Modern Putting-Out System Thrives in Italian Knitwear Industry

A New Phoenix?: Modern Putting-Out in the Modena Knitwear Industry
Author(s): Mark Lazerson
Source: Administrative Science Quarterly, Vol. 40, No. 1 (Mar., 1995), pp. 34-59
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A New Phoenix?:
ModernPutting-outin
the Modena
KnitwearIndustry
MarkLazerson
SUNYat Stony Brook
?
1995 by CornellUniversity.
0001-8392/95/4001-0034/$1.00.
Supportforthis researchwas provided
bya Jean MonnetFellowshipat the
EuropeanUniversityInstituteandbya
researchgrantof the O.E.C.D.'sOffice
on LocalEmploymentInitiatives.Iam
most indebtedto PaoloBignardi,who
introducedme to the innerworkingsof
the knitwearindustryandgave
generouslyof himselfduringmy many
visitsto his home andfirm,andto the
ModenaNationalConfederationof
Artisansandits staff members,who
offeredme invaluableassistance.The
ModenaCameradel Lavoro,the Modena
Associationof SmallEnterprises,the
ModenaIndustrialAssociation,and
ProfessorsSebastianoBruscoandTiziano
Bursiof the Universityof Modenaalso
providedcrucialhelp.Inaddition,Iwould
liketo thankCharlesPerrow,who first
encouragedme to studyputting-out,and
MarshallMeyerandthreeanonymous
reviewersfortheireditorialand
substantivecomments.
Drawing on data from the contemporary Italian knitwear
industry, this paper examines putting-out, the domestic
system of production, and criticisms of it in traditional
theories of economic development as inherently
backward and organizationally inefficient compared with
large-scale production. I describe the historical
putting-out system and its context and distinguish it
from modern putting-out by contrasting the features of
each. The paper shows that a modernized form of
putting-out, composed of interlinked microfirms, is
compatible with high living standards and organizational
efficiency. The success of the system rests on
technological and marketing factors, the presence of
cohesive family units, cooperative relationships between
business and community actors, and an institutional
environment supportive of small, family-run firms.'
The putting-out, or domestic system of production,
symbolizes the transition from traditionalhandicraft
production to modern manufacturing (Weber, 1981: 153).
Before factories were centralized, merchants put out raw
materials to formerly independent craftsmen and to
subsistence farmers and their families, who then
transformed them into goods either at home or in nearby
sheds (Heaton, 1936: 341; Weber, 1981: 118-119). Once all
of the separate tasks were completed, merchants or their
agents collected the items and sold them. In most cases,
the putting-out workers owned their tools, determined the
length and intensity of their workday, and had few or no
employees. This system of putting-out, which assigned
fragmented tasks to workers of different skills paid at
differential rates, presaged the modern division of labor and
the factory (Landes, 1969, 1986: 595).
As a precursor to the industrial revolution, putting-out was
expected to disappear once centralized manufacturing
processes matured. Marx (1977: 591, 600) accurately
foresaw that putting-out would become "an external
department of the factory," yet he erred in assuming that
increased technological development and state-imposed
limits on the length of the workday eventually would make it
"go to the wall" (Marx, 1977: 605). According to economic
liberals, putting-out suffered from endemic poor
workmanship, pervasive theft, and spasmodic coordination;
its demise was assured by the supposed superior
technology and organization of the modern factory (Landes,
1969: 118; Bythell, 1978). Even today, institutional
economists persist in labeling decentralized manufacturing
as organizationallyinefficient, a system that both encourages
unmonitored workers to shirk and imposes unnecessary
expenses or so-called transaction costs, incurred through the
movement of goods and services across many firm
boundaries (Alchianand Demsetz, 1971; Williamson, 1980).
Italso undermines quality control (North, 1981: 168-169).
Neo-Marxists, perversely, concur with many of these
judgments. Capitalists, they say, abandoned putting-out
because it failed to extract sufficient surplus from their
workers (Marglin, 1976).
Despite these condemnations, modern putting-out has
reemerged in some advanced industrialized societies as a
34/AdministrativeScience Quarterly,40 (1995): 34-59

Modern Putting-out
new phoenix of late capitalism. One such place examined
here is the Italianknitwear industry, centered in the province
of Modena, a richagro-industrialarea of north-centralltaly in
the Emilia-Romagna region. In Modena, modern putting-out
offers superior organizational properties to large-scale
industrialorganization. Putting-out in Modena is directed by
knitwear manufacturers, who increasingly concentrate on
financing and purchasing raw materials, coordinating
production, and designing and selling garments. Although
known in the trade as manufacturers, they actually do little
manufacturing. Rather, the vast majority rely on external
networks of independent, mostly small, artisanal firms to
produce the garm-ents.
Inwhat follows Iwill show that putting-out today represents
an attractive alternative to the centralized factory under
certain technological, market, institutional, and social
conditions. Interms of technology, the production process
allows for spatial and temporal separation among discrete
work stations. Similarly,the semifinished goods that must
be moved from one putting-out firm to the next do not
require special and costly shipping arrangements, as do
highly fragile or perishable items. Interms of market
constraints, putting-out offers advantages in terms of quick
response times when products are highly differentiated and
there are rapidchanges in consumer tastes. These factors
often reduce the level at which economies of scale are
achieved. Institutionaldeterminants in the form of state
regulatory policies that offer small enterprises labor-cost and
fiscal advantages are also important. Last, traditions of local
community cooperation reduce certain transaction costs
associated with decentralized production, and extended
families permit economies in combining some production
and reproduction activities.
I refer to the system of putting-out in Modena as modern to
distinguish it from historical putting-out, which was broadly
characterized by general technological backwardness and
labor exploitation. Modena's putting-out system represents
the modern rationalityof an advanced industrialeconomy:
Its use of technology and the division of labor equals that of
the most modern clothing factories. Modena's putting-out is
also closely linked with social wealth and plenty. Today, this
production system has helped catapult Italyto first place as
the world's largest knitwear clothing exporter by value
(Zeitlin, 1992; United Nations, 1993: 775-776). My research
indicates that in a modern industrialcontext, putting-out
offers efficient solutions as defined by market criteria.
THE RESEARCHFRAMEWORK
To understand the organizational structure of the Modena
knitwear industry, I have visited 44 firms, comprising 16
manufacturers and 28 subcontractor-artisans over the last
several years. Inthe aggregate, these firms covered every
phase of production. I used open-ended questionnaires to
interview the firms' principals. On several occasions I passed
entire days accompanying knitwear employers during their
visits to contractorsandsubcontractors.Ialso interviewed
eight homeworkersintheirhomes. Exceptforthree firms
35/ASQ, March1995

located inadjoiningprovinces,the entireinterviewsample
came fromthe provinceof Modena.The National
Confederationof Artisans(CNA)assisted me inarranging
most of the interviewswith subcontractors.The Industrial
Associationof Modena(Confindustria)andthe Associationof
SmallEntrepreneurs(API)introducedme to about halfof the
manufacturersIinterviewed.Some of the homeworkers
were locatedthroughthe ModenaLaborConfederation
(CGIL).Otherinterviewswere arrangedthroughpersonal
contacts, inwhich Iused a snowballapproach:Each
respondentwas asked to introduceme to a new
respondent,untilIwas no longeruncoveringnew
information(Glaserand Strauss, 1967). By using a varietyof
samplingmethods and enlistingthe assistance of different
tradeassociations andtradeunions, Ibelieve Ihave
eliminatedany likelihoodof respondent-selectionbias. Data
fromthe interviewswere supplementedby repeated
discussions with industryand unionrepresentatives,
principallyfromthe NationalConfederationof Artisans(CNA)
andthe ModenaLaborCouncil,andstatisticalinformation
obtainedfromgovernment,union,and industrysources.
Datagatheredforthe 1991 nationalcensus were computed
and providedto me in 1993 by the Officeof Statisticsof the
Communedi Modenabecause the officialnationalcensus
datawill not be availableuntillate 1995.1 also obtaineddata
collected inApril1988 by the Cameradel Lavorodi Modena.
Thefirstsection of the paperdefines and differentiates
historicaland modernputting-outanddescribes the
organizationalcharacteristicsand evolutionof Modena's
knitwearindustry.Inthe second andthirdsections Ievaluate
the criticismsmade of putting-outinterms of transaction
cost analysisand laborexploitationin lightof the Modena
experience. Inthe finalsection of the paper,Iconclude by
postulatingthe institutional,social, and politicalconditions
underwhich an economicallyprogressivemodel of
putting-outproductionis most likelyto arise and pointto
other places besides Modenawhere similardevelopments
exist.
THEPUTTING-OUTSYSTEM
HistoricalPutting-out
Merchant-manufacturersfirstorganizedhistoricalputting-out
inthe countryside,whichwas unburdenedby the costly
regulationsof urban-basedguildsandwas populatedby
subsistence farmersandtheirfamilies,willingto workfor
little(Mendels, 1972; Hudson,1986: 261-262). But
putting-outwas not a distinctlyruraldevelopment: In
England,France,and Germanyit occurredinvillagesand
towns, where independentcraftsmenwere forced by
competitionto submitto putting-out(Berg,Hudson,and
Sonenscher, 1983: 25-28; Aminzade,1986; Kisch,1989).
Evenafterfactoryproductionwas well established,
putting-outcontinuedto flourishintothe beginningof the
twentieth century(Samuel,1977; Bythell,1978; Lazonick,
1990).
Historicalputting-outnormallywas patternedon the
producersowningtheirtools but not the rawmaterialsthat
they transformed,forwhich they were paidpiece rates
36/ASQ, March1995

Modern Putting-out
(Hudson, 1986: 59). Production was normally coextensive
with the household unit; so much so that putting-out and
domestic production have been used almost always
synonymously. The family stood at the center of putting-out
production, even if apprentices and hired hands were
regularlyemployed, especially by former craftsmen (Bythell,
1978: 14; Sheridan, 1979; Aminzade, 1986). Inthe German
Rhineland some putting-out firms employed as many as 20
apprentices (Kisch, 1989: 199). In addition, putting-out often
created a ripplingeffect that blurredorganizational roles:
Merchants put out to weavers, who then put out to
spinners, who in turn put out to carders (Mantoux, 1961:
204). Domestic production also usually included workshops
that were attached to the home or located in nearby sheds
and barns (Heaton, 1936; Mantoux, 1961). Table 1
summarizes the similarities and differences between
historical putting-out systems and putting-out in Modena.
Putting-out in Modena
Knitwear manufacturing in Modena is mostly the preserve of
artisanal firms. Artisanal firms account for 76 percent of all
the firms in the knitwear industry and 48 percent of the
workforce (data from Comune di Modena, 1993). They are
legally recognized as enterprises owned by one or more
individualswho possess the means of production and are
personally engaged in the firm's productive activities. An
artisanal firm engaged in manufacturing may hire no more
than 22 in-house employees, including family members who
otherwise are not considered employees (Lazerson, 1988).
The vast majorityof artisans have few or no employees and
rely on the help of family members and relatives, who are
liberallydefined by law to encompass the artisan's entire
extended family, from first cousins to nieces and nephews.
Relatives are legally classified as collaborators rather than
employees and are entitled to share firm profits, according
to Law number 230-bis of the ItalianCivilCode. Family labor
remains a criticalcomponent of the putting-out system in
Modena. Putting-out work often remains centered in or next
to the home, where 75 percent of knitwear artisans have
their laboratori,a term used to distinguish their small
workshops from large industrialfactories (ERVET,1983: 22).
Putting-out in Modena is also fundamentally different from
modern subcontracting, even if it is a subset of it. Both
subcontractors and putting-out workers usually own their
own tools and workplace and are unsupervised. Neither
group deals directly with the final consumer of the goods
produced, although many subcontractors do fabricate
finished products. By contrast, a putting-out firm does not
make a finished product and only constitutes a small link in
an external production chain. Putting-out is marked by a
division of labor among firms in which each firm only
undertakes a few tasks. Circumscribed tasks also
correspond to the restricted organizational responsibilities of
putting-out firms: They only contribute labor and the
requisite machinery to transform the manufacturer's raw
materials according to his explicit instructions. In contrast,
subcontractors normally purchase their own raw materials
and usuallyare responsibleforproductconceptionas well as
execution.Thussome manufacturingsubcontractorsnumber
37/ASQ, March1995

Table1
KeyAttributes of Historicaland Modena Putting-out Systems
Historicalputting-out Modena knitwearartisans
Historicalattributes
Emergedfromcraftproduction. Influencedbytraditionof putting-out.
Precedesfactoryproduction. Emergesfromfactoryproduction.
Marketattributes
Intermediateproducer;no Same
relationshipto finalseller.
Technologyattributes
Productiontasks areseparateand Same
discrete.
Technologyusuallyinferiorto thatof Technologyequalto or superiorto
the factory. thatof the factory.
Ownershipattributes
Producersown the means of Same
production.
Producersdeterminelengthand Same
intensityof workday.
Unfinishedgoods andmaterials Same
owned by manufacturer.
Paymentbased on piece-rate Same
system.
Organizationalattributes
Decentralizedproduction. Same
Productionusuallyco-extensivewith Workshopoften inor nextto
householdunit,butvaried. artisan'shome, butalwaysa
separatelydemarcatedarea.
Usuallyresponsiblefortransporting Same
goods to andfrommanufacturer.
No directsupervisionor monitoring Same
by manufacturer.
Followinstructionsof manufacturer. Same
Specializeinone orveryfew tasks. Same
Rudimentarydivisionof labor. Veryelaboratedivisionof labor.
Laborattributes
Owneroperated,no managerial Same
structure.
Dependenton familyandsome Familylaborstillcrucial,butroleof
hiredlabor. hiredlaborgreater.
Inruralareas,often dependenton Full-timeworkers,manyof whom
casualworkers;morespecialized worklonghours.
workersintowns andvillages.
Inruralareas most workersare Workershave industrial
subsistence farmers. backgrounds.
Lowpay,no socialprotections. Employeesprotectedby union
Unionsandtradeassociations contractandartisansorganizedin
banned. tradeassociations.Artisans
well-remunerated.Their
employees paidaveragewages
withfullsocialprotections.
State role
No governmentalassistance. Policy Extensivemunicipal,regional,and
of noninterventionin markets. state regulationthroughtax, social
welfare,grant,andplanning
mechanisms.
among the world's largest and most powerful industrial
organizations, such as Robert Bosch, the German
manufacturer of automatize electronic components
(Lazerson, 1990b).
Subcontractors and putting-out firms also occupy different
positions in the manufacturing continuum. Customers who
rely on subcontractors often need to supplement their own
capacityand capabilities;customers who putout work
38/ASQ, March1995

1
Dataas of December1992, obtained
fromthe ModenaCameradei Lavoro
(Federationof Labor).
Modern Putting-out
usuallydo so because, much likethe originalputting-out
merchants,they do littleor no manufacturing(Harrisonand
Kelley,1992).
From homeworkers to artisans. Manufacturershave
sharplyincreasedthe amountof putting-outsince the late
1960s. When the nascent knitwearindustryin Modena
sproutedaroundCarpiafterthe Second WorldWar,it built
on the existingputting-outnetworksthat hadbeen used to
producestraw hats, a traditionalindustrythat dates fromthe
1600s butthat hadreachedindustrialdimensions by the turn
of the century(Cappelloand Prandi,1973; Cigognettiand
Pezzini,1993).Afterthe marketfor straw hats collapsed in
the immediatepostwarperiod,manyof the putting-out
workersswitched to knitwearproduction,a change that
slowly transformedputting-outorganization(Cigognettiand
Pezzini,1993). Once, manyworkerswere women whose
husbandswere eithersmallfarmers,sharecroppers,or
farmhands.Inthe kitchenof theirhomes they workedalone
or, dependingon the season, with theirchildrenand
husbandfora single manufacturer.Todaysuch women,
legallydefinedas homeworkers,numberapproximately1200
andworkprincipallyforartisans,forwhom they perform
minorrefinishingtasks.1 Partlybecause of tax and laborlaw
reformsthat providehomeworkerswith fairlysimilarbenefits
to those of in-houseemployees, employers have less
incentiveto hirethem. Accordingly,theirnumbershave
declinedprecipitouslyoverthe last decades; some of them
have chosen to workdirectlyforartisans,while manyothers
have become artisansthemselves (Lazerson,1990a).The
numberof unregisteredhomeworkersunrecordedby the
Departmentof Laboris difficultto gauge. Most are believed
to be pensionerswho seek extraincome off the books. My
interviewswith tradeunionrepresentatives,manufacturers,
artisans,and illegalhomeworkersindicatethatthe latter
have continuedto dwindlesince the 1970s, when a survey
conductedby the cityof Modenareportedthatthey had
alreadybecome marginalto the industry(Comunedi
Modena,1978: 17-27).
Some mayarguethatthese homeworkersare the real
descendants of historicalputting-outandthattheirdecline
confirmsboththe originaljudgmentaboutthe failuresof
putting-outandthe inappropriatenessof applyingputting-out
terminologyto the Modenaknitwearartisans.The variations
in putting-outin Modena,however, are no greaterthan
those that existed in historicalputting-out.Inaddition,the
marginalizationof homeworkersandthe eliminationof the
once-numerousunregisteredartisanscan be attributed
principallyto changes in publicregulatorypolicyratherthan
to any organizationaldeficiencies. Ifartisans'relianceon
hiredhelp increases andthe linkbetween putting-outand
the householdeconomy weakens further,however, Imay
need to revise my judgmentof the Modenaknitwear
industryas a putting-outsystem.
Firmsize. Table2 presents dataon the workforcesize of
Modenaknitwearfirms.The table shows a sharpdecline in
largeintegratedmanufacturingfirmsanda parallelrise in
smallspecializedfirmsoverfourdecades. The share of the
workforceemployed in largefirms(50 or more persons)
39/ASQ, March1995

declined from 36 to 14 percent between 1961 and 1991
(ISTAT,1964; data from Comune di Modena, 1993). The
workforce includes owners, family members, employees,
and homeworkers. Today, fewer than 5 percent of
manufacturing firms produce a complete line of garments.
The majoritymarket and design garments and organize
putting-out production (Comune di Carpi, 1993: 24). A
ten-year review of the financial accounts of the largest
Modena clothing manufacturers indicates that those firms
that decentralized production reaped higher profits than
those that did their own manufacturing (Bursi, 1989). Even
the authoritative and neoclassically oriented Paris-based
Organization for Economic Cooperation and Development
(OECD)confirmed that in Italydecentralized firms "proved
significantly more profitable than their larger counterparts"
(OECD, 1983: 25).
Table2
Thirty-yearChange in Distributionof Modena KnitwearFirmsby WorkforceSize*
Workforcesize
1 2 3-5 6-9 10-19 20-49 50-250 Total
1991
No of firms 569 541 614 335 257 100 25 2448
As % 23% 22% 25% 13.7% 10.5% 4% 1% 100%
No.of staff 569 1082 2286 257 3413 2813 2118 14698
As % 3.9% 7.4% 15.6% 10.5% 23.2% 19% 14.4% 100%
1981
No.of firms 2145 858 634 308 232 78 36 4291
As % 49.9% 19.9% 14.7% 7.1% 5.4% 1.8% .8% 100%
No.of staff 2145 1716 2339 2234 2892 2337 3305 16968
As % 12.6% 10.1% 13.7% 13.1% 17% 13.7% 19.4% 100%
1971
No.of firms 548 410 299 112 92 77 52 1590
As % 34.4% 25.7% 18.8% 7% 5.7% 4.8% 3.2% 100%
No.of staff 548 820 1085 793 1237 2376 4384 11243
As % 4.9% 7.2% 9.6% 7.5% 11% 21% 38.9% 100%
Employmentsize of firm
1 2 3-5 6-10 11-20 21-50 51-264 Total
1961
No.of firms 678 259 196 88 53 27 25 1326
As % 51.1% 19.5% 14.7% 6.6% 3.9% 2% 1.8% 100%
No.of staff 678 518 737 678 749 862 2369 6591
As % 10.2% 7.8% 11.1% 10.2% 11.3% 13% 35.9% 100%
*Sources:ISTAT,1964: 20-21; 1975: 8-9; 1985: 14-15.
Inthe 1961 census the categroy "variousother textiles not otherwise classified"was used insteadof knitwear.Since knitwear
constitutesthe onlymeasurabletextileproductioninthe province,thiscategoryis essentiallyidenticalto the knitwearcategoryinlater
census reports.Percentagesmayaddto less than100 because of rounding.
Table2 shows that Modenaknitwearproductiontoday
depends on smallindependentproductionunits,70 percent
of which have fewer thanfive workers,includingthe
owners. The 1991 census reportedthatthe averagefirm
size was six persons, but ifthe 4,325 owners andfamily
helpersare excluded,the average numberof employees per
firmfallsto 4.2 (datafromComunedi Modena,1993).All
but33 of the 2,448 area knitwearfirmsemploying14,698
people, or 5.5 percentof Modena'sworkforce,are
composed of single unitsthatare legallyindependent;only
one companyhas as manyas three plants(ISTAT,1985b: 4,
16-17). About30 percentof these firmsare manufacturing
40/ASQ, March 1995

2
Thereareno reliabledataon the incomes
of artisansnorareinterviewsveryuseful
forobtainingthis information.My
informantsestimatedthatartisanswho
employno laboranddo not havelarge
investmentsincapitalequipmentearn
abouttwice as muchas a production
employee,thoughthe differencein
hourlyearningsmaybe substantially
lower.
Modern Putting-out
firmsinthatthey marketa finalproduct(datafrom Camera
del Lavorodi Modena,1988). Insome cases, firmsthat are
formallyindependentmay be linkedtogether through
common shareholdingorfamilyrelationships,butthis is
infrequent(Lazerson,1988).
Workingconditions. These smallfirmsprovideno evidence
that putting-outsurviveson low wages. Modena,one of
Italy'spoorerprovincesinthe 1950s, has become since the
mid-1970s one of its 10 wealthiest (Brusco,1982; Forni,
1987: 37). Carpi,the second largestcity in Modenaandthe
epicenterof the knitweartrade,has the area's highest per
capitaincome of approximately$26,000, using 1992
exchange rates. Laborcosts inthe knitwearindustryaverage
$13 per hourforsemiskilledlabor,about20 percent less
than inthe highlypaidmechanicalengineeringsector; but
they easily exceed the $9.71 an hourpaidby the large
verticallyand horizontallyintegratedAmericantextile
manufacturers(WernerAssociates, 1989).2
Since the beginningof the 1980s the unioncontractin
Modenahas reducedthe differenceinwage rates between
the largestandsmallest firmsto about 10 percent. Fringe
benefits-a monthof paidvacation,paidmaternityleave,
free medicalcare, and pension and retirement
contributions-are also identicalin largeand small
establishments. Butindirectwage costs are between 5 and
10 percent lower inthe smallputting-outfirmsbecause
employees there are ineligibleforthe generous
unemploymentbenefits providedin industrial-sizedfirms.
Employeesin putting-outfirmsalso are reimbursedfor lost
payfromillness onlyafterthe thirdday, ratherthanthe first
day, as in industrialfirms.Highwages, however, are
supportedby a tightlabormarketin Modena.In1992
unemploymentwas 4.3 percent,comparedwith a national
averageof 11.5 percent. Knitwearfirmsalso must compete
forfemale laborwith medical-supplyfirms(Provinciadi
Modena,1988: 9). Politically,too, laboris strongerin
Modenaand Emilia-Romagnathananywhereelse in Italy.
Boththe localand regionalgovernments, ruledby the
CommunistPartyand its successors for nearlya
half-century,remainhostileto neoliberalderegulation
policies. Modenaprovidesno evidence that decentralized
productiondisorganizesthe workingclass and incubates
sweated labor,as some scholarshave claimed(Murray,
1983; Schmiechen, 1984; Lashand Urry,1987; Castellsand
Portes, 1989; Lozano,1989; Wilson, 1991).
No reliabledataon artisanalincomes exist, but it is fairto
assume that artisanswho consistentlyfailto earnmore than
employees willchange jobs. Most owners of the very
smallest artisanalfirms(withno employees) Iinterviewed
claimedto earnaboutdoublethe average industrialwage;
those with employees earnsubstantiallymore.
Public policies. Artisanalstatus qualifiesa firmfor
subsidizedloans,special dispensationsfromcertainlabor
andsocial securitylaws, andothereconomic incentives
(Weiss, 1988). Includedamongthe latterare state-subsidized
artisanalloansof about$100,000 to acquireplantand
equipment.The provinceof Modenaandthe
41/ASQ, March1995

Emilia-Romagnaregionboth have exceptionalrecordsin
promotingzoninglaws and planningpoliciesthat have
created an abundanceof low-cost workshopssuitablefor
small putting-outartisans(Brusco,1982; Lazerson,1988).
State supportforsmallfirmsmust be measuredwithinthe
context of the muchgreaterlargesse grantedto largeprivate
and publicItaliancorporations,likeFIAT,Montedison,
Olivetti,and Italsider(Forteet al., 1978; Ranci,1983). This
assistance has been highlightedduringthe currentcorruption
scandals in Italy,when itwas revealedthatthe country's
largestcorporationsreapedhuge windfallprofitsfromstate
contractsgrantedin returnfor illegalpoliticalcontributionsto
politiciansandtheirparties.
The OrganizationalFactors Contributingto Putting-out
Putting-outdeclinedslightlyinthe 1960s with the rise of
verticallyand horizontallyintegratedcompanies, onlyto gain
new impetus inthe early1970s when strong laborunions
and new laborlaws began to erode the profitabilityof the
largestestablishments,especiallythose with 15 or more
employees (Lazerson,1985). Manufacturersreliedmore on
the existing putting-outchannelsand encouragedtheir
employees to become self-employed(Brusco,1982; Sabel,
1982).Whatis remarkableis that putting-outthen
intensified,even afterunionpower ebbed in the late 1970s
andwhen the differencebetween the laborcosts of
putting-outfirmsandfactorieshadallbutdisappeared.
Manufacturershad realizedthatdecentralizedproduction
permittedgreaterspecializationandfaster response times. It
also avoidedlargeinvestments ina vast arrayof costly
machinerythat is difficultto utilizeeffectivelywithina single
company,when shortproductionrunsof about500
garmentsdemandconstant machineresettingand retooling
(Pioreand Sabel, 1984; Bursi,1989; ZeitlinandTotterdill,
1989).The asymmetriesof knitweartechnology,inwhich
some knitweartasks remainhighlylaborintensivewhile
others are automated,also limitthe through-putefficiencies
of the centralizedfactory,where unfinishedgarmentscan
easily pile up,therebyincreasinginventorycosts and
delayingdeliveries(Chandler,1977; Mariottiand Cainarca,
1986).When there is great productiondifferentiation,
economies of scale become secondaryto economies of
timing(Aoki,1990) and,consequently,smallerorganizations
and relianceon putting-outcan reduce uncertainty.
Thisemphasis on specializationhas resultedina highly
decentralizedindustrycharacterizedby an interfirmrather
thanan intrafirmdivisionof labor.Itis also an industryin
which microfirmshave a conspicuous presence. Ineach of
the last fourdecennialindustrialcensuses, large-firm
employmenthas registereda monotonicdecline; the very
smallest firms,with five persons or fewer, have presented a
less consistent performance:29 percentin 1961; 21.7
percentin 1971; 36.4 percentin 1981; and 26.9 percent in
1991. Thereare a numberof factorsthat contributeto both
the largenumberof smallfirmsand changes intheirdensity
over time, includingtechnology,distribution,publicpolicies,
moralcapital,and small-firmeconomics.
42/ASQ, March1995

Modern Putting-out
Technology. When production processes involve multiple
tasks that are separate and discrete, maximum economies
of scale can be achieved "at the level of one or a very few
machines, not whole factories" (Sabel, 1982: 226). Thus, a
putting-out firm specializing in a few production tasks and
accepting work from several manufacturers can acquire the
skills, machinery, and workflow to achieve greater
economies of scale than the centralized factory. This
explains the many numerical-control computer machines I
saw in the very smallest weaving, embroidery, and cutting
shops that Ivisited and why both manufacturers and
putting-out producers agree that firm size does not
determine the technology employed.
Distribution factors. The second reason for the abundance
of small firms is the fragmented system of Italianretail
distribution. Because of state policies and political lobbying
that have benefited small family-owned shops while limiting
large distribution outlets, there is approximately one retail
outlet in Italyfor every 72 inhabitants, four times as many as
in France and eight times as many as in Germany (ISTAT,
1985a: 15). These distribution patterns affect manufacturing
organization in two important ways. First, because retailers
usually demand a line of garments distinct from their nearby
competitors, manufacturers are forced to produce a greater
variety of garments. This requires shorter production runs
that are best handled by the very smallest putting-out
producers. Second, because small retailers purchase limited
quantities and offer only a small selection, undercapitalized,
small manufacturers can supply them without investing the
large sums of money needed to produce the vast
assortment of models and inventory demanded by large
chains and department stores. While small manufacturers
with fewer than nine employees are easily served by small
putting-out firms, they are nonetheless very competitive
outside Italy,exporting one-third of their production,
principallyto countries of the European Union and North
America (Regione Emilia-Romagna, 1993: 23).
Public policies. Ifthe public policies mentioned earlier
encourage small firms, others have recently caused a
significant drop in the number of the smallest knitwear
firms, those with one or two owners and no employees. In
Modena an intensified enforcement campaign during the
mid-1980s by the INPS (the Italiansocial security
administration) closed a number of the very smallest of firms
with one or two owners and no employees. According to the
INPS, these firms had falsely claimed artisanal status to pay
lower social security contributions; in reality they were
dependent external workers employed by a single employer.
An official of the National Artisans Confederation estimated
in a conversation with me that over 60 percent of the
decline in the smallest artisan category can be traced to this
enforcement campaign. Generally, the INPS defines an
artisan as a dependent worker if she works for a single
customer, does not have a dedicated workshop area, and
does not possess her own machinery (Lazerson, 1990a). The
INPS campaign in Modena was supported by the Modena
ProvincialArtisanal Commission (CPA),a quasi-public body
composed of artisans,tradeunions,and publicofficialsthat
43/ASQ, March1995

seeks voluntary artisanal compliance with the relevant
regulations. In Modena there is an unusual social consensus
that artisans should compete in terms of quality and
efficiency, not reduced labor standards, tax evasion, or
violations of the provincialcollective labor contract (Capecchi,
1989; Brusco and Pezzini, 1990). This contrasts with
southern Italy,where the same laws have not been applied
and sweat shop abuses exist among putting-out workers
(Botta et al., 1976; Messori, 1986; Amin, 1989).
Government pressure on marginal artisans intensified further
with the passage of the Visentini Law in 1985, an income
tax measure to reduce tax evasion that required businesses
with sales over $7,500-the overwhelming majority-to file
highly detailed tax returns to document all income and
record each putting-out transaction. The resulting higher
taxes and more costly accounting procedures mandated by
this law led to further closures.
Moral capital. Ifthose starting a putting-out firm face more
difficulties today than some years ago, Modena's
environment still offers important inducements to new
entrants. One is the presence of what Dei Ottati (1994)
called moral capital: the abilityof skilled workers known in
the community and work place for both their honesty and
diligence to use their reputational resources as collateral for
loans of machinery and capital from manufacturers, who in
many instances are their former employers. These
ex-employees promise to perform putting-out work, either
for the lender directly or for someone else who has assured
them of sufficient work to begin repaying the debt. Workers
rich in moral capital but poor in finance capital thereby gain
the opportunity to become self-employed. Moral capital may
be seen as a subset of what Coleman (1990) has called
social capital, which encompasses mutual expectations of
reciprocity and adherence to the norms of civic networks.
Putnam (1993: 163-185), in a recent study of Italy,argued
that abundant social capital in north-central Italian
communities like Modena enhances the efficiency of their
markets and expands the amount and availabilityof credit.
Although lenders reduce their exposure to default somewhat
by taking a security agreement on the machinery they lend
it is their reliance on Modena's social capital and the
individuals' reputations that induces them to accept risks
that institutional lenders routinely refuse.
Small-firm external economies. Another factor favoring
small firms is simply that their large numbers support a vast
market in products and services specialized to meet the
needs of microproducers. For example, artisans make
cutting tables and carts specially designed for small
putting-out firms, and textile representatives sell yarn and
fabric in small batches. Organizationally,the artisanal
associations in Modena market collective services that
sharply reduce the overhead costs for small production units.
Storefront offices located throughout the knitwear district
offer low-cost accounting, bookkeeping, and payrollservices
to artisans, as well as technical and vocational programs.
TRANSACTION COSTS AND PUTTING-OUT
Paradoxically,the very success of putting-out and its
embrace by the largest manufacturers with the power to
44/ASQ, March1995

Modern Putting-out
rationalize production has eliminated some of the very
smallest firms that are unable to assume additional
organizational responsibilities. Correspondingly, firms with
between 10 and 49 members have grown, although few of
these have more than 25 members. To assess these changes,
some details of the knitwearproductionprocess are necessary.
Figure 1 presents a sequential flow chartof knitweartasks.
Figure1. Phases of the knitwear putting-out process.
5: Dyeworks
Garmentsmay be
4: Assembly softened, cleaned or dyed 6: ButtonMaking(Optional)
Clothcut and sewn into garments Buttonsand buttonholes added
3:ClothEmbroidered(Optional) MANUFACTURER
*Buysyarn 7: Pressing & Ironing
*Designssmples * > Labelsalso added
2: Pressing&Stitching(Optional) *Designs samples rod
Some cloth is pressed and sOrganizes production
stitched priorto cutting eFinds customers
8: Inspection& Packaging
1: Weaving | Defectivegarments
rejectedor mended
Notes: Arrows indicate that semifinished goods are To Customer
returned to manufacturer after each task is completed,
but goods may be shipped directly to the next producer.
Homeworkers may also be used for phases 2, 3, 4, and 8.
Manufacturers first purchase the yarn from textile firms,
which are principallylocated in distant Biella, in the northern
Piedmont region. They then put it out to weavers, who turn
it into cloth according to the manufacturers' specifications.
The finished cloth is then put out to assemblers, who may
then put it out to specialized cutters or cut and sew it into
garments themselves. Finally,the garments are put out once
more to be pressed, inspected, and packaged. Depending on
the exigencies of the final customer and the characteristics
of the materials, further refinements may be necessary:
sewing and pre-ironingthe cloth priorto its cutting; dying
the already-assembled sweater; fulling the garment to
soften the fabric and remove excess animal hairs;
embroidery; and button making. As Table 3 indicates, many
of these tasks-especially the highly capital-intensive
weaving and embroidery production phases-are performed
by artisans having few or no employees.
This extensive interfirmspecialization normally means that
the semifinished garments enter and leave the shipping and
receiving departments of manufacturers many times before
their completion. But as more large manufacturers have put
out work, some have sought to reduce their transaction
costs by relying on putting-out artisans who can organize
several different production functions. According to a survey
of 1,400 knitwear putting-out firms in the Carpiarea, 24
percent offer more than a single service (Comune di Carpi,
1993: 36). Most of these firms are ironing establishments
45/ASQ, March 1995

Table3
Number of Employees and Phases of Productionof KnitwearArtisanalFirmsin Modena*
Numberof employees
Productionphases None 1 2-3 4-6 7-10 11+ Total
Weaving 229 29 32 13 3 4 310
% 73.9% 9.3% 10.3% 4.2% 1% 1.3% 100%
Completeassembly 88 17 26 30 31 32 224
% 39.3% 7.6% 11.6% 13.4% 13.8% 14.3% 100%
Partialassembly 267 30 33 24 16 4 374
% 71.3% 8% 8.8% 6.4% 4.3% 1.1% 100%
Fabriccuttingonly 33 10 2 1 1 0 47
% 70.2% 21.3% 4.3% 2.1% 2.1% 100%
Finishing,inspection,packaging 73 7 21 4 5 3 113
% 64.6% 6.2% 18.6% 3.5% 4.4% 2.7% 100%
Laundry,pressing,fulling 166 32 31 25 19 9 282
% 59% 11.3% 11% 8.9% 6.7% 3.2% 100%
Buttonmaking 37 4 6 5 1 2 55
% 67.3% 7.3% 10.9% 9.1% 1.8% 3.6% 100%
Embroidery 70 10 18 11 2 5 116
% 60.3% 8.6% 15.5% 9.4% 1.7% 4.3% 100%
*Dataprovidedbythe ModenaCNA,whichrepresentsbetween 50 and60 percentof allknitwearfirmsinModena,as
of October1988. Thecategory"employees"includeshomeworkersbutexcludes familyhelp.
Percentagesmay not addto 100 because of rounding.
that also package and inspect garments. In some cases
these new organizational requirements have forced the very
smallest putting-out workers out of business, but more
frequently the production network has been reorganized so
that the smallest artisans work for larger artisans who in turn
work for the manufacturers. Inthe Carpistudy 16 percent of
putting-out firms put out work to other firms (Comune di
Carpi, 1993: 40).
Transaction Cost Criticisms of Putting-out
The above discussion demonstrates that transaction costs
have not dissuaded Modena's manufacturers from
decentralizing their operations. Transaction costs are a
concern, but they can easily be reduced within the existing
structure of putting-out. Williamson (1980, 1985), in a very
detailed article on putting-out, has argued that these
expenses are so burdensome that centralized factories gain
a clear competitive advantage, but his argument rests on
data from historical putting-out, in which outworkers
unrestrained by factory supervision allegedly thieved,
embezzled, and produced shoddy goods. Geographical
dispersion of putting-out firms also imposed excessive
freight expenses, which were compounded by the absence
of a reliable transportation and communication network. In
addition to these specific criticisms of putting-out,
Williamson (1975) has argued elsewhere that purchases on
the market usually cost more because of writing and
administering expensive contracts and paying above-market
prices, a consequence of inadequate information.
Transportation costs. Clearly, historical putting-out had to
contend with long distances and poor communication and
roads, even if by the nineteenth century putting-out had
become rather urbanized (Heaton, 1965: 396-404; Kisch,
1989). If Bythell's (1969: 37-38) study of the English cotton
industry concluded that most depots were often fairlyclose
46/ASQ,March1995

3
Dataprovidedbythe statisticalofficeof
the Cameradel Lavorodi Modena,based
on annualstatementsfiledby knitwear
manufacturingcorporationsat the
Modenacourthouse.
Modern Putting-out
to the weavers and transporting materials was not unduly
burdensome, others reported that transportingwoolen material
just 12 miles caused great inconvenience and substantial
delays in production(Lipson, 1965: 178). Wadsworth and Mann
(1968: 394) and Heaton (1965: 352) all concurred that much
time was wasted moving textiles from place to place.
Obviously, Modena's infrastructuretoday is very different:
The roads are good, as is communication. Shipping distances
are usually short: 90 percent of all knitwear firms in the
Province of Modena are located within a 25-mile radius of
the city of Carpi(Provinciadi Modena, 1987: 49). Nearly all
workers live in the same community in which they work,
and many still commute by bicycle. This spatial
concentration diminishes both transportation costs and the
need to furnish artisans with large buffer inventories
between shipments. In some cases transportation costs are
no greater than they would be inside a centralized factory.
For example, in Carpi,where hundreds of workshops sit
cheek by jowl, handcarts often move garments and materials
from one firm to the next. On the other hand, semifinished
garments are now transported far outside the province of
Modena, and there is evidence that this trend is growing as
the larger manufacturers increasingly take advantage of
lower wage costs in southern Italy(Comune di Carpi, 1993:
41-47). Ifwe assume, in the worst case scenario, that
manufacturers absorbed all transportation costs, then they
would amount to between 0.6 to 3 percent of total expenses,
based on estimates that subcontractors' labor costs in the
knitwear industry represent approximately 30 percent of a
manufacturer's total expenses (Bursi, 1987, 1989).3
Dishonesty in putting-out. Williamson (1980, 1985) said
that the problem of dishonesty arose because of the
absence of managerial control. Williamson's position is
based on historical research conducted by Landes (1969:
56-57) and Lipson (1965: 69), although others have argued
that theft losses were more than compensated by the
advantages of putting-out (Heaton, 1965: 352; Landes,
1969: 190; Kriedte, 1981; Schlumbohm, 1981; Jones, 1982).
What is beyond dispute today in Modena is that theft and
embezzlement by putting-out workers are practically
unknown. Some very old artisans in my interviews recalled
minor acts of embezzlement in the 1950s and 1960s, which
they claimed were tacitly approved of by manufacturers in
compensation for low pay and, in any case, were easily
concealed by poor accounting methods. As one
manufacturer reminded me, losses from theft reflect poor
organization, not the presence or absence of centralized
factories. Most manufacturers control inventories by
counting or weighing the cloth; weavers have a margin of
between 1 and 2.5 percent for waste and lost material. A
few very prestigious firms scientifically test the quality and
thickness of the woven cloth, but an even greater number
do not even own scales. Most raw materials have declined
so much in relative value that it is no longer efficient to
monitor them closely. Now, waste cloth that once was sold
must be given away or discarded at the owner's expense.
Honesty, of course, remains a major concern of
manufacturersin Modena,especiallythose who invest
47/ASQ, March1995

heavily in fashion. The need to maintain design secrets was
even proposed as a reason why historical putting-out was
abandoned in favor of factory production two centuries ago
(Chapman, 1967: 34). As a solution to this problem, some
manufacturers in Modena make samples internallyand only
put out work once orders for the season have been
procured. This prevents artisans from either intentionally or
accidentally revealing design secrets to competitors. But
other high-fashion manufacturers trust artisans to protect
their designs scrupulously from misappropriation by
competitors. Inthe computer industry, putting-out production
is sometimes preferred over the centralized factory to assure
secrecy and confidentiality, for it reduces the number of
persons having access to information (Lozano, 1989: 57-58).
Of course, for the many small manufacturers in Modena
who invest little in fashion and promiscuously borrow
designs from one another, secrecy concerns are irrelevant.
Trust. Ifthe straightforward business practices in Modena
contrast favorably with the dishonesty prevalent in the
English cotton and woolen industry of the eighteenth and
nineteenth centuries, it is unlikelythat the explanation lies
with production changes and the greater acumen of modern
manufacturers. Despite close supervision and costly control
systems in modern factories and department stores in the
United States, they are often sites of widespread pilferage
and inventory "shrinkage" caused by their own employees
(Granovetter and Tilly,1988). Inthe English cotton industry,
complaints of dishonesty actually intensified as the ability of
manufacturers to detect it improved (Bythell, 1978: 125).
Heaton (1965: 405-437) made clear that the central problem
in historical putting-out was not theft of cloth and yarn by
impoverished outworkers per se, but the fraud and deceit
that permeated the entire industry. Wadsworth and Mann
(1968: 393) emphasized how embezzlement by English
outworkers was often a response to the various forms of
trickery they suffered at the hands of manufacturers and
their agents: unjust fines and deductions from piece-rates;
payment in bad money; illegal payment in kind, known as
wages in truck; and lengthening the warp and distributing
bad material (Landes, 1969: 58-59).
Long-term relationships. Inthe Modena knitwear industry,
mutual expectations of trust and confidence arise from
repeated transactions between artisans and manufacturers;
that, not reliance on sophisticated controls, limits deceit. In
one large survey, 85 percent of subcontractors reported
long-term, stable relationships with their customers (ERVET,
1983: 57). In my own research, over 80 percent of both
manufacturers and artisans in business at least ten years
said that most transactions are with firms with whom they
have contracted for longer than five years.
Williamson's (1975) analysis predicts that it is exactly such
long-term relationships that produce asset specificity and the
resulting exploitation of the weaker party. Asset specificity
refers to a firm's investments in human, material, or
locational resources that are specific to the needs of another
firm. Because firms that possess these particularassets are
few in number, Williamson reasoned that it is more likely
than not that customers will eventually pay above-market
48/ASQ, March1995

ModernPutting-out
prices for their goods and services. Surprisingly,Williamson
(1980) never mentioned asset specificity in his very detailed
attack on putting-out production, but he cautioned elsewhere
(1975: 27-28) that even in the presence of a large number
of sellers and buyers, asset specificity occurs when two
highly specialized firms develop intimate knowledge of each
other's needs, precisely the behavior in which Modena
knitwear manufacturers and artisans continue to engage.
Written contracts are also exceedingly rare in the knitwear
industry, and even when used, they are written on standard
legal forms containing boiler-plate language that is not
written by lawyers. For most manufacturers and artisans, a
party brandishing a written contract implicitlyconveys a
message of distrust and therefore should be avoided. Quality
control-a major concern for most Modena manufacturers
who produce moderate to expensive garments-is achieved
with minimal cost to the manufacturer. Manufacturers either
send their agents to inspect the garments in the workshops
of the artisans responsible for final packaging or perform the
packing and inspection themselves. Because artisans must
remedy defects at their own expense, they have a stronger
incentive to perform quality work than do most factory
employees. All but a few of the manufacturers I interviewed
believed artisanal-made garments were as good as if not
better than factory-produced ones, and even the dissenters
said the differences were negligible. Most manufacturers
attributed high quality to long-term cooperation with the
same putting-out workers.
Price information is readily available in the Modena knitwear
districtboth because of the enormous concentration of firms in
the same industryand because of the transparentrelationships
that exist between many artisans and manufacturers. Even if
few garments are exactly comparable in terms of labor time,
base prices for tasks such as button making, embroidery,
and sewing collars and cuffs are public knowledge. On
numerous occasions I heard these prices discussed in cafes,
piazzas, and trade association storefronts, a tangible example
of how in concentrated industrialareas "the secrets of the
industry are in the air" (Becattini, 1990: 42). Although
artisanal firms and manufacturers are separate organizations,
transparency in their relationships facilitates the flow of
information. Manufacturers are free to drop by their artisan
suppliers to inspect work in progress.
Long-term relationships also lead to less adversarial price
bargaining. Price bargaining remains intense in Modena, but
among suppliers and manufacturers with long-term
relationships it is far from an arm's-length process. Suppliers
regularlydocument their costs, even to the point of opening
their books to manufacturers with whom they have
long-term relationships. In cases of disagreements over
price, negotiations center on eliminating or modifying certain
production tasks and adjusting production flows and
completion dates rather than reducing a supplier's profit. It is
widely recognized that prices are incomplete sources of
information (Geertz, 1978): Delivery dates, the time and
form of payment, the responsibility for transporting the
goods, the qualityof the work,andeven compliancewith
the tax laws allneed to be negotiated.These ambiguous
49/ASQ, March1995

issues are more easily confronted when the transacting
parties have continuing relationships with their suppliers.
Reciprocity and cooperative behavior are important elements
of these long-term relationships that make firms favor
incomplete contracting rather than insist on contractual
rights (Macaulay, 1963). Although subcontractors are
responsible for any production errors, manufacturers
normally refrainfrom charging them for minor mistakes in
order to demonstrate their reciprocal good faith. By
exploiting short-term changes in market conditions one risks
undermining long-term relationships. Manufacturers who
pressure subcontractors to lower prices during periods of
slack demand risk being severely squeezed themselves
during the seasonal rush when deadlines are short and
artisans can name their price.
LABOR FACTORS IN PUTTING-OUT
The flowering of modern putting-out in Modena clearly
challenges transaction cost analysis. But does Modena
putting-out still depend on labor exploitation? Historical
putting-out relied in considerable measure on extremely low
wages and casual and unskilled labor furnished by women
and children from urban households and subsistence farmers
from ruralareas (Bythell, 1978: 165-168; Schmiechen,
1984: 59). According to Landes (1969: 190), putting-out
depressed wages and created substantial human misery on
the European continent in the nineteenth century. Low
wages even allowed putting-out to compete with industrial
production until factories achieved qualitative productivity
leaps (Landes, 1969: 118-119; Bythell, 1978: 179-180;
Sheridan, 1979).
Under historical putting-out most merchants and
manufacturers were openly hostile to any form of labor
regulation; they exploited ruralareas, where controls by
government and workers over laborwere weak and
undermined the privileges of urban craftsmen (Heaton,
1965: 315; Bythell, 1978: 39, 162; Kisch, 1989: 24-25, 152).
While Thompson (1964: 297) attributed the impoverishment
of putting-out workers in the beginning of the nineteenth
century to state policies that undermined the workers' living
standards, solidarity, and organizational cohesiveness, case
studies of cutlery production in Solingen, Germany and silk
manufacturing in Lyon, France reveal that public regulation
stabilized wages under historical putting-out (Boch, 1995;
Cottereau, 1995).
Laborflexibilitywas also central to putting-out work, for its
part-time character made it attractive to both subsistence
farmers in the countryside and household labor in urban
towns (Bythell, 1969: 60-63). While manufacturers preferred
putting-out to hiringemployees, problems arose when
outworkers chose to farm or to hunt rather than to work
(Thompson, 1967; Landes, 1969: 58-59). Higher piece-rate
incentives only enabled outworkers to obtain the little cash
they needed from even lower output levels, creating a
backward-sloping labor supply curve (Bythell, 1969: 117;
Landes, 1969: 59; Marglin, 1976).
50/ASQ,March1995

Modern Putting-out
Family Labor
As already mentioned, employees in Modena putting-oit
firms are covered in large measure by the same contract as
employees in industrialfirms. Laborflexibility, however,
remains an important aspect of modern-day putting-out.
Because Italianlabor laws severely discourage part-time
work, the Modena artisans depend heavily on full-time
female employees. These same laws also make overtime
work extremely costly, especially to industrial-size firms that
rely entirely on paid labor. Artisanal owners and their family
members, who account for 29 percent of all knitwear
employment and an even greater share of total hours
worked, have a strategic advantage here, because they can
usually meet the seasonal workflows without paying help
overtime wages (data from Comune di Modena, 1993).
Artisans regularlysubstitute their own labor for paid labor,
working at times on holidays and Sundays (Comune di
Modena, 1978: 83). On average, they put in 2,428 hours
annually, with the even harder-workingweavers clocking
2,817 hours (ERVET,1983: 34). Of course, integration with
the household economy eases this burden somewhat:
Grandparents volunteer their labor during busy periods,
parents combine work with childrearing,and weavers can go
to sleep upstairs while, below, their looms drone through
the night. One-third of retired parents live with or near their
children in Emilia-Romagna (Barbagli,Capecchi, and Cobalti,
1986: 18), allowing many to volunteer for work in their
children's artisanal shops. The common practice among
artisans of placing their living and working quarters under the
same roof also permits artisans to partiallysubsidize their
housing costs with state artisanal construction loans, while
achieving the oft-expressed Italianideal to live within a
extended family (Pitkin, 1985).
Artisanal Autonomy
Not only are Modena putting-out workers not an exploited
substratum, they enjoy substantial economic autonomy in
terms of labor skills, market position, and organizational
resources. Inthe Marxist tradition, putting-out workers are
lumped with the proletariat(Marx, 1977: 595-599;
Aminzade, 1986), but in Wright's (1978) more nuanced
analysis, their control over both their working day and their
tools accords them a contradictory class location between
the bourgeoisie and the proletariat. Marx (1977: 595-599),
for example, argued that putting-out or domestic workers
were as exploited as factory workers, if not more so. Even
today, neo-Marxists view outworkers as among the most
oppressed proletarians: Denied labor-law protection, their
capacity to organize collectively has been further undermined
by their physical dispersion (Rubery and Wilkinson, 1981;
Castells and Portes, 1989).
The proletarianizationthesis rests on the dubious claim that
putting-out erodes skills and increases capitalist control over
the labor process. Aminzade (1986), for instance, reported
that French silk-ribbonmerchants monopolized control of the
design aspects of production when they introduced the
Jacquard loom. Outworkers then became dependent on the
perforatedcardboardpatternsneeded to operatethe looms.
51/ASQ,March1995

Similarly, Kisch (1989) and Landes (1969) emphasized that
the growth of traditionalputting-out in Europe paralleled the
destruction of the guild system and its craft and
apprenticeship traditions.
In Carpithere is no evidence of deskilling or of
manufacturers monopolizing the secrets of knitwear
production. Skill levels in the Carpiknitwear industry are
fairlyevenly dispersed across artisanal firms and
manufacturers, in sharp contrast to the segmented labor
market theory of several American economists (Gordon,
Edwards, and Reich, 1982). Career mobility studies reveal
how skilled workers in the knitwear and clothing industry
move from large firms to open artisanal firms (Solinas,
1982). In my own survey, approximately two-thirds of the
artisans had at one time been manual workers in the
knitwear industry. Manufacturers also depend on artisanal
firms as a trainingground for skilled labor, since knitwear
skills are not firm specific (Solinas, 1982).
Interms of technology, artisanal weavers have long been
knowledgeable about making the perforated cardboard
patterns still used in today's Jacquard looms. The more
advanced computerized looms require electronically encoded
memory tapes, but no weavers ever reported to me that
their manufacturer-customers imposed onerous conditions
on their use. Some weavers pay self-employed computer
technicians to encode designs, while others take advantage
of cheap public courses on software programs to learn
computer-aided design. State loan subsidies and special
technology grants to small firms also allow artisans to
obtain the same advanced machinery owned by the largest
factories.
Market Autonomy
Market autonomy is normally measured by the extent to
which putting-out workers can choose for whom to work
and under what conditions. This, of course, requires
ownership of the means of production, something that
usually characterized historical putting-out (Dobb, 1947:
146-147; Bythell, 1978: 84; Lazonick, 1990: 49). Admittedly,
a de jure position of autonomy may conceal a de facto
dependent one. Evidence of this is presented by both
Aminzade's (1986) study of outworkers in Lyon's silk
industry, who were reliant on manufacturers and merchants
for credit, and Kisch's (1989: 76, 82, 151) report of
proletarianized putting-out workers under the thumb of
merchant-manufacturers in the twin Rhineland cities of
Elberfeld-Barmen.
Several different Modena surveys have indicated that most
artisans have multiple customers. The 1984 records of the
Artisans' Register show that 84.7 percent of the knitwear
artisans within the city of Modena had more than one
customer (Commissione Provinciale per L'Artigianato,1987:
47). Another 1988 survey of 12 percent of weavers in the
province of Modena revealed that 60 percent had from three
to five customers, and 21 percent had six or more (CNA,
1988). Similar results have emerged from a very recent
survey of all knitwear firms performing putting-out work in
Emilia-Romagna,the regioninwhich Modenais located.
52/ASQ,March1995

ModernPutting-out
There, more than 50 percent of firms had four or more
customers; only 16 percent reported a single customer
(Regione Emilia-Romagna, 1992: 70).
Some artisans I interviewed even disputed defining
dependence in terms of the number of customers served.
These artisans had from two to three customers and
regularlyturned away new business. Their long-term
relationships and the specialized skills they offered gave
them confidence that their customers would not desert
them for a cut-price competitor. Embroiderers and some
weavers, for example, were often able to pick and choose
for whom to work,and were well-placed to bargain with the
largest manufacturers. Even those artisans with limited
organizational and productive capacities placed greatest
importance on developing transparent and durable
relationships with a few manufacturers.
Nor did most large and small manufacturers seek dependent
artisans. On the contrary, many worried that their
artisan-suppliers would become too dependent on them and
would risk closure in case of a downturn in orders.
Manufacturers, who often described putting-out firms
metaphorically as the external lungs of their own companies,
sought to avoid such an eventuality by dividing their work
among several artisans and referring artisans to new
customers.
During my interviews I also encountered both artisans
obligated to work exclusively for firms that lent them money
or machinery to start their businesses and manufacturers
who preferred docile subcontractors, but these few cases
were exceptions to the rule. As mentioned earlier, a number
of artisans use their future labor as collateral for credit or
machinery from a manufacturer, but the promise to work
exclusively for the creditor normally expires with the
repayment of the loan (Dei Ottati, 1994).
DISCUSSION
Putting-out in the Modena knitwear industry has become the
dominant mode of production both because of its own
internal rationalityand because of a supportive social
environment in which cooperative behavior and
entrepreneurial attitudes are deeply embedded (Granovetter,
1985). Transaction costs are not a significant factor in
shaping the organizational character of the Modena knitwear
industry, and when they arise they are resolved within a
decentralized production system characterized by long-term
relationships between customers and suppliers. Nor are
exploitative labor relations a feature of Modena putting-out:
Strong labor organizations, community regulation,
self-policing, and wage competition from other industries
maintain high labor standards. Actually, the putting-out
model offers workers without financial capital unique
opportunities for social mobility.
Market demand and technological conditions are necessary if
not sufficient factors to explain the success of putting-out.
Highly seasonal and fashion-sensitive, knitwear demand is
volatile; its production allows for few through-put
efficiencies and limitedeconomies of scale. Thisopens the
53/ASQ,March1995

way for different forms of decentralized production and an
interfirmdivision of labor. Capitalcosts, despite
computerization, remain affordable, and transportation
expenses for garments that are light and neither fragile nor
perishable are negligible. Clearly,a putting-out scenario for
the steel or petrochemical industries would be implausible,
and even for standardized men's clothing, such as overcoats
or underwear, microfirms are less feasible than for women's
fashion wear (Zeitlin, 1992: 21).
But technology and market demand alone cannot explain
why putting-out has reemerged with such success in Italy
and failed to do so, for example, in the United Kingdom, a
country with substantially lower labor costs than Italy. Inthe
1980s British clothing manufacturers had to close plants,
reduce employment, and increase imports from abroad
when faced with changing market conditions (Stopford and
Baden-Fuller, 1989; Zeitlin and Totterdill, 1989; Urry, 1990).
British manufacturers aware of Italianknitwear organization
tried to decentralize their vertically and horizontallyintegrated
plants and put out work, but they were thwarted because
the disorganized and exploitative character of their own
putting-out producers prevented them from offering quality
products at affordable prices (Zeitlin, 1985: 20). Under
pressure to reduce costs, many British manufacturers turned
to Italiansubcontractors (Rawsthorn, 1989).
For Britain'sclothing industry, the mere existence of a more
efficient form of economic organization that it could emulate
did not guarantee effective implementation and survival. But
elsewhere there are other examples of highly decentralized
production models that are similar to Modena's putting-out
system. In Italythere are many, among which are Prato, a
world center of woven textiles for clothing, and Castel
Goffredo, the European center of women's hosiery
production (Lazerson and Uzzi, 1995). Friedman (1988) has
written extensively about Japan's Sakaki Township, where
hundreds of highly specialized microfirms, many with few or
no employees, are at the core of a flourishing machine-tool
industry. Most of Taiwan's economy, especially its
computer, bicycle, and clothing industries, is based on very
small, family-owned-and-operated firms that are engaged in
extensive subcontracting operations that appear to mimic
aspects of the Italianputting-out system (Orru,1991; Orru,
Biggart, and Hamilton, 1991).
Orru(1991) argued that the similarities between Italianand
Taiwanese organizational forms are far from coincidental: In
both countries there are cohesive family structures and a
combination of state policies that discourage large business
units and favor small ones. In both countries, capital markets
until recently have been fairly restricted, although for very
different reasons. While this diminishes prospects for large
firms, it creates interstices for individuals and firms
sufficiently embedded in the community to exchange moral
capital for financial capital.
Ifthis paper underscores the key role of the family in the
putting-out enterprise, the Italianexperience also cautions
one from imputing too much importance to cohesive family
structure.InsouthernItaly,where familyties are so strong
54/ASQ,March1995

Modern Putting-out
that Banfield (1958) once targeted them for impeding
economic cooperation, disproportionately few artisanal firms
have been created during the last 30 years (Weiss, 198A4).
Putnam (1993), in his comparative study of Italy's unequal
regional development, argued that it is centuries of civic
engagement in various cooperative endeavors, not family
structure, that creates the moral and normative conditions
for economic growth.
History is important, but it is far from conclusive. For a long
time it was argued that Modena's rich endowment of
entrepreneurial skills, put to good service in putting-out, was
a legacy of its sharecropping past, which taught crucial
bookkeeping and accounting skills to many families (Paci,
1980). But a careful study of artisans showed that many
came from varied backgrounds (Forni, 1987). Similarly,
Saxenian's (1994) study of the Silicon Valley experience in
Californiademonstrates that while social networks and trust
among economic actors help explain economic growth, they
need not derive from a common Renaissance past or even
from cohesive family units. In Silicon Valley, a connection to
Stanford University appeared to provide sufficient social glue
to bond family-less and rootless entrepreneurs in a common
endeavor (Saxenian, 1994: 30). Silicon Valley's computer
firms bear little resemblance to Modena's egalitarian and
relatively low-technology and low-capital putting-out knitwear
industry, but in both places, decentralized, intensive,
noncontractual subcontracting relationships rest on a
community of shared identities and mutual trust (Saxenian,
1994: 4).
Since the history, politics, and social and economic structure
of each community are vastly different, there will be
significant variations among them, both in the organizational
structure of their industries and in their patterns of wealth
distribution. InVeneto, the region bordering Emilia-Romagna
to the northeast, putting-out arrangements have also created
great wealth. There, the Catholic Church has operated as the
principalmediator of conflict, placing less emphasis on social
equality than in Emilia-Romagna,where the left has been
historically dominant (Trigilia,1984). Firmstructure in Veneto
also exemplifies how a more concentrated form of economic
ownership may lead to a different form of putting-out.
Benetton, the multinational knitwear producer, which itself
began as a putting-out operation less than 40 years ago,
overshadows the industry in Veneto (Belussi, 1987, 1992). It,
too, puts out nearly all its production locally, but principallyto
nonartisanal industrialestablishments that employ an
average of 40 to 50 employees internallyand substantial
numbers of homeowners externally (Belussi, 1992: 88). At a
very distant corner of the globe, Agra, the shoe-
manufacturing region of India,demonstrates that the Italian
form of putting-out based on an extreme division of labor is
not easily reproduced in a developing country. There,
putting-out is very limited and rudimentary; most production
is conducted in horizontallyintegrated work places and
factories (Knorringa,1995). An Italian-style putting-out
system could be more efficient, but for the time being the
historical burdens of caste and religion impede the networks
andforms of cooperationnecessary to achieve it (Knorringa,
55/ASQ,March1995

1995).Whileputting-outin Modenamaydefy easy
replicationby policyplanners,it inspiresconfidence thatthe
paths to economic developmentare less predictableand
well-troddenthaneconomists have led us to believe. Italso
revealsthat socialaspects too longviewed as unrelatedto
moderneconomic organization-extended families,trust,
andattachmentto communityandfriends-may actually
containelements that prefigurea reinvigoratedsocial market
economy.
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Modern Putting-Out System Thrives in Italian Knitwear Industry

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