of a paper which was tirst
presented at a workshop “Intra-fhm and Inter&m
Reorganization in Third World Manufacturing Industry”
held at the Instituteof Development Studies, Sussex, April
14-16, 1993. I received many helpful comments from the
participantsof this workshop. I am particularlygrateful for
insightful suggestions from John Humphrey,Mick Moore,
Khalid Nadvi and Hermine Weijland. Tessa Peasgood and
SarahDibb-Fullerprovidedvaluable researchassistance.
The researchis based on secondary sources and on inter-
views catried out in Brazil in late 1992. My thanks go to the
shoe marmfacturers of the Sinos Valley who gave generously
of their time. A numberof people helped me to get a grip on
the shoe industryin the courseof extensive discussions. 1 am
particularly grateful to Enio Klein, Superintendent of
FBNAC; Lawrence Geller, President of the Exporters
Association; Edvino Schaeffer, Director of the Business
Association of Novo Hamburgo; my colleagues Roberto
Ruas, Valmiria Piccinini and Acyr Seleme of the Federal
University of Rio Grandedo Sul and Nery dos Santos of the
Science Policy Research Unit at the University of Sussex.
My collaboratorLuiza Bazan has helped me to understand
the social foundations of industrial growth in the Sinos
Valley. Finally, I wish to thank the Te&nological Cents of
the Shoe and &ather Industry(CTCCA)in Novo Hamburg0
for providing me with a base from which to work. The
research is funded with a grant from the Overseas Deve-
lopment Administration to the Institute of Development
Studies, but the responsibility for everything said in this
paperis mine alone.

9
10 WORLDDEVELOPMENT
This paper is a case study of this industry and pur-
sues two questions:
- To what extent does the industrial district model
capture the reality of the Sines Valley?
- If it does not, where do they differ and why?
What other model of industrial organization cap-
tures what has occurred over the last 25 years?
In attempting to answer these questions I draw on
published sources and on interviews carried out in the
Sines Valley during November/December 1992.’ This
was a first round of fieldwork in an ongoing project.
2. WHY STUDY INDUSTRIAL DISTRICTS?
In recent years, industrial districts have attracted
attention, particularly in Europe, because of their
apparent success in achieving international competi-
tiveness and attaining high employment standards
(pyke and Sengenberger, 1992). The term “industrial
districts” goes back to Alfred Marshall (1920), who
stressed the economies which arise from the “concen-
tration of specialized industries in particular locali-
ties” (heading of Chapter X of the Principles of
Economics). The term was reintroduced into the
recent debate by the Italian economist, Becattini; he
tried to make sense of the successful performance of
local firms in Tuscany, Emilia Romagna and nearby
regions in what has come to be called the “Third
Italy.” Becattini went beyond Marshall’s economic
analysis, however, and stressed the need for an inter-
disciplinary approach. He defined the industrial dis-
trict as a “sociotenitorial entity which is characterized
by the presence of both a community of people and a
population of firms” and he adds that “in the district,
unlike in other environments.. .community and firms
tend to merge” (1990, p. 38).
In the ensuing international debate, the stylized
model of the Third Italy has become the main refer-
ence point. The main components of this model are:
- geographical and sectoral concentration of
fill-IX
- predominance of small- and medium-sized
fklS
- vertical disintegration (at the firm level)
- cooperative competition
- a sociocultural identity which facilitates trust
- active self-help organization.
One of the main purposes of this paper is to exam-
me whether these elements are present in the Sinos
Valley.
It is worth recalling that the industrial district expe-
rience feeds into a wider debate concerned with a shift
in industrial organization in advanced countries. The
main theme is the relative decline of Fordist mass pro-
duction and the growth of activities based on less rigid
and more adaptable structures, often referred to as
flexible specialization (Piore and Sabel, 1984). Views
differ on how far-reaching this change is and what
form it takes. In principle one can distinguish between
a large-firm and a small-firm variant of flexible
specialization. The former exists where large firms
decentralize internally and adopt new organizational
techniques. In the small-firm variant, flexible
specialization results from the clustering of firms and
deep interfirm division of labor (Rasmussen Schmitz
and Van Dijk, 1992). This is where the industrial
districts fit into the wider debate.
While this debate has so far been concerned mainly
with the advanced countries, it has also influenced the
research agenda on less-developed countries (LDCs)
(Humphrey, 1993; Kaplinsky, 1991; Murray, 1992;
Nadvi and Schmitz, 1994; Schmitz, 1990, Tendler,
1987). The industrial district experience seems of par-
ticular relevance to LDCs, since most European suc-
cess stories:
- come from sectors in which LDCs are thought
to have a comparative advantage;
- are based on local tirms, mainly of small and
medium size;
- and have occurred in regions which were
rooted in small-scale agriculture and industrialized
relatively late.
The European debate does not, however, provide a
clear guide for the researcher on how to proceed. The
debate is conceptually muddled and has large empiri-
cal gaps. For example, there are disputes over what
constitutes an industrial district, how significant they
are and whether they can maintain their success. In
other words, the reference point for this paper is in
itself problematic (see Schmitz, 1994). The empirical
questions concerning the European experience cannot
be resolved in this paper, but conceptual and method-
oligical issues will be addressed. In fact, the t(r)opical
tale from Brazil which unfolds in the subsequent sec-
tions, demands that they be addressed.
3. THE SINOS VALLEY -A SUPERCLUSTER?
The purpose of this section is to introduce the
reader to the Sinos Valley. This is done by giving an
initial overview of which elements of the industrial
district model are present in the Valley. Subsequent
sections explore each of the elements in detail.
For there to be an industrial district, the two most
basic prerequisites are sectoral and geographical con-
centration. A group of producers making the same or
similar things in close vicinity to each other brings, in
itself, few benefits. It lays, however, a basis for a num-
ber of subsequent developments-which may or may
not occur: the division of labor and specialization
among firms; the provision of their specialized prod-
ucts and services at short notice and great speed; the
emergence of suppliers who provide raw materials
and components; the growth of suppliers who provide
 TALE OF A SUPERCLUSTER 11

Table 1. The Sines Valley footwear cluster-number ofjbns and workers in 1991

Activity Fiis Direct Jobs

Footwear industry 480 70,ooo
Service rendering industries - workshops 710 18,000
Tarming industry 135 22,000
Leather and footwearmachines industry 3,6@3
Componentsindustry 2: 28,000
Rubber industry 26 1,900
Leather articles industry 52 4,900
Export and forwarding agents 70 2,ooo
Others 80 3,ooo

Total 1.821 153.4ot-l

Source: ABAEX (1992). Projections on information from PEE, AICSUL, ACI-NH, SINLXMAQ,
SINBORSUL, Municipal Government of Novo Hamburgo.

new or second-hand machinery and spare parts; the
emergence of agents who sell to distant national and
international markets; the growth of specialized pro-
ducer services in technical, financial and accounting
matters; and the formation of associations providing
services and lobbying for its members. This is pre-
cisely what occurred in the Sinos Valley. Table 1
shows the dimensions and depth of the cluster.
At the core of this district are close to 500 shoe
manufacturers. They farm out certain operations to
hundreds of small subcontractors whose exact number
is hard to determine. But the outstanding feature of the
Sinos Valley is that within a radius of 50 kilometers of
Novo Hamburgo, the economic center of the Valley,
most inputs are produced: uppers, soles, heels, insoles,
insocks, shanks, glues, nails, eyelets, dyes, etc - all
of them made to many different technical specifica-
tions. In addition, most of the machines to turn these
materials and components into shoes are made locally.
Roughly speaking, for every job in shoe manufactur-
ing them is a job in the local supply industry.
The extent and depth of this footwear cluster is
underlined further by Table 2 which gives the number
of shoe producers and suppliers in all Brazilian states.
It shows that Rio Grande do Sul (where the Sinos
Valley is located) has a high number of shoe producers
and suppliers; in contrast to say Minas Gerais which
has a substantial shoe industry but a relatively weak
local supply industry. The only other state which
comes close to Rio Grande do Sul (in having the whole
spectrum of local supply industries) is the state of S8o
Paul0 which specializes in men’s shoes (town of
Franca) and children’s shoes (town of Birigtii). Here
one can make an initial connection between clustering

Table 2. Brazilian shoe manufacturers and suppliers, by state and subsector. 1991
State Shoe Tanning Machinery & Components Chemicals
industry industry Equipment
Amazonas 11 3 1
Bahia 56 17 1 3
Ceara 279 13 5
Espfrito Santo 55 3
Goias 203 25 10
Mato Grosso do Norm. 105 12 1
Mmas Gerais 1855 115 5 9 1
Paraiba 87 6 4
Parana 53 33 1 1 1
Pemambuco 40 15
Rio De Janeiro 217 12 2 11 5
Rio Grande do Norte 10 5
Rio Grande do Sul 1276 157 125 169 48
Santa Catarina 415 35 3 17 1
S%oPaul0 1070 135 45 148 46
Rest of Brazil (10 other state) 49 35

Total 5781 622 181 377 105

Source: CTCCA, Anubio da Indkstria National do Couro, Cal@os e Afins (Novo Hamburgo: CTCCA,
1991).
12 WORLD DEVELOPMENT
and competitiveness. Shoes are produced in many
parts of Brazil (Table 2), but the capacity to export
exists only in a few places, notably where the industry
has clustered and the cluster has depth. Rio Grande do
Sul accounts for about 30% of the total footwear pro-
duction of Brazil and over 80% of exports, Slo Paul0
accounting for most of the remaining exports
(ABAEX, 1992).
The Sinos Valley also contains a wide range of spe-
cialized producer services. Table 1 lists 70 export
agents who fulfill more than a mere trading function.
Examples of other producer services include: free-
lance designers, technical and financial consultants,
and specialized transport services. The industry is also
served by two weekly papers (which specialize in the
shoe trade) and four bimonthly technical magazines
(of good quality and in competition with each other).
These publications are for the shoe and leather trade
nationally but are produced in the Sinos Valley,
adding to the enormous concentration of specialized
know-how.
Thus, it is hardly surprising that the diffusion of
information and ideas in the Valley is rapid and dense.
Klein (1991) emphasizes that it occurs not only in
business transactions, but also at social gatherings of
friends, family, sports club, neighborhood or church.
The diffusion reaches its peaks during the biannual
shoe fairs which are organized by FENAC (elaborated
below). None of this is to suggest that all infotmation
is shared, but clearly in such a cluster secrets are hard
to keep. While sometimes a problem for individual
firms, it tends to benefit the collective performance.
To complete the picture, mention should be made
of the institutions which have emerged with this
industry. There are three centers which provide spe-
cialized training and technical services for the shoe
and leather industry; there are six specialized indus-
trial associations and two professional associations.
All this suggests a sense of cooperation and a collec-
tive approach to common problems. Add to this the
fact that, in 1991, the Sinos Valley managed to export
70% of its output in a highly competitive international
market, that is, almost 100 million pairs of shoes
exported or nearly US $900 million in foreign sales
(ABAEX, 1992).
It would not be difficult to piece together a picture
of an industrial district which outshines most of its
European counterparts. Since industrial districts are a
cornerstone of the paradigm of flexible specialization,
does the Sinos Valley experience point to the demise
of Fordist mass production? Far from it. In the midst
of this thriving Valley there are Fordist giants; these
are factories of over 2,000 workers (huge for an indus-
try in which scale economies are low2). These workers
are organized along conveyors, engaged in highly
fragmented repetitive work, making large volumes of
standardized ,products. Such large factories account
for a good part of the growth in exports in the 1970s
and 198Os, but in order to compete in the 1990s they
have had to reorganize their way of producing.
This industry can be used to tell many different sto-
ties of industrial organization depending on which
market segments are covered, which time periods are
included, and how many layers the researcher man-
ages to uncover. For example, behind the initial pic-
ture of collective self-help (the above-mentioned asso-
ciations are very active) there has been enormous
disunity in the industry, and if one digs further one
finds unexpected new signs of interfhm collaboration.
In short, there is no easy story to tell if it is to do jus-
tice to the entire Sines Valley. The organization of its
shoe and allied industry does not fit neatly into the
recent models. In many ways the Sinos Valley is a
supercluster, such is the depth of interfirm relation-
ships and density of information flows. Simul-
taneously one finds Fordist mass production.
The following two sections seek to explain how and
why this has occurred. Section 4 shows how a small
firm cluster became increasingly heterogeneous by
tracing the changes in the size structure of the shoe
industry from the late 1960s to today. Section 5
explores why the industrial structure became rather
different from what the industrial district model would
lead us to expect.
4. SIZE STRUCTUBE OF THE SHOE INDUSTRY
One of the key features of the industrial district
model is that the firms in it are of small or medium
size. In contrast, the shoe industry of the Valley com-
prises firms of all sizes, including very large ones. The
Table 3. Size structure of the shoe industry of the Sinos
Valley, 197143
Firm size according to No. of Fis
no. of workers 1971 1983
l-10 150 89
11-50 154 92
51-100 82 65
101-500 64
101-600 138
501- l,ooo 4
601 - 1.100 16
1,001 + 1
1,101 + 17
Total 455 417
Sources: ACI, Produpio de Calgados no Sul, Censo da
Indtitria de Calpdos do Vale do Rio abs Sinos (NOVO
Hamburgo: Associac%o Comercial e Industrial, 1971). ACI,
Censo do Calcaab, Thirteenth issue (NOVO Hamburgo:
Associacao Comer&l e Industrial, 1983).
 TALE OF A SUPERCLUSTER 13

Table 4. Size structure of the shoe industry of Rio Grande do Sul, 1991
Firm size according to No. of Firn~s No. of Firms No. of Fiis
no. of workers (Source 1) (Source2) (Source3)
l- 19 54
20- 99 155 N/A N/A
loo-499 150
5c0+ 15

Total 434 1.276 4,909

Sources: 1. Enterpriseregister of the Federation of Industries of the State of Rio Graude do Sul
(FIERGS).Quotedfrom Russ Piccinini and Seleme (1992).
2. Compiledfrom CTCCA,Anudrio da Indibria National do Couro, CalGados e Ajins (Novo
Hamburg0 (see Table 2).
3. Superintendhcia da Administra@o Tributhria, Divisao de Estudos Economico-Fiscais.

firms which are large now, however, were small 25
years ago.3
In order to elaborate on the size structure of the
industry it is useful to go back to the years before the
export boom. In the late 1960s a well-developed clus-
ter already existed in the Sinos Valley producing
almost entirely for the internal market. During the
1950s and 1960s this cluster had been able to grow and
increase its share of the internal market at the expense
of shoe producers in other parts of Brazil (Reis, forth-
coming). A survey carried out in the four most impor-
tant municipalities (Novo Hamburgo, Campo Born,
Sapiranga and Sgo Leopoldo) listed 454 firms in 1968
(ACI, Censo 1969). According to a respondent who
codirected this survey at the time, virtually all these
firms were small, most very small.
Since then the size composition of the industry has
changed dramatically. Consistent time series are not
available for the last 25 years but one can piece
together an overview of the main changes. Table 3
compares the years 1971 and 1983. Note in particular
the increase in the number of firms with more than 500
workers: from five in 1971 to 33 in 1983. The impor-
tance of small firms certainly declined in relative
terms, but there are doubts about whether their number
decreased in absolute terms as suggested in Table 3.
Unfortunately there are no comparable data for the
early 1990s. Data for the state of Rio Grande do Sul
are however available for 1991 and the Sinos Valley
accounts for the bulk of the state’s shoe industry.
Therefore, Table 4 gives a good approximation of the
number of large- and medium-sized enterprises.
Particularly striking is the substantial increase in the
number of large firms (over 500 workers). The number
of small firms (209 firms with up to 100 workers) how-
ever is underestimated by a wide margin. It is hard to
tell by how much. Table 4 includes three estimates of
the total number of shoe firms in the state of Rio
Grande do Sul, ranging from 434 to 1,276 to 4,909.
The discrepancy between these three sources (all
referring to 1991) is almost entirely about small firms.
The reality is probably halfway between the two
higher figures.4 To conclude, in parallel with the large-
and medium-sized firms there continues to be a size-
able segment of small firms.
5. INDUSTRIAL ORGANIZATION IS SHAPED
BY THE MARKET
This section explains the reasons for the structural
changes noted above. The main theme of the section is
that the way the cluster has developed and the way
production is organized has been shaped - above all
-by markets and the way traders operate. The story
to be told is, however, neither linear nor are the causal
chains unidirectional.
(a) From small firm cluster to large exporter
How did the Sinos Valley manage the transition
from producing only for the internal market to being a
major exporter, and how did industrial organization
develop in the process?
In order to understand the export growth it is impor-
tant to recall that by the end of the 1960s a cluster of
over 400 shoe firms already existed in the valley pro-
ducing entirely for the intemal market. Due to a policy
of import substitution, this market was protected from
imports but there was internal competition. During the
1950s and 1960s the shoe industry of the Sinos Valley
had been able to grow and increase its share of the
internal market at the expense of shoe producers in
other parts of Brazil.
The sectoral and geographical concentration laid
the basis for the subsequent export boom in two ways.
First, US shoe importers were looking for new shoe
suppliers in low-wage countries, which they visited at
the time (1969-70). The Sinos Valley manufacturers
were able to land their lirst contracts because importers
recognized the advantages of buying from an estab-
14 WORLDDEVELOPMENT
lished cluster which included some specialized local
input suppliers (interview with one of the first
importers).5 Second, the local manufacturers did not
just passively wait for importers to come; they took
collective action (discussed further in section 8). The
national shoe fair, held in Novo Hamburgo, was pro-
moted overseas: foreign buyers were invited to visit it;
foreign journalists were invited - airfares paid - so
that they could report on the fair and on the local shoe
industry. Advertisements to promote Brazilian shoes
were placed in foreign papers. Moreover, most impor-
tant, a consortium of producers took their products to
the United States and Europe in search of export
orders (Klein, 1991 and interview with the author).
All this was aided by export incentives newly intro-
duced by the Brazilian government in 1969-70
(Lticke, 1990), but it was through collective action
that the local producers were among the first to avail
themselves of the export incentives. In summary,
clustering helped to build the economic and institu-
tional platform on which the subsequent export boom
was based.
The local initiatives and central government incen-
tives led to quick results because export agents were
very effective in connecting the Brazilian producers
with the US market. In that market a major change was
underway. In a nutshell, whereas in 1960 imports
accounted for 20% of US consumption, this rose to
80% in 1990 (Klein, 1991). This rise in imports
occurred in a relatively silent way because the US
manufacturers themselves became importers. Their
detailed knowledge of the market and connections
with the retailers facilitated the rapid rise in Brazilian
exports. The retailers themselves were indifferent to
where the shoes came from.
Thus, in a matter of a few years, a cluster of local
producers, most of them small, was plugged into a dis-
tant mass market. Without their collective strength
this connection would not have occurred. Once made,
it meant that a number of local producers evolved into
mass producers. The effects on the cluster were two-
fold. In an economic sense it was strengthened
because the export growth increased the demand for
local inputs and machinery, thus contributing to fur-
ther specialization and deepening of the cluster. In a
political sense it was weakened: collective action
became more difficult because the sector became more
differentiated, the sheer speed of growth weakened
social ties among local producers (explained in sec-
tions 8 and 9) and because the initiative moved from
them to the new figure of the export agent.
(b) The role of export agents
As stated above, initially the traders were ex-manu-
facturers from the United States. This did not last. In
some cases, the role of intermediary between the
American market and the local producers came to be
carried out by offices which the US retail chains set up
in the Valley. Other intermediaries were independent
agents; initially most of them were foreign, especially
American, but increasingly Brazilians were included.
These export agents were not just buyers. In addi-
tion to negotiating with the US retail chains on the one
hand and the Brazilian producers on the other they
carried out the following functions: they studied the
market which necessitated visiting shoe shops in the
United States and Europe as well as international shoe
fairs. They developed models which required setting
up model shops in the Valley to produce samples.
They inspected product quality and production sched-
ules on site; they provided technical assistance; they
organized the transport and payment arrangements.
All this required building up substantial technical
departments for which they initially recruited experi-
enced personnel from the United States and Europe
but then pirated skilled workers from the local manu-
facturers.
In spite of their developmental function the export
agents are controversial figures in the Valley. This is
for two reasons: first, it is widely known that a shoe
with a factory gate price of, say, $10 sells for $40 in
the United States (price to the consumer). This gives
rise to a sentiment that profits in manufacturing are
hard earned and profits in trading arc easy and exag-
geratedly high. In practice the agents earn a commis-
sion of about 10% (of factory gate price) from which
they have to pay their sales people and technical staff
in the United States and Brazil (interviews with export
agents). Second, before placing an order the export
agents often hold what amounts to an auction system:
a model of the shoe that they have managed to sell to
the US retailer is given to various manufacturers who
are invited to make a bid. Several manufacturers we
spoke to complained that in awarding contracts agents
do not always reward quality and punctuality in previ-
ous contracts and care little about continuity. price is
all that matters. The response of the export agents was
that they prefer to work with a small number of manu-
facturers on a regular basis but are often forced to
invite bids from other producers because they them-
selves face the jibes of the US shoe buyer: “If you as
my agent cannot obtain the goods for the price I expect
then there are other agents who can. And if not from
Brazil at my price, then from any of the other shoe
exporting countries” (interview).
Under this system the industry expanded rapidly
during the 1970s and the first half of the 1980s.
Product development and marketing was taken care of
by the export agents; they also enforced adherence to
basic quality and delivery standards. Export manufac-
turers concentrated on increasing scale and competing
on price. The factories expanded so fast that workers
had to be bussed in from outlying regions. Several
manufacturers relocated their factories closer to where
 TALEOFASUPERCLUSTER
the workers lived. Production was organized along
conveyors, work was fragmented, training times could
be kept short and wages low (Ruas, 1989). Profits
were reinvested for capacity expansion rather than
innovation. Fordism seemed to reign supreme in the
Valley. The fast growth of exports from the Sinos
Valley during the 1970s and first half of the 1980s is
reflected in Figure 1.
(c) The impact of recent changes in the market
Rapid export growth came to an abrupt end in the
second half of the 1980~.~ The reason was increased
competition from other countries with even lower
wages. The main threat came from China. Chinese
exports to the United States squeezed Brazil out of the
American market for low-priced leather shoes (Ruas
Piccinini and Seleme, 1992).
As a result, Brazilian manufacturers are forced to
move up market. This is not easy because in addition
to the threat from China and other exporting countries,
changes have occurred in the US market. Competition
among American retailers concentrates increasingly
on reducing the cost of inventory. This is beginning to
have implications for the way shoe production is orga-
nized in the Valley.
In the past Brazilian shoe exporters used to have
3-6 months of orders in hand, this is now reduced to
typically l-l.5 months (interview with export agents,
confirmed by manufacturers). In order to reduce the
cost of inventory the retailers buy little by little instead
of placing one bulk order. The trend is to buy closer to
the point of sale. Take the example of 60,000 pairs per
model: in the past retailers used to place an order of
40,000 and then perhaps buy a further 20,000 over the
season. Now the retailer may still want 60,000 but
1968 1970 1972 1974 1976 1978 W&l 1982 1984 I986
Figure 1. Sitw Valley: Shoes producedfor internal and
cvttwal mar-kets. 1968-87.
15
starts with, say, 10,000 and then follows this up with
additional orders of say 6,000 at a time. With luck the
producer may wind up with the same sum total of
60,000. This is merely an example and in many cases
the numbers of pairs per order are much smaller.
Thus Brazilian manufacturers have to adjust to
three changes in the market: smaller orders, shorter
delivery times and higher quality requirements. The
consequences have been two-fold: first, a number of
large firms have gone out of business. According to
dos Santos (1992, p. 134), 12 of the 100 largest shoe
producers closed down during 1987-92. Second, large
firms which continued production shifted their empha-
sis from growth to internal reorganization. Production
departments the size of football fields are being broken
down into mini-factories: most of these continue to be
organized around conveyors but cellular manufactur-
ing is beginning to be applied. The hiring and firing of
labor is beginning to make way for investment in
human resources and reducing labor turnover. Wages,
however, remain low (Piccinini, 1991a; Antunes and
Russ, 1992; and own interviews with manufacturers).
In parallel with such changes in production some
large firms are also trying to modify their marketing.
The objective is to diversify and sell directly to the
European retailers. Some manufacturers do so suc-
cessfully, but most exports continue to be for the US
market and are channelled through the export agents.
In principle, the changes in the market, particularly
in the smaller orders and shorter delivery times,
increase the viability of small firms. A survey of 50
small firms, which I conducted in 1992-93, showed
that a number had managed to secure export orders:
25% of these firms were exporting 50-100% of their
output.
The bulk of the small firms, however, continue to
produce primarily for the internal market. There are
some large firms producing for the internal market
who do so quite successfully by establishing their own
retail stores and promoting their own brands. Unlike
the United States and several European countries,
however, Brazil has a very diffuse retail system; most
stores are independent and place their generally small
orders with an army of travelling salesmen who then
feed them back to the shoe manufacturers, most of
whom are small. The way the internal market operates
is relatively little understood but it seems safe to say
that the very diffuse marketing of shoes is essential to
understand the continuing existence of the large num-
ber of small shoe manufacturers. It is worth adding
that the Brazilian retailers themselves are trying to
reduce the cost of inventory. Thus, in the internal
market there has also been a trend toward shorter
delivery times and smaller orders.
The Sinos Valley has gone through three phases: up
to the end of the 1960s it was a cluster of primarily
small firms, most still at an artisan stage. Then there
was a period of expansion, much of which occurred on
16 WORLD DEVELOPMENT
Fordist lines, sustained by exports of large volumes of
standardized low-priced shoes. More recently there
has been a reorientation toward smaller production
runs combined with shorter delivery times and more
emphasis on quality prompted by changes in both the
external and internal market. The influence of these
changes will surface again in the course of the next
section which deals with the relationships between
manufacturers and suppliers.
6. VERTICAL DISINTEGRATION
A key feature of the industrial district model is that
most firms specialize in particular stages of a produc-
tion process, hence the term “stage firms” (Brusco,
1990). The purpose of this section is to explore
whether such vertical disintegration (at the firm level)
is also prevalent in the Sinos Valley. Section 3, which
mentioned the many specialized input suppliers and
subcontractors seems to give an affirmative answer.
Then section 4 showed the emergence of very large
shoe manufacturers. Does this mean that these firms
orchestrate the division of labor in this sector? The
short answer is as follows: some very large firms have
integrated vertically in spite of a relatively well-devel-
oped supplier network. Thus, while still located in the
cluster they no longer need it, or certainly much less so
than when they were smaller. The rest of the industry,
however, relies very much on complementarity for
buying components and services. Recently there have
even been signs of a move toward further vertical dis-
integration and further deepening of interlirm division
of labor. The remainder of this section explains these
trends in more detail.
According to a study by Prochnik (1992) there has
been a tendency toward vertical integration. This con-
clusion is based on interviews in large Brazilian shoe
firms, most of which were located in the Sinos Valley.
In some cases these shoe manufacturers had added to
their operation a section which carried out the final
processing of the leather. In other cases entire tanner-
ies were acquired. Expansion into production of rub-
ber and plastic components also took place (confirmed
in ongoing research by Nery dos Santos).
The reasons for this vertical integration are not
entirely clear. There is mention of the need to have a
reliable supply of good quality inputs for large scale
production (Pro&n&, 1992). Elsewhere (Schmidt,
1989) the stress is more on the shoe manufacturers’
need for leather with varied specifications and the
inflexibility of large tanneries to supply them. Without
doubt difficulties with input supplies are real; they
were mentioned to us by various shoe manufacturers
and frequently feature in reports and interviews in
technical magazines such as Tecnicouro or
Laqamentos. One needs, however, to question the
wisdom of such vertical integration in view of the
changes in the market mentioned above, particularly
smaller orders and faster responses.
This scepticism is shared by Prochnik (1992) and
Ruas, Piccinini and Seleme (1992). Perhaps the clear-
est assessment comes from one of our respondents
who was for many years an accountant in large shoe
firms and is now a small shoe manufacturer himself.
He stressed thatthe verticalization in the Sinos Valley
is limited to about half a dozen very large firms. While
acknowledging that problems with the supply of
inputs had arisen, he felt that the main reason for their
verticalization lay elsewhere: during the years of easy
growth their profits increased so fast that they did not
know where to apply them, so some of the reinvest-
ment resulted in backward integration. He felt
strongly that vertical integration was not a dominant
tendency. This is confirmed by our discussions with
other manufacturers.
The vast majority of shoe firms are not vertically
integrated. Table 1 tends to confirm this high degree of
interfirm division of labor. Note in particular the exis-
tence of over 200 firms producing components for the
shoe industry. A comparable table is not available for
earlier decades but if one pieces together the informa-
tion from various oral and written sources (Klein,
1991; Carneiro, 1986) it becomes clear that the Sinos
Valley has been an agglomeration of specialists for
several decades. If anything, the specialization and
inter&m division of labor have increased - notwith-
standing the vertical integration strategy pursued by a
small number of very large firms.’ There are, however,
signs that the relationship between input suppliers and
shoe manufacturers is beginning to change. Whereas
in the past conilict resulted in blame and the switching
to different suppliers/customers there are now some
attempts to explore problems jointly. However timid,
they are steps toward collaborative manufacture and
learning by interaction8
This section has focused so far on the supply of raw
materials and components from which shoes are
made. Shoe production goes through various stages
and the remainder of this section is concerned with
these stages: to what extent are they carried out “in-
house”; to what extent are they put out to specialized
“stage firms”; and, what kind of relationships exist
between the “final firms” and “stage firms” (to use
Brusco’s, 1990 terms). Pursuing these questions
means taking a difficult path because many of the
stage firms are homeworkers whose numbers are hard
to quantify. A specialized study of this segment of the
industry is being undertaken by Azevedo (1993), but
for the time being our work has to rest on piecing
together information from a variety of sources. The
following sets out what kinds of processes are
externalized, how common this practice is and what
tendencies can be detected.
Shoe production consists of a number of discrete
stages which, from a technical point of view, need not
 TALE OF A SUPERCLUSTER
Finishing
Lasting
lnrole lining
Stamping
Heel covering
Sole lining
Sole cuuing
Upper stitching
Hand stitching
Weaving upper
Tresss
Uppcr plaiting
Uppcr cutting
Pattern grading
Pauem cutting
Percentage
Source: A rurvsy of 50 small fimu. conducted by Hubert Schmitz and Acy Sclomc
Figure 2. Externalization ofproduction tasks byfirms (percentage)
be caked out under one roof. Few shoe firms in the
Sinos Valley carry out all stages in-house. Operations
which are farmed out fall into two categories:
(a) Operations which require highly specialized
equipment and/or skilled labor. Examples are the
production of lasts, the creation of new models, or
the grading of patterns. The reason for externalizing
such operations lies in the efficiency advantage of
the supplier; these are mostly but not always small
firms. In some cases small shoe manufacturers buy
in the services provided by large firms, for example,
for making lasts or insole printing.
(b) Operations which are relatively simple and
labor intensive. Examples are the stitching of
uppers, hand-weaving of uppers or the preparation
of bottoms. By externalizing such work, shoe man-
ufacturers save on premises, sometimes on equip-
ment and particularly on labor costs. The saving on
labor costs is in the region of 20 to 30% (according
to interviews with manufacturers). Piccinini
(199lb) also emphasizes the flexibility advantage
of outwork. Virtually all such work is carried out by
small firms. When the work is entirely manual it is
usually distributed to “self-employed,” mostly
women working from their homes (for descriptions
see Azevedo, 1988; Costa, 1988; Ruas, 1993).
It is hard to assess the quantitative significance of
such contracting out, but some rough estimates can be
made, taking the above categories (a) and (b) together.
One way of estimating the percentage of subcon-
tracted work is to return to Table 1 which lists 7 10 sub-
contractors employing 18,000 people, compared to the
70,000 internal workers (same table). This gives a
total of 88,000 workers engaged in shoe production, of
which 20.5% are accounted for by the subcontracted
workforce, based on 1991 data. A similar computation
on 1988 data (in ABAEX, 1989) would give 18.6%.
17
of respondents
Firm-level observations confirm the extensive use
of subcontracting. It seems to be particularly common
among small firms (according to my survey of small-
scale shoe manufacturers, see Figure 2), but less so
among the very large firms (according to ongoing
research by dos Santos). It should, however, be
pointed out that variations among enterprises are
great, partly because they specialize in different types
of shoes and partly because they give different
emphases to control and flexibility. The former is
easier in internal production, the latter is enhanced
by subcontracting.
As regards trends, they cannot be established on the
basis of available data, but some likely future changes
can be mapped out: first, subcontracting will probably
increase. We noted earlier that the size of orders and
the response times are shrinking, and the number and
types of models is increasing. This puts a premium on
flexibility and is likely to contribute to an increase in
subcontracting. Indeed, Prochnik (1992) concludes
from his interviews in large firms that the practice of
subcontracting will increase. My interviews with
small manufacturers pointed in the same direction.
Second, the increase in quality requirements,
referred to earlier, could potentially pull practices in
the opposite direction9 Product quality is difficult to
maintain or improve when several operations are con-
tracted out. This is why some manufacturers are
beginning to change their relationships with their sub-
contractors from casual to more regular ones. This
emerges from case studies in firms which are of a
medium to large size and which are particularly con-
cerned with product quality due to the markets in
which they operate .I0They provide training to their
subcontractors, they give advance notice if orders
decline and seek to achieve reliable quality from their
subcontractors by investing in the relationship with
18 WORLD DEVELOPMENT
them. To be sure, there. is still a long way to go for this
practice to become mom common but the first indica-
tions of a qualitative change are visible.
7. LOCAL RIVALRY
The previous two sections dealt with vertical rela-
tionships, that is from the shoe manufacturers forward
to the buyers and backward to the suppliers. This and
the next section deal with horizontal relationships, that
is among the shoe manufacturers. In the industrial dis-
trict model the clustering enterprises both compete
and cooperate, hence the notion of cooperative com-
petition. It means that competition does not exclude
joint action for solving specific problems, for exam-
ple, in precompetitive areas such as the provision of
infrastructure, services or training. It is the coopera-
tion element which has attracted most attention, that is
associations, consortia and other self-help initiatives.
Their relevance in the growth of the Sinos Valley is
discussed in the next section. This section is con-
cerned with competition.
The question of competition is easy to deal with.
There is no controversy about its existence; all our
interviews brought out that competition is fierce.
Klein (1991) emphasizes that rivalry among local pro-
ducers has been one of the main reasons for the suc-
cess of the Sinos Valley. In making this argument he
follows Porter (1990) who suggests that what propels
firms into becoming competitive is not just competi-
tion per se but local rivalry. This point is illustrated
with the following story: an export agent invited bids
for a shoe to be produced for the US market. Frustrated
that none of the bids was below $7 per shoe he pointed
out that Taiwanese producers could make it for $6.
The local manufacturers showed no reaction and the
negotiations got stuck. When he mentioned that
another local producer was willing to make the shoe
for $6 a pair, however, the other local manufacturers
became keenly interested and reentered the negotia-
tions.
In the course of this competition, some enterprises
grow and others decline. Time series on birth or death
rates of shoe enterprises in the Valley would be hard to
construct but several respondents, with long experi-
ence in the shoe trade, mentioned that there has always
been pressure from below: the stream of people trying
to set up new enterprises has never dried up.
Moreover, my survey on small firms shows that there
are a significant number of new entrants into the sec-
tor: 35% of firms in this representative sample are up
to three years old. Clustering facilitates the setting up
of new enterprises because as Marshall (1920) put it,
“the mysteries of the trade become no mysteries; but
are as it were in the air” (p. 225). Equally important,
the machinery required to start up production is rela-
tively easy to find. I counted more than 20 dealers of
second-hand machinery in the Valley. Indeed, my sur-
vey shows that most of the equipment in small firms is
second (or third or fourth!) hand. Borrowing machin-
ery from other manufacturers is also frequent-a sign
of cooperation.
To conclude, intense competition is an important
element of the industrial district model even though
the analysis of competition is overshadowed often by
the attention given to cooperation among producers.
In the Sinos Valley, competition is fierce even though
some market segmentation exists. There is intense
local rivalry which is likely to continue since entry
barriers am low and setting up a shoe business contin-
ues to be one of the main venues for pursuing status
and income ambitions.
Recently one of the main criticisms from within
and outside the industry has been that too much effort
goes into competition within the Valley and that not
enough attention is given to competition from abroad
(see, for example, Ruas Piccinini and Seleme 1992).
The argument is that this requires collective action.
This issue is pursued in the context of our next section
which deals with self-help institutions.
8. SELF-HELP INSTITUTIONS
As mentioned before, much of the industrial district
discussion has focused on cooperation among firms
(see, for example, the title of Pyke Becattini and
Sengenberger, 1990, Industrial Districts and Interfirm
Cooperation in Italy). Cooperation can take various
forms and can have different degrees of intensity.
Various distinctions can be made, a simple one would
be between individual firms cooperating (lending each
other equipment, sharing an order) and collective
action. Both are considered important to the success
of clusters but the former is harder to trace. This sec-
tion focuses on the latter, more precisely, on collective
action which is institutionalized in associations, ser-
vice centers and the like.
Self-help institutions have played a major role in
the development of the Sinos Valley, but there is no
simple tale to tell. A brief historical account is perhaps
the best way of cutting through contradictory develop-
ments. As mentioned in previous sections, the 1970s
and first half of the 1980s were the years of fastest
growth primarily due to the increase in exports (see
Table 5). A number of factors contributed to this
growth, we mentioned the importance of (initially
mainly foreign) export agents and government export
incentives. What is rarely mentioned, except in Klein
(1991), is that a number of local institutions were set
up prior to this boom:
1963 -The shoe fair organization FENAC.
1965 - The SENAI Tannery School.
1966 -The Technical School Liberato Salzano
for chemistry and mechanics.
 TALE OF A SURERCLUSTER
1968 -The SENAI School for Shoe Design and
Manufacturing.
1972 - The Technological Centre for the Leather,
Shoe and Related Industries - CTCCA.
The setting up of these schools and centers in the
Sinos Valley owes much to collective campaigning
and pressure from local producersrr The private sec-
tor also played a major role in financing some of these
centers and in defining what they offer. In spite of var-
ious shortcomings, together they constitute a formida-
ble capacity to tram, research and advise. Establishing
a direct connection between the work of these schools
and the increase of exports would be difficult, but
there can be little doubt that together they enhanced
the capacity of local industry to respond to the new
export opportunities.
A more direct connection between export growth
and local institutions, especially self-help institutions,
can be made when we turn our attention to FENAC.
The main purpose of this organization is to hold shoe
fairs as well as components and machinery for the
shoe and leather complex. The initiative for this shoe
fair came from the manufacturers; the municipality
provided the site and is today the main shareholder. In
addition to holding fairs, FENAC played a major role
in the late 196Os/early 1970s in bringing foreign
buyers to the Sinos Valley and taking local manufac-
turers to fairs abroad, mentioned also in section 5(a).
This was done in conjunction with the Business
Association of Novo Hamburg0 (ACI). The ability of
local producers to avail themselves of the federal
export incentives was enhanced by the fact that
FENAC and the Association had good access to the
federal government in Bra&a; for some years their
officials occupied public office in the federal govem-
ment. In summary, self-help institutions played an
important role in the early export success.
It is, however, important to note that the five insti-
tutions listed above would not have emerged without
participation of the public sector. The sequence of
involvement, the organizational arrangements, the
contributions to installation and running costs of the
public and private sectors varied between the institu-
tions and over time. The critical point is that there was
a local developmental coalition across the public/
private sector divide, particularly in the transforming
period of the 1960s and early 1970s.
This early phase of significant collective action and
its institutionalization was followed by a phase of
comparative disintegration and disunity from the mid-
1970s to the late 1980s. Until the mid 1970s the
Business Association of Novo Hamburg0 (ACT)
embraced and represented the interests of all enter-
prises in the Sines Valley. With the rise in shoe
exports conflicts of interest also rose, shoe manufac-
turers wanted easier access to inputs and equipment
from abroad, while local suppliers were against it; and
the needs of large shoe exporters differed from those
19
producing for the internal market. As a result, a num-
ber of new associations were formed: the association
of the tanning industries (AICSUL), the association of
component producers (ASSINTECAL), the associa-
tion of machinery suppliers for the leather and shoe
industry (ABRAMEQ, initially SINDIMAQ/ABI-
MAC), the association of export agents (ABAEX),
and, above all, the association of shoe manufacturers
(ABICALCADOS, initially ADICAL) which is
essentially the club of the big shoe producers and
concerned primarily with enhancing their exports.
Membership of these associations is not restricted to
firms of the Sinos Valley (in some cases it extends to
the whole of Rio Grande do Sul or the entire country)
but all these associations have their seat in Novo
Hamburg0 and most members are local firm~.~~
Such splitting up into separate associations is a
common occurrence (Moore and Hamalai, 1993) and
a “natural” outcome of differentiation in the economy.
The problems is that there ceased to be a political
voice for industry of the Sinos Valley as a whole. The
associations were more concerned with defending the
interests of their subsectors than with common prob-
lems. This occurred partly because conflicts among
the subsectors were real (particularly in the short run)
and partly because each association sought to project
itself.13
The lack of common purpose can be illustrated with
the fate of the shoe census. In 1969 the Business
Association of Novo Hamburg0 carried out a compre-
hensive survey on production and sales of local shoe
firms. Subsequently this developed into an annual
census of the shoe industry which was carried out
throughout the 1970s and most of the 1980s. It
included data on size of firms, raw materials used,
types of shoes produced, main markets, employment,
etc, all made available at a relatively disaggregated
level. Since data collection and processing was an
expensive operation and the information was of prac-
tical value to shoe producers, suppliers and buyers, the
Business Association of Novo Hamburg0 sought to
share the costs with other new associations, but they
refused. As a result, the production of the census
ground to a halt in 1987.r4This database which was a
valuable resource for all, individual and collective
actors, collapsed. Today there is not even a reliable
register of enterprises.
Since late 1991, there have been signs of new coop-
eration among the institutions. The six industry asso-
ciations and the Centre for Technology (CTCCA)
formed a working group to discuss what key common
problems had emerged, what studies should be com-
missioned to understand them better, and how to coor-
dinate lobbying.r5 Joint projects also include a data-
bank and the creation of a permanent forum in which
these institutions can work together. Even though
progress remains slow it signals new awareness of the
need to cooperate.
20 WORLD DEVELOPMENT
Table 5. Membership and use of self-help imtitutiom according to size of&n (in 96)
Size of Firm Member of
Association(s)
Less than 10 workers 0 7%
Between 10 and 50 workers 38%
Between 51 and 100 workers 67%
More than 100 workers 61%
Source: Survey of 50 firms with up to 100 workers conducted by Hubert Schmitz and Acyr Seleme in 1992/3.
Survey of 18 firms with more than 100 workersconductedby Roberto Ruas and Elaine Antunes in 1993.
The main reason for this change seems to be
increased international competition. In particular the
pressure to raise quality has forced the issue of co-
operation among suppliers, shoe manufacturers and
export agents on the agenda. This is reinforced by the
federal government’s new “Quality and Productivity
Programme” in which all the above-mentioned sec-
toral and local institutions are expected to play a major
role (PBQP, 1991).
In drawing conclusions on the role of local institu-
tions, it was shown that one needs to differentiate
between three different time periods. If one digs
deeper, one would also need to differentiate between
size of enterprise. Data for the most recent period
show that support for and use of self-help institutions
varies according to size of firm (see Table 5).
One would expect that self-help institutions are of
particular importance to small firms, yet the data show
that membership in or contact with or use of these
organizations increases with firm size. It seems that
firms of less than 50 workers contribute little and draw
little on local self-help institutions. The benefits which
they derive from clustering arise more from the prox-
imity of specialized input suppliers and rarely result
from joining collective efforts. It was probably differ-
ent prior and during the first years of export growth
when size differentiation was limited and when most
of today’s large enterprises were still small.
To conclude, self-help organizations are an impor-
tant part of the industrial district model. The role such
institutions play in the Sinos Valley can be summed up
as follows:
- The shoe manufacturers and supply industries
have given rise to an impressive range of local insti-
tutions: six industry associations, two professional
associations, an organization which holds regular
fairs and four centers which provide training and
technical services (with varying combinations of
public and private sector finance).
- Duplication and overlap in the range of services
provided by these institutions are not necessarily a
problem. On the contrary, they induce competition
and give local producers a choice of where to turn.
- The differentiation of the industry and prolifer-
ation of collective actors has, however, contributed
Contact with Contact with
Technical Schools of Technology Centre
SENAI CTCCA
0
10% 30%
47% 42%
100% 94%
to disunity in the Sinos Valley and a neglect of com-
mon problems.
- Small firms (of less than 50 workers) seem least
to contribute to and least to draw on local self-help
institutions.
- The role of interfirm cooperation and local insti-
tutions has changed over time. Collective action
played an important role prior and during the first
years of export growth. Subsequently collective
action (for the Valley as a whole) declined. More
recently it has increased again in the face of stiffen-
ing international competition.
Inter&m cooperation is also influenced by socio-
cultural factors which are examined in the section that
follows.
9. SOCIOCULTURAL. IDENTITY AND TRUST
A further element of the industrial district model is
that the ties between actors are not purely economic:
there exists a sociocultural identity which facilitates
trust relations between firms and between employers
and workers.16 The economic importance of such ties
is easy to envisage; the industrial district is a system of
production which consists of a multitude of formally
independent actors with a high density of transactions
among them. For these to function smoothly and result
in cumulative (not merely one-off) gain, trust and
reciprocity are of great importance. They are also
essential for collective action.
In the Sinos Valley, there used to be a strong socio-
cultural basis for such reciprocity. Most of the popula-
tion was of German origin, descendants of people who
emigrated during last century from a very poor region
in Germany, the Hunsrtick, most had led a peasant
existence in Germany and continued to be peasants in
Brazil. There was little entrepreneurial tradition in this
community but the life mode in the Sinos Valley was
one of self-employment rather than selling labor to
others (such as the owners of large cattle herds in other
parts of Rio Grande do Sul). Presumably this con-
pibuted to the strong sense of wanting to own one’s
own business which prevails in the Valley until today.
This drive for economic independence did not, how-
 TALE OF A SUPERCLUSTER
ever, develop at the expense of communal ties. On the
contrary, a strong community spirit developed in the
region based on the common German heritage.
Korzeniewicz (1990) links this so&cultural iden-
tity to the economic success of the region.” According
to one of his respondents:
There is in the region a competitive spirit that is very
healthy but at the same a gregarious spirit of unity and
collaboration, perhaps because of the German &scent.
Community action is impressive,you can easily manage
to get the participationand the supportof peoplefor com-
mon activities (Korzeniewicz,1990,p. 131).
Such issues of the sociocultural foundation of eco-
nomic competitiveness are hard to research. A collab-
orator, Luiza Bazan, is focusing on this very issue in a
case study of one of the municipalities of the Sinos
Valley. While this work is still to be written up, a
review of the interview material permits some initial
indications. In the Sines Valley non-economic ties
between actors do seem to play a major role. Some
have to do with ethnicity (being of German descent);
others with geography (being local) or kinship. The
existence of such ties exerts pressure to keep commit-
ments and to cooperate but their importance has
changed over time. It seems useful to distinguish
between three phases:
- First, the reciprocity and trust based on socio-
cultural identity seemed to work well until the early
1970s. It underpinned the collective action which
led to the setting up of the shoe fair organization
FENAC and the training and technology centers,
- Second, in subsequent years (most of the 1970s
and 1980s) so&cultural ties weakened and had less
inRuence on inter&m relationships. This seems to
have been a result of the speed at which growth and
differentiation occurred and of the key role of out-
siders, the export agents, in this growth process.
- Third, most recently there has been a return to a
greater spirit of cooperation, not because of socio-
cultural ties but because of the economic cost of not
cooperating. As mentioned earlier, there are indica-
tions of a qualitative change in the relationship
between shoe manufacturers and their suppliers and
new signs of collective action.
The above refers to relationships between entre-
preneurs. A similar phasing can be used to map the
changes in relationships between employers and
workers. Until the early 1970s they belonged to and
felt part of the same community which induced coop-
eration in the workplace. These communities began to
disintegrate with the fast growth of the industry, most
visibly so in Novo Hamburg0 but increasingly also in
the smaller towns of the Valley. Sociocultural ties
have not entirely disappeared, but even where they
continue to exist a more stratified society has emerged.
Increasingly, class differences asserted themselves
21
outside the factory and within the factory antagonism
seemed to increase.l* More. recently however, some
employers began to see the importance of a more col-
laborative approach. The reason is economic. In order
to achieve the increasingly high quality standards and
tight delivery schedules industrial relations need to
change. Not all employers recognize this and even
fewer have changed their practices. But if one hears
production managers in some firms say (with convic-
tion) that labor is their greatest resource then - at
least in Brazil - this signals a qualitative change.
To conclude, in the stylized model of the industrial
district, the cluster of firms and the local community
are inseparable. In addition, a common social identity
is thought to favor codes of behavior which induce
trust and cooperation. We found that in the Sines
Valley such a so&cultural identity did indeed exist
and contributed to the emergence of the cluster. The
speed of the export growth in the 1970s and 198Os,
however, undermined the previously existing social
fabric. The influence of so&cultural ties lessened.
Greed and the ambition to get rich fast squeezed out
community values. More recently there has been a
return to more cooperative relationships, but this has
little to do with sociocultural ties among actors. The
new quality and delivery standards induce shoe manu-
facturers to invest in their relationships with suppliers
and workers. This investment is expected to engender
commitment and trust.
10. IMPLICATIONS FOR LABOR
European industrial districts came to prominence in
the 1980s for two reasons: the attainment of intema-
tional competitiveness and of high labor standards
(bke and Sengenberger, 1992). As regards the Sines
Valley, there is little doubt about the competitiveness
of its shoe industry. But what has its economic growth
meant for labor? The record has been mized: employ-
ment has increased but wages have remained low.
According to the industrial census, employment in
the shoe industry of the state of Rio Grande do Sul
increased from 27,000 in 1970 to 76,000 in 1980, an
increase of 280%. The results of the 1990 census are
not yet available, but data from the Federation of
Industries of Rio Grande do Sul indicate that employ-
ment growth continued in the 1980s - even though at
a slower pace: approximately 80% over the decade.
Some of this job growth took place outside the Sinos
Valley, but it is within the Valley that indirect job cre-
ation (in supplier industries and producer services) is
highest. Even though there are problems with the
reliability of data and the comparability of different
sources, the increase in employment has been impres-
sive.
One might have expected that such substantial
growth in the number of jobs would be accompanied
22 WORLD DEVELOPMENT
by rising wages. It was not. During 1970-80 average
wages in the shoe industry of Rio Grande do Sul
remained roughly at the same level (based on compu-
tation of Industrial Census data). During 1980-90
average wages seem to have fallen. Computation
based on data of the Federation of Industries
(FIERGS) suggests a decrease in the order of 40% for
the state’s shoe industry (compared to a decrease for
the state’s industry as a whole in the order of 25%). A
computation based on data of the local shoe census
(ACI, various years) shows the same ttends for the two
decades: by 1980, the real average wage was at
roughly the same level as in 1972; and by 1987 it was
about 38% below that of 1980.19Firm-specific exam-
ples suggest that the decrease was less, nearer 24%
during 1980-90.20 Tracing the evolution of real wages
over time is difficult when intlation is high and defla-
tors vary; the margins of error can be high. But for the
purposes of this paper a rough indication of trends is
sufficient and the various sources consulted point
toward a decline in real wages over the 1980sz1 To
give an idea of the absolute wage level: the bulk of the
workforce (approximately 80%) earns between one
and three minimum wages (based on management
interviews), that is between US $53 and $159 per
month.22
Wages in the shoe industry are lower than those in
most other industries in the state of Rio Grande do Sul
(Piccinini, 1990). But family incomes in the Sinos
Valley are probably not quite so low. Frequently two
or more members of the family work in the shoe indus-
try which employs all age groups and both sexes.
According to the shoe census of 1987, 47% of the
workforce are women, and direct observation suggests
that the industry employs many teenagers. In addition
there is a significant amount of domestic outwork,
which tends to be a source of complementary income.
All this suggests that - at the family level -multiple
sources of income are common and helps to explain
why poverty is not quite as stark, widespread and
visible as the low wages would suggest.
Nevertheless, two and a half decades of extraordi-
nary growth has been combined with falling real
wages. The immediate reason lies in the erosion of real
wages by accelerating inflation. When inllation rates
reach up to 30% per month, delays in raising the nom-
inal wage have a cumulative eroding effect on the real
wage. The underlying reason for stagnant or falling
real wages lies in the labor surplus. In the early years
of the export boom the shoe industry attracted
migrants from other parts of the state. In later years,
expansion took place mainly outside Novo
Hamburgo, in municipalities of the Valley where
labor was more abundant. There were short periods
when labor was scarce, particularly in the boom year
of 1984, but these were exceptions. The degree of
abundance/scarcity also varied with the occupational
category. Overall, however, the labor surplus consti-
tutes the major difference to European experiences
from which the industrial district model was derived.
It is the main reason for the high wages in the
European clusters and the low wages in this Brazilian
cluster.
Have these low wages helped the cluster to grow?
No doubt, low wages were essential when the industry
began to export. Whether the cluster benefited from
stagnant or falling wages in subsequent years is more
questionable. One could argue that slowly rising
wages would have induced entrepreneurs to try earlier
and harder to engage in the “new competition” (Best,
1990), by adopting new organizational principles,
investing in technology and in product development.23
This is not a hypothesis which can be tested. It can be
said, however, that for most of the 1970s and 1980s
there was mainly quantitative growth, that is, expan-
sion of capacity to make low-priced, wage-sensitive
shoes. The cluster only changed gear and moved into
qualitative growth when it was pushed from the out-
side to do so.
11. CONCLUSIONS AND ISSUES FOR
FURTHER RESEARCH
The industrial district model was used as the main
reference point in this paper, but the wider debate on
flexible specialization was also addressed. This final
section seeks to draw together the main conclusions
for these debates and to highlight some issues for fur-
ther research.
(a) TheJexible specialization debate
One of the main conclusions of this paper is that in
many ways the Sinos Valley is a highly developed
industrial district. Yet it would be wrong to deduce
from this that the Sinos Valley is a show-case of flexi-
ble specialization. This twist in the story is hard to
handle because industrial districts gained prominence
in the recent international debate as one of the main
variants of flexible specialization. As shown in the
course of this paper, some Sinos Valley firms devel-
oped into Fordist giants and integrated vertically. The
emergence of this unexpected hybrid gives rise to a
more fundamental question. How useful is the juxta-
position of flexible specialization and Fordist mass
production, which is the starting point of much of the
recent debate on industrial organization? Should we
dismiss it altogether?
If we take the longer view one can distinguish three
phases: until the 1960s most of the Sinos Valley was a
cluster of craftsmen, with the exception of a few facto-
ries. The main feature of the 1970s and 1980s was the
rise of Fordism even though small-scale production of
varied products for regional markets in Brazil contin-
 TALE OF A SUPERCLUSTER
ued. The 1990s promise to be the decade of flexible
specialization in both its small and large-lirm variant.
Large firms are beginning to decentralize internally
into mini plants, throwing out their conveyors, intro-
ducing cellular manufacturing and internal just-in-
time, trying to stabilize their workforce, investing
more in training, and building more cooperative rela-
tionships with their suppliersU The improved quality
and delivery standards of suppliers also help the small
firms which are sometimes comparable in output to
the mini plants of large firms but tend to be more de-
verticalized. The scope for such small-firm production
is increasing in the 1990s due to smaller order size and
shorter delivery schedules. One can argue over the
advantages and disadvantages of the small and large-
firm variant but few would deny that the market
requites a change of industrial organization toward
flexible specialization. This is far from being
achieved, but first steps have been taken.
In summary, a distinction between three phases,
which are predominantly craft (up to the late 196Os),
Fordist (the 1970s and 1980s) and flexible specializa-
tion (the 199Os), is plausible and has its uses if one is
confined to using a broad brush. The problem is that
some of the most interesting features of the Sinos
Valley escape a broad brush. To give just two exam-
ples: first, the large firms which are adopting new
methods in order to become more flexible and raise
quality do so only selectively.25 Second, Fordist
expansion contributed significantly to the growth of
the local supply industry and the proximity of the sup-
pliers enhances the prospects for flexible specializa-
tion, particularly in its small-firm variant. This case
study suggests that more important than the bound-
aries are the connections between Fordism and flexi-
ble specialization.
This is why the industrial district model was used as
the main reference point. While feeding into the
debate on flexible specialization, in itself it is not
based on a juxtaposition to Fordist mass production.
(b) The industrial district debate
The primary question addressed in this paper con-
cerned the extent to which the industrial district model
captures the reality of the Sinos Valley. In many ways
it does. The sectoral and geographical concentration
of shoe manufacturers is formidable. Even more strik-
ing is the depth of the local economy which includes
almost the entire range of supply industries and pro-
ducer services. Such depth and density has given rise
to the notion of the “supercluster.” Collective action
has also been significant in the development of the
cluster but has changed over time; initially it was
based on a common so&cultural identity, then it
crumbled and its recent return is based more on an
economic rationale. In many respects the Sinos Valley
23
is a highly developed industrial district.
Some features, however, do not fit into this model.
The remainder of this section examines these differ-
ences. It also suggests that one needs to go beyond this
model to understand how and why a cluster of local
small shoemakers has become an internationally com-
petitive industrial complex. Thus, what follows con-
tains both conclusions and suggestions for further
research.
(i) Methodological and conceptual issues
This paper proceeded by contrasting the industrial
district model with reality. There is an inherent danger
in this approach in that it can give rise to a static
perspective. We sought to avoid this by tracing the
changes over time. This proved essential in that the fit
between elements of the industrial district model and
the reality in the Sinos Valley varied over time.
Overall, it seems that the industrial district model was
helpful in that it guided us to critical factors which
need to be investigated to explain the growth of the
shoe industry: the combination of competition and
cooperation, collective action, social embeddedness,
etc. Disaggregating the model into its components
provided a useful framework for organizing the
empirical investigation. Since this is a case study of a
rapidly growing industry, however, two shortcomings
of this model are also apparent: it emphasizes special-
ization, i.e. differentiation by product/process, but
ignores (negates?) differentiation by size; it is strong
on linkages internal to the cluster but weak on external
linkages.26
Before elaborating, it is useful to recall that the
industrial district model is not an analytical model but
an ideal type or, less flatteringly, a list of stylized facts.
Why then has it attracted so much attention over
recent years? As indicated above, the reason is that
local industrial systems with such characteristics had a
favorable growth and employment record in the 1970s
and 1980s; at least this is what case studies from Italy,
Germany, Denmark, Spain and various other countries
suggested (Pyke and Sengenberger, 1992). Some of
these European success stories, however, seem to be
running into trouble. There is even a recent article
entitled “Requiem on the Third Italy” (Bianchi, 1993)
but such judgement may well be premature.”
Whatever the outcome, the case for examining
industrial districts in LDCs cannot rest merely on how
they perform in Europe. It has to rest on an analytical
argument that this form of industrial organization
offers a competitive advantage. The first to develop
such an argument was Alfred Marshall. As mentioned
in section 2, he stressed the economies which “can
often be secured by the concentration of many small
businesses of a similar character in particular locali-
ties” (1920, p. 221). He called them “external
economies” which arise incidentally with the increas-
ing division of labor between firms. The Sinos Valley
24 WORLD DEVELOPMENT
experience shows the importance of such external
economies, but also stresses the need to go beyond
Marshallian economics. In addition to the incidental
external economies it is necessary to capture the com-
petitive gains which arise from purposeful learning by
interaction (for example, between producer and user
of components) and from collective action. In order to
bring out the various gains which am opened up by
clustering and which individual producers can ramly
attain, I have introduced elsewhere the concept of col-
lective efficiency (Schmitz, 1992). But this was
merely the first step in a conceptual struggle. The rea-
son for raising such issues here is to indicate that the
tools of analysis brought up in the industrial district
debate remain blunt. In order to sharpen them it will
probably be useful to draw on other bodies of research
such as theories of collective action, social network
analysis or innovation studies which focus on learning
by interaction.
(ii) Size differentiation
Where the industrial district model and reality dif-
fered most was in the strong presence of large firms.
Indeed, the title of this paper seeks to capture the
cohabitation of small shoemakers and Fordist giants.
As stressed above, however, the size structure
changed over time. The Valley used to have a predom-
inantly small firm economy and the subsequent rise of
large firms has passed its peak. Recent market changes
seem to favor small firms, but judging the outcome is
not straightfotward and requites further research. In
examining the differential impact of market changes
on firm size it would probably be useful to distinguish
between:
- The ability to react: smaller batches and shorter
delivery times tend to favor small firms. Large firms
need not become ailing dinosaurs, they can respond
to these external changes by restructuring inter-
nally, but small firms may well have an agility
advantage.
- The ability to be proactive: here the large firms
seem to have an advantage. A proactive strategy
aimed at improvements in quality and innovation
includes collaboration with suppliers. The problem
of the small firm is that it has no clout vis-li-vissup-
pliers and can rarely, if ever, initiate changes along
the value-added chain. The benefits from the efforts
made by large firms, however, in raising the quality
and punctuality of their suppliers will - with time
- be reaped by the small shoe firms.
While it is hard to predict the outcome of research
which pursues these questions, it is probably safe to
say that the Valley will not change back into a cluster
of small firms, i.e. it will not become like the textbook
model of industrial districts. The “problem” here lies
with the model rather than reality. The emphasis on
smallness of firms turns the model into a strait-jacket
when one examines clusters which grow. Growth
tends to bring about both differentiation in
product/processes and in size. Equally, within clusters
there tend to be leaders and followers. An explicit
emphasis in further research on the leading firms may
contribute to an understanding how clusters develop
over time.
(iii) Internal and external linkages
Once the analysis shifts from the static to the
dynamic, it becomes necessary to include external
linkages. This needs emphasizing because the indus-
trial district debate is primarily about linkages internal
to the cluster (e.g. proximity between producers and
users of components, cooperation between local firms,
the social embeddedness of economic transactions)
and indeed has helped to focus on these in a fresh light.
Understanding the internal organization of the cluster,
however, does not suffice to understand its trajectory.
The Sinos Valley experience shows this in a stark way.
One of the clearest lessons from this case study is that
traders need to be included in the research in order to
understand the manner and pace at which clusters
develop.28
The paper showed that export agents played an
important role in enabling the cluster to export. There
is a tradition of viewing such intermediaries as
exploiters who accumulate at the expense of local pro-
ducers. No doubt, export agencies in the Sinos Valley
were a lucrative business but interestingly they pro-
vided not only a trading link but acted as development
agents also. This was not an act of generosity but one
of necessity. In order to sell Brazilian shoes abroad
they had to bring in new designs and assist firms in
reaching international quality and delivery stan-
dardsz9 The Sinos Valley, however, being now a
relatively mature cluster, also shows the dangers of
relying too much on export agents. Ongoing research
by Nery dos Santos suggests that the manufacturers
accommodated themselves to this division of labor
with the export agents and invested little in product
development and marketing. This is probably one of
the main reasons why the Sinos Valley remains heav-
ily tied to the US market which still accounts for about
70% of exports, and inroads into the higher quality
European market have increased only slowly. This
gives rise to the more general question of whether
there can be sustained product and process innovation
within the cluster without somehow reducing this
functional divide between manufacturers and export
agents.
Exploring such issues as the role of traders and their
developmental impact at different stages of clustering
ultimately requires comparative research. Fortunately,
there are case studies on the footwear industry in Italy,
Mexico (Rabellotti, 1993, and in this issue) and India
(Knorringa, 1993) which - partly by design, partly
by accident - also focus on clustering. Like this
research, however, they are studies in progress and the
 TALE OF A SUEERCLUSTER
comparative work remains to be done.
(iv) The cupaciQ to respond
The main theme in these conclusions is that the fit
between the industrial district model and the reality of
the Sinos Valley varied over time. The cluster changed
in response to the changes in the market. Indeed, this
capacity to respond to opportunity and crisis is one of
the most interesting features of this experience. To
highlight this further it is worth adding a ,brief com-
ment on how this cluster responded to changes in
macroeconomic policy.
Elsewhere we have pointed out that the European
industrial district debate has little, if anything, to say
on the role of the macro policy environment (Schmitz
and Musyck, 1994). In Brazil, it would be foolish to
ignore the effects of how federal government deter-
mines the incentive structure of the economy. In the
case of the Sinos Valley two sets of government inter-
ventions stand out, one which favored export growth
and one which was detrimental. The paper mentioned
the introduction of export incentives in the late 1960s.
No doubt these contributed to export growth. But it
was also pointed out that the supply response of the
shoe manufacturers was greatly enhanced by cluster-
ing. A comparative study of the performance of labor-
intensive industries in Brazil tends to confirm this.
Liicke (1990) stresses that the footwear industry’s
exceptional response to export incentives and to exter-
nal demand was due to favorable supply conditions in
the Sinos Valley. Most of the supply factors listed by
Lticke can be seen to result from clustering, notably
the concentration skills, the proximity of suppliers and
NOTES
1. The fieldwork includes a survey of 50 small tirms, car-
ried out in conjunction with Acyr Seleme. The data have not
yet been fully analyzed but the impressions gamed during
visits to these ftrms inform this paper. I also had the opportu-
nity to visit medium- and large-sized firms and interview
managers or owners, but much of what is said in this paper
about such firms is based on secondary sources.
2. Some firms have over 3,000 workers but distributed over
several plants.
3. In discussing the size structure and its changes over
time the following terms are used: “very small” = firms up to
10 workers, “small” = 11-100 workers, “medium” =
101-500 workers, “large” = 501-1,000, “very large” = more
than 1,000 workers.
4. The highest estimate is based on statistics provided by
the state’s treasury, which overestimate the real number of
firms because those that go out of business are deleted with a
lag whereas new start-up firms are included immediately.
25
the existence of self-help institutions. Would the
export growth have occurred without incentives?
Probably yes, but more s10wly.~
The export incentives were gradually dismantled in
the early 198Os, seemingly without much negative
effect on the industry’s competitive position in the
world. The difficulties in the second half of the 1980s
had more to do with the competition from China and
with the anti-intlation policy of the government. The
latter is the second set of macro policy interventions
which made its mark on the industry. In the course of
various packages to control hyperinflation, the gov-
ernment froze the exchange rate (or delayed devalua-
tion) which drove exporters to despair (Klein, 1991).
The differential effect of these stabilization policies
(which failed in the end) on the various actors in the
Sinos Valley is a matter for further research. Overall,
what is astounding is how comparatively well this
cluster has escaped the (continuing) macroeconomic
crisis.3r
This experience confirms an earlier hypothesis
(Schmitz, 1990) that clustering increases the capacity
to adapt, but the why and how require further study.
Indeed, this is a priority issue for further research,
because high uncertainty seems to be only certainty
for industry in the rest of the 199Os, not just in Brazil
but worldwide. High uncertainty means high risk. A
better understanding of how clustering helps local
firms to cope with uncertainty and take risks would be
an important advance. 32For policy purposes, it would
be particularly important to know how local mstitu-
tions influence perceptions of risk and investment
decisions.
5. Local production of machinery for the shoe industry
only took off in the 197Os,but maintenance and repair work-
shops already existed. Most machinery firms started as main-
tenance workshops.
6. Data comparable to that used for Figure 1 are not avail-
able. The “Shoe Census” ceased to be produced in 1987. For
details see section 8.
7. Their verticalixation never extended to all inputs and
their net effect has probably been one of increasing the inter-
firm division of labor by increasing the demand for inputs
and thus encouraging specialization., It is also worth men-
tioning that the Sinos Valley today is a net exporter of inputs
for the shoe industry-exporting to other parts of Brazil, but
as yet little abroad.
8. Ongoing research by Nery dos Santos suggests that
shoe firms pursue this especially with new suppliers special-
izing in the finishing of leather and less so with old large tan-
neries. A large shoe firm, which Luixa Baxan and I investi-
gated in some depth, had embarked on a collaborative
26 WORLD DEVELOPMENT
strategy with 60 suppliers of raw materials and components;
the case material shows that progress is uneven and that
many obstacles.must be overcome, but there is a definite
qualitative change in relationships with suppliers. A number
of other shoe manufacturers had started similar initiatives.
9. Indeed, ongoing research by Rosane Cruz reports a
case in which rising quality requirements and tighter delivery
schedules led a firm to phase out the use of subcontracting.
Such a response, however, seems to be an exception.
10. Based on case study carried out in conjunction with
Luiza Bazan.
11. Vocational training centers of SENAI exist throughout
Brazil but few, if any, regions/sectors have such a concentra-
tion of speciahzed schools and technology centers.
12. These associations are independent. membership is
voluntary, and they are not part of the govermnent-control1ed
sindicaro system.
13. Based on interviews with representatives of several of
the above associations and with industrialists.
14. Based on interview with official who was in charge of
producing the census at the time.
15. Based on interviews with representatives of some of
these institutions and an internal working paper of this group
to which we were given access.
16. As mentioned earlier, Becattini (1990) stresses that
local community and local economy cannot be separated if
one wants to understand the growth potential of industrial
districts. These concerns feed into a wider literature on the
so&cultural foundations of competitiveness; see, for exam-
ple, Dore (1983) and Granovetter (1985).
17. This is only one of many factors analyzed by
Korzeniewicz. Indeed, any attempts to explain the success of
regions such as the Sinos Valley purely in sociocultural or
ethnic terms need to be countered with examples of other
communities of German descent in South America which
remain underdeveloped and poor.
18. Bazan’s interviews show, however, that among work-
ers a divide emerged between locals and migrants.
19. Comparable wage data - based on the shoe census -
could only be calculated for 1972-87. The average real wage
was calculated by dividing the total wage bill by the total
number of workers and by deflating the result with the
General Price In&x (IGP) of the Ftmda@o Gettllio Vargas.
The same procedure was used for the computations of the
Industtial Census and Industrial Fe&ration data.
20. Based on primary data for three occupational cate-
gories (operator in cutting, in sewing and auxiliary worker).
Nominal wages were translated into multiples of minimum
wages. Since the real minimum wage changed over the
decade, the multiples were deflated with the minimum wage
index of DIEESE.
21. IamgrstefultoLuizaBazanforworkingoutdttailed
time series on employment and wages, based on various
sources. This section only provides a rough summary of this
Work.
22. Calculated at the black market rate of exchange (“u..uI
puralelo”). For a mote detailed analysis of wages and wage
differentials in different fypes of tirms and for different occu-
pational categories, see Piccinini (1990).
23. This line of reasoning linds support in a statistical
analysis of the growth determinants of the 100 largest enter-
prises of 1987, based on the sboe census of 1981-87. DOS
Santos (1992. pp. 132-134) found that fast growth was not
associated with rising labor,productivity and mentions low
wages as the reason for the lack of process innovation.
24. This came out clearly in interviews with managers of
innovating lirms, but due to space limitations the evidence of
intratirm change could not be included in the text. For inter-
national examples of what can be achieved by adopting new
organizational principles in shoe manufacturing, see Mody,
Suri and Saunders (1992).
25. FIeury and Humphrey (1993) and Posthuma (1992)
have noted the same in other Brazilian industries. Indeed,
industries such as metal working and engineering are more
advanced than the shoe industry in the use of new production
methods.
26. I am grateful to Hermine Weijland for helping me to
recognize these problems more clearly.
27. Germany’s success region, Baden-Wtlrttemberg, is
also under duress. See Cooke, Morgan and Price (1993) for a
recent assessment.
28. Export traders were also important in the footwear
indushy of Taiwan (Levy, 1990) and, to some extent, India
(Knorringa, 1993).
29. There are similarities with the impannarore who
according to Beccatini (1990) and Piore and Sahel (1984)
played a key role in the growth of the industrial district of
Prato in Italy. Evidence of a different kind comes from a
study by Weijland (1992). Her comparative statistical analy-
sis of small firm clusters in Indonesia shows that growth was
associated with the presence of marketing agents, comirming
the importance. of middlemen particularly at an early stage.
30. Slower growth would have had its advantages. As men-
tioned earlier, the speed of growth contributed to the break-
down of cooperative spirit.
3 1. Conlirmed in a special report on the Sinos Valley in the
Brazilian weekly Veja, “0 Vale Resiste - Como a inddstria
cal9adista do Vale dos Sines encontra caminhos para
enfrentar a crise” (January 1992).
32. Even for theEuropean industrial districts there is little
empirical evidence on this issue. There are, however, useful
reflections on the possible connections between clustering
and uncertainty or risk of technical innovation. See, for
example, Camagni (1991) and Dei Gttati (1991).
 TALE OF A SUPERCLUSTER
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