In the 150 years that followed its unification in 1861, Italy left the periphery of the world economy and, by joining the “convergence club,” reached a level of wealth close to the core of the industrialized Western countries. In the past two decades, however, the country’s economic performance has been one of the worst in the world, and the weakness of the Italian productive system clearly emerged. This pattern casts doubts about the robustness of the position acquired by Italy in the international economy: Is Italy a permanent member of the core of the most advanced countries just facing a crisis or, to the contrary, has it only temporarily left the periphery of the world economy and is going back to its original role? The aim of this special forum is to provide an answer to this historical question, by looking at the relations among institutions, firm structure, and economic performance. To do so, we take advantage of the vast and diverse body of historical literature that emerged in the aftermath of the 150th anniversary of the Italian unification in 2011. These studies range from structural projects on the long-term development of the Italian economy, to new or improved data series, and to research on specific themes such as trade, industrial structure, and the stock exchange market. ^{Footnote 1} The availability of these new resources offers a great occasion to re-examine the nature of Italian capitalism; this forum represents an attempt to exploit such opportunity.

Alongside new historical research, innovative approaches have emerged in various fields of economics in the past twenty years. The work by North, Acemoglu, and associates; the so-called law and growth approach; and the “variety of capitalism” literature have all contributed to relaunch the idea that institutions are the main determinants of long-term growth. ^{Footnote 2} However, the problem of lack of a precise definition of what institutions are, and of how exactly they operate, could limit the heuristic power of this concept. Indeed, over time, the term “institutions” has been used to indicate things as diverse as forms of business organization, legal principles, mechanisms of interactions among firms, and the set of formal and informal incentives that coordinate the actions of economic agents. Furthermore, most of these approaches tend to stamp Italy with only a simplistic label—for instance, that it is a French-law legal system or a “state-influenced market economy”³—without going deep into the understanding of the specificities of its long-term economic development. In other words, unless institutional theory is well rooted in historical analysis, which is the very aim of this forum, the Italian case still appears as terra incognita and fundamental questions remain to be answered.

To use institutions as the main explanatory variable of Italian economic performance over the past century and half, we adopt North’s classical definition of institutions as the “rules of the game” of economic actors. We therefore refer to institutions as both formal ones, such as laws and regulations, and informal ones, such as values, social norms, cultural beliefs, and so on. In this perspective, a clear distinction must be made between institutions and organizations, the latter being the structures providing institutions. This distinction is fundamental to understand why institutions might or might not be efficient in fostering economic performance or, to use Acemoglu’s jargon, why they promote inclusiveness rather than mere resource extraction. According to North, institutions are intentionally devised to reduce transaction costs to the insiders who operate within organizations. The provision of institutions that are efficient in regard to the functioning of the economic system in general is, therefore, conditional on two factors. First, insiders’ private interests must coincide with those of the economy. Second, assuming that the previous condition holds, political entrepreneurs operating inside organizations must understand what exactly the needs of the economy are, and what are the most suitable institutions to satisfy such needs. Furthermore, institutional efficiency is neither static nor just the sum of the efficiency of single institutions; norms that are efficient in a given period might become detrimental if economic conditions change, and norms or laws that are efficient individually might became a burden once operating in conjunction with other regulatory devices, cultural beliefs, and so forth. ^{Footnote 4} Within this view (which we label the Acemoglu-North view), we analyze the functioning of institutions mainly from the specific focus of the promotion of innovation. The starting point is Abramovitz’s intuition that long-term economic growth depends on the congruence with technological regimes and that, as maintained later on by Zysman, institutions have a profound role in sustaining such congruence. ^{Footnote 5} Our take on this view is that the rules of the game have an impact on countries’ ability to promote innovation (hence technological congruence) directly via incentives to education and research, but also indirectly by supporting or not firms’ growth, and by shaping entrepreneurial views and behavior. Moreover, a crucial issue is the interaction among different economic and institutional actors is the “market logic” à la Zysman, which creates the right (wrong) incentives to follow a pattern of optimal (suboptimal) economic growth.

In general, all four articles included in this forum share the idea of the centrality of institutions in the explanation of Italian economic growth process, but the specific engagement with this approach varies across the individual contributions. In particular, two articles (“Institutions, Politics and the Corporate Economy” by Colli and Rinaldi and “Happy 150th Anniversary, Italy? Institutions and Economic Performance Since 1861” by Di Martino and Vasta) clearly identify some formal institutions and follow their evolution and impact over the long term, whereas the other two contributions focus more, in general, on the outcome of the institutional setting in a broader sense.

In their conclusions, Felice and Vecchi, the authors of “Italy’s Modern Economic Growth, 1861–2011,” suggest that phases of growth and decline of the Italian economy are strongly connected with changes in economic policymaking—reflecting, in turn, the impact of informal institutions such as the culture and the mental habits of the ruling elite. This conclusion is shared by the authors of “Institutions, Politics, and the Corporate Economy,” who give to the values and ideologies of the elite—including the influence of the Catholic Church in slowing down the path to modernization—an important role in the explanations of the peculiarity of Italian firms’ size and structure (and scarce ability to innovate). The cultural approach of the ruling class is behind the provisions of specific laws and regulations that gave incentives to firms to remain small while, on the other hand, curbing the further development and growth of big business. Therefore, the explicit focus of the article is, on the one hand, on Italian peculiarities such as the artificially high protection of artisan firms and/or of small local banks, and on the other hand, on policies that did not give incentives to Italian big business to look at the international market, to the financial sector to develop in line with the needs of the large companies, and to the training and educational system to provide adequate technical and managerial capabilities. The role of human capital and scientific and technological research activities is the focus of the article “The Ghost in the Attic? The Italian National Innovation System in Historical Perspective, 1861–2011,” by Nuvolari and Vasta. Also in this case, the contributors considered formal institutions and their cultural background together. The disappointing result of Italy in science and technology and in innovation is linked to inefficient (or absent) policies and rules: the confused organization of the national research center (CNR); a very high degree of openness of the patent system, which could have attracted technological transfer from abroad but could also have reduced the capacity of Italian firms to develop their own innovation; and, last but not least, the lack of promotion of bridging institutions between universities and industry. This failure, however, would be hard to understand without considering the idealistic nature of the Italian cultural tradition that led to a lack of interest in science and technology, thus also in the scarce performance in industrial innovation. The article “Happy 150th Anniversary, Italy? Institutions and Economic Performance Since 1861” in a sense subsumes all the others, by offering a general reconstruction of the role of key institutions in Italian economic performance. Specifically, the article links long-term performance to firms’ structure and entrepreneurial behavior and analyzes the impact of formal institutions such as rules, regulations, and enforcement on these two issues. This contribution focuses on aspects such as bankruptcy law, regulation of firms’ governance and bookkeeping, and enforcement of tax compliance. Also, in this case, the inefficiency of formal institutions is linked to informal aspects—for example, the legalistic approach in public administration that determined a de facto separation between a perceived inner-looking functioning of ministries and public institutions and the needs of the productive system.

How can the results provided by individual contributions be analyzed in a consistent way to provide an institutions-based analysis of the Italian development in the last century and half? The starting point, implicit in all these articles, is that Italy never was an international leader nor did it operate on the technological frontier, but it constantly had to adjust to exogenous international shocks and trends. The international dimension is therefore the background against which the functioning of Italian institutions must be analyzed. Among the most important external shocks prompting major readjustments, one can mention the interwar Great Depression, the post-World War II mass-production technology-driven economic boom, the European economic integration, or the current wave of globalization. The hypothesis that emerges from the forum is that the Italian economic performance, even when positive, has been shaped in large part by fortunate contingencies and often frustrated, rather than promoted, by the institutional setting that, in fact, limited the ability of the country to fit the features of the international economic environment (or to be technologically congruent). In particular, formal institutions often emerged already inadequate for the needs of the economy, and tended to adapt only very slowly, even more so for informal institutions that showed a high degree of inertia and resilience to change. Specifically, when looking at formal institutions, the fil rouge of the forum is that Italian capitalism has been affected by the extractive nature of rules of the game, creating anomalies in all the issues considered. What three articles (“Institutions, Politics, and the Corporate Economy,” “The Ghost in the Attic,” and “Happy 150th Anniversary, Italy”) show is that, as compared with any other Western economy, in Italy basic rules operate in unique ways. As a result, firms were and remained peculiarly small, entrepreneurs tended to adopt short-term approaches, and innovation was given a marginal role. Consequently, Italy never fully left its specialization in labor-intensive, low-technology traditional sectors, and never neared the world technological frontier. In this picture, the post-World War II golden age is partly an exception: Some of the policies implemented to support technological development did work and, driven by the expansion of state-owned big businesses, firms’ size increased. However, severe doubts remain as to whether this led to substantial changes in managerial attitudes and practices in average private concerns. These peculiarities are mirrored at the macro level: Italy never fully caught up with the frontier, and appears as a textbook case of persistency of regional differences and of the inability to close the gap between the more and less advanced areas of the country. On the plus side, however, Italian citizens enjoyed a relatively even income distribution, something that did not worsen even during phases of rapid industrialization and economic growth.

If both formal and informal institutions did not help the development of the Italian economy, the question that naturally follows is why more efficient institutions were not provided. Although the articles in this forum focus more on the impact of institutions than on their emergence, the theoretical approach we use also helps to shed some light on this aspect. In general, a possible explanation can be found in the point analyzed earlier on discrepancies between the interests of institutional actors and the ones of the economy; in both “Institutions, Politics, and the Corporate Economy” and “Happy 150th Anniversary, Italy,” the authors offer examples of rules and regulation provided either just in the interest of specific minority groups and/or without a proper understanding of the needs of the Italian economy. A further explanation, borrowed from North and his associates’ most recent contribution, points in the direction of the interaction among various organizations, rather than in the dynamic in within individual ones. ^{Footnote 6} For example in “Institutions, Politics, and the Corporate Economy,” a clear struggle is identified between the business elite (and its representative organizations) and political parties, and, in “Happy 150th Anniversary, Italy,” between the public administration and the world of industry (as well as among different football clubs within the national football league). In a complementary way, in “The Ghost in the Attic,” the lack of dialogue between industry and research organizations, along with the lack of a mediating organization, is seen as one main causes of the inefficiency of Italian institutions in promoting innovation.

Although a general agreement on the features of Italian capitalism clearly emerges, a conclusive assessment on its long-run performance it is harder to reach, as it naturally depends on perspectives and expectations. The inhabitants of Florence admiring the new Filippo Brunelleschi Dome at the middle of the fifteenth century, at the time of the Italian economic supremacy, had different expectations about the future of the peninsula than the eighteenth-century merchants of Venice facing fierce, and ultimately winning, Dutch and English competition. ^{Footnote 7} Similarly, only a few optimists would have imagined in 1861 that a century later Italy would have been among the world industrial leaders, and very few pessimists in 1961, in the middle of the “economic miracle,” would have thought that the future generations would face much bleaker economic opportunities.

Such differences are also reflected among scholars when looking at the Italian economic pattern since unification. For example, even a rather objective indicator such as gross domestic product (GDP) growth has been read and interpreted in the literature in very diverse ways. Some authors provide a narrative of a consistent upward trajectory, ^{Footnote 8} whereas other scholars describe Italian economic growth as a long process of convergence with two tails of disappointing performance, ^{Footnote 9} and a third interpretation could suggests that Italy had two peaks of successful economic growth (1900–1913 and the 1950s–1960s) surrounded by a suboptimal pattern.

In this sense, this forum is no exception and the reader will find in the various articles—which, however, follow an unified focus, mainly concentrated on the role of institutions—a homogenous body of findings and a certain degree of diversity of opinion. The time perspective of the analysis and the variables considered, as well as the perception of the position that Italy should have in the international arena all contribute to explain this result.

This special forum is dedicated to the memory of Francesca Carnevali, who witnessed the first steps of this project, actively participated in its discussion, and constantly encouraged this group of authors to persevere in their efforts.