Regione del Veneto - U.O. Sistema Statistico Regionale
Share in Facebook Share in Twitter Share in Google+ 
Statistical Report 2013
Chapter 3

Changes to the economic system

Economic systems constantly evolve and transform. This chapter looks at the changes of Veneto's economy through a time series analysis of the production of wealth in comparison with other Italian regions as well as a study of the development of the added value of each sector compared using shift/share analysis, a technique which enables the growth of added value to be broken down into components that consider the contributions of various development factors, thus allowing a better interpretation of the dynamic of the wealth produced. Some components deemed responsible for the biggest changes in the economy over the last decade are here analysed: globalisation which, through the development of trade and production flows, has become a motivating factor for the competitiveness of the territory; Research and Development which has been an important lever for triggering the changes and plays a large role in feeding the strategic entrepreneurial process.

3.1 Time and territorial comparisons of Veneto (Note 1)

Can the famous 'Veneto model' be defined as outdated? From the time series analysis of the main economic variables, Veneto emerges as an affluent region, with a per capita income higher than both the Italian and the European average. The average growth of the region's GDP is more dynamic that of Italy, although it slowed down at the turn of the millennium, when the economic dynamism that characterised it in the nineties, allowing it to be counted among the industrial powers of the time, was left behind.
The economic history of Veneto was studied through the period 1995-2011 (Note 2) and during the subsets 1995-2000, years of wellness, 2000-2007, when the GDP trend started to fluctuate and finally 2007-2011, the years of the great crisis.
Considering the entire period 1995-2011, Veneto's GDP grew on average by 0.9% a year, as did Italy's. This result arrived after the strong average annual increase of the period 1995-2000, equal to 2.4% (1.9% for the whole of Italy) to which the 2000 exploit contributed especially: the 2000/1999 percentage variation was equal to +5%. The years 2000-2007 saw a growth in GDP equal to 1.3% (similar to the national figure): after the weakness of 2002 (-0.8%) good recovery was seen especially in 2004, +2.7%, until the percentage variation of 2007/06, +2%. Finally, the latest period 2007-2011 saw a reduction in wealth of 1.4%: the drop in 2009/2008 of 5.5% strongly affected the entire period.
As described in the first chapter of this report, the actual value of Veneto GDP, after having reached its peak in 2007, returned in 2011 to values similar to those of 2004. Actually, the GDP in the autonomous province of Bolzano was the only one to return to pre-crisis levels (2007) in 2011, whilst in the rest of the country, recovery was only partial: for the entire North of Italy, the level of 2011 was the same as that of 2005, for the Centre to that of 2004 and for the South it fell to that of 2000 (Note 3) .
In a territorial comparison, Veneto had the highest development of all the regions in all the periods, except during the crisis period when it experienced a bigger decline compared to the other economically strong regions of the North, such as Lombardy and Emilia Romagna, perhaps due to its economy which still strongly relied on manufacture and international trade, thus it was more affected by the global recession. (Figure 3.1.1)
Let us perform the same analysis at the macro sector level. The Veneto agricultural sector, which in 2011 represented 2% of the actual wealth produced in Veneto, in the period 1995-2011 showed a variation of 0.2%, given by a significant growth within the period 1995-2000 (+2.6% against +2.1% of the Italian average), a decrease was experienced in 2000-2007 equal to -1.5% (-0.5% for Italy) and a stasis in the period 2007-2011 in which the other sectors suffered more (0.1%, against -0,5% for Italy). In comparison to other regions structurally similar to Veneto, only Lombardy obtained better performances in this sector (a smaller sector in that region, representing only 1.2% of the total added value). (Figure 3.1.2) (Figure 3.1.3)
Industry in the strict sense, or rather the industrial sector excluding building, is an important sector for Veneto economy as it produces 27.2% of the entire added value. In the period 1995-2011, its annual growth was 0.7% and represented one of the best performances in the whole of Italy, only exceeded by Abruzzo and Molise and better than the negative rate of the main industrialised regions of the North.
The best period for Veneto industry was definitely before 2000, when the annual growth rate was equal to 1.9%, whereas the national average was 0.9% and the rates of competitors were lower. Manufacturing in Veneto also proved to be competitive in the period 2000-2007, +1.1% per annum (the national average was 0.8%): despite the crisis in 2002/03, recovery in the years 2006 and 2007 was substantial. Finally, during the period 2007-2011 the decrease continued at -1.5% per annum, against -2.8% nationally, -2.5% in Lombardy, -2.3% in Piedmont, -3.7% in Friuli Venezia Giulia and -2.5% in Emilia Romagna. The figures seem to suggest that here is a hard core of manufacturing businesses able to respond to the crisis and support the economy even in difficult times. In this phase in which the advanced economies pointed towards tertiarisation, the role that industry plays must not be forgotten.
Advanced countries have yet again become aware of the crucial importance of manufacturing activities for durable and sustainable growth. After the finance trend in past years, Barack Obama led the way in the United States for the return of the crucial role of industry in the overall balance of the economy, so much so that the latest statistics showed a surprising increase of employment in US factories.
The European Commission also supported it: 'The Single Market, with 500 million consumers, 220 million workers and 20 million entrepreneurs, is a key instrument in achieving a competitive industrial Europe. One out of four jobs in the private sector in the European Union is in manufacturing industry, and at least another one out of four is in associated services that depend on industry as a supplier or as a client. 80% of all private sector research and development efforts are undertaken in industry - it is a driver of innovation and a provider of solutions to the challenges our societies are confronted with.' (Note 4) (Figure 3.1.4)
The building sector represents 6.1% of the entire added value in real terms. During the period 1995-2011, the sector's annual growth was 0.8% (0.3% at a national level). In Veneto, the development of this sector was more delayed than in the other Italian regions: within the years 1995-2000 there was an increase of 0.4% per annum (1.1% for Italy), whereas for the period 2000-2007 the annual increase was 4.8% (2.5% for Italy). The biggest increase was experienced in 2002 and 2005 and in 2006 the added value reached its peak, in real terms: 9,396 million Euros at 2005 prices. The years 2007-2011 represented a downturn, with an average annual variation of -5.3% (-4.3% at a national level), although this decline slowed in 2011, when a decrease of -0.3% was recorded compared to the previous year, probably also attributable to the "Piano Casa" (Note 5) introduced with the Law of the Region of Veneto, that provides for extensions and/or demolition and reconstruction with an expansion, notwithstanding municipal, provincial and regional regulations. (Figure 3.1.5)
Services represent the most important economic sector for Veneto: 65% of the overall added value. The whole period analysed, 1995-2011, experienced an average growth rate of 1.2%, equal to the national figure. The period of maximum growth was from 1995 to 2000, +2.6% per annum (2.2% for Italy), followed by an increase by 1.3% in the years 2000-2007 (1.4% for Italy) and a negative variation, -0.9% in the crisis years 2007-2011 (-0.3% for Italy). In the last period, the decline experienced in 2008 and 2009 affected the result significantly, but this was followed by the recovery in 2010, +1.4%, and the stability of 2011, +0.4%. The maximum value produced by the sector was in 2007 and the collapse of the crisis has not yet been recovered: in 2011 the values returned to those of 2004. (Figure 3.1.6)
The components of Veneto demand, consumption and investment (Note 6), in the entire period of 1995-2010 recorded annual average percentage variations of 1.4% and 1.2% respectively. Over the years, the trend was similar, except during 2007-2010 when there was a sharp decline in investments, equal to -3.9% (-4.6% for Italy), all things considered, consumption was stable, -0.2% (-0.3% for Italy).
Taking all the Italian regions into consideration, the effects of the recession in 2007-2010 affected the components of demand in different ways: investments recorded a generalised contraction, whereas consumption maintained a positive trend in some cases. In particular, final domestic consumption maintained substantially stable in the North-West and the North-East, with significant increases only in the autonomous provinces of Trento and Bolzano (+1.1% and +0.4% respectively) and in Emilia Romagna (+0.4%), whereas the dynamic was slightly negative in the Centre, with significant decreases in Umbria and Marche. The contraction of final consumption was particularly marked in the South (-1.3%), especially in Campania and Sicily.
Fixed gross investments suffered high intensity decreases in all areas, with average annual decreases between 3.7% in the North-East and 5.5% in the Centre.
In the North, the most significant decrease was registered in Lombardy, whereas in the Centre the sharpest decline concerned Tuscany and Marche. In the South, where investments in the period suffered an annual average decrease of 5.2%, Molise, Sardinia and Campania were affected by particularly large decreases.
However, some regions experienced a positive trend in investment expenditure: Umbria, Abruzzo, Puglia and the Aosta Valley. (Figure 3.1.7) (Figure 3.1.8)

Figure 3.1.1

Annual average percentage variations of Gross Domestic Product per region (chained values, base year 2005) - Years 1995-2011

Figure 3.1.2

Annual percentage variation of the Gross Domestic Product and the Added Value per sector. Veneto - Years 1995:2011

Figure 3.1.3

Average annual percentage variations of Added Value in agriculture per region (chained values, base year 2005) - Years 1995:2011

Figure 3.1.4

Annual average percentage variations of the Added Value of industry in the strict sense (*) by region (chained values, base year 2005) - Years 1995:2011

Figure 3.1.5

Annual average percentage variation of Added Value in building per region (changed values, base year 2005) - Years 1995:2011

Figure 3.1.6

Annual average percentage variation of the Added Value in services per region (chained values, base year 2005) - Years 1995:2011

Figure 3.1.7

Annual average percentage variations of domestic final consumption per region (chained values, base year 2005) - Years 1995:2010

Figure 3.1.8

Annual average percentage variations of fixed gross investments per region (chained values, base year 2005) - Years 1995:2010

3.2 Components of business cycle development: shift/share analysis (Note 7)

In order to follow the evolution of the business cycle and identify the contribution of the various components, the shift/share analysis was used, a technique enabling the growth of a concerned variable, in this case the added value, to be broken down into components that consider the contributions of various development factors, thus allowing a better interpretation of the dynamic of wealth produced.
The technique used enables the effect of three components to be isolated: the trend component, the structural component and the local component. The first expresses the extent of added value growth in the entire territory of reference, i.e. the country's; the second expresses the contribution provided by regional productive specializations, which is affected by the presence in the territory of sectors that grow quite quickly. The third component expresses the growth difference between the region and the country without taking into account the effects of the sectoral composition of the region, i.e. it represents the extent of the independent growth capacity of the area: for example, contributing to the growth of the local component are the characteristics of the territory related to the technological, infrastructural and logistical field, the expansion of management culture in businesses, the district know-how, the availability of raw materials or simply the special characteristics regarding the productivity of the work force operating in the territory.
This type of analysis therefore provides a new key for understanding the growth of added value, which separates the structural contribution of the various productive specialisations, from those that are the remaining local factors of development, i.e. those related to the dynamic nature of the territory. In fact, the presence of favourable productive specialisations, i.e. the most dynamic businesses of the economy, is a factor of independent progress and can be separated from the intrinsic and competitive factors, at least conceptually. (Figure 3.2.1)
The variation between 2010 and 2000 (Note 8) was studied, i.e. that which refers to the last ten years of official statistics available for the regional added value, a period in which there was a clear restructuring of the economy on the basis of the service sector and in which many phenomena influenced the economic dynamics, especially the globalisation of the markets, which led to the entrance of new players and the enlargement of the action range of businesses as a necessary condition for success.
The regions that recorded the biggest increase of added value from 2000 and 2010 are the Aosta Valley, Lazio, Trentino Alto Adige and Lombardy. Out of these regions, Lazio and the Aosta Valley were most favourably affected by the contribution of the structural component to the growth of added value, or rather the regions which felt the effect of the presence on the territory of faster productive specialisations. In the same way Calabria and Sardinia, regions with large service sectors, especially regarding the tourist component, benefitted from the favourable structural composition of production, although they didn't show growth particularly higher than the national average in the decade under examination.
By contrast, the structural composition of the production activities was a disadvantage to Veneto, Lombardy, Emilia Romagna, Abruzzo, Marche, Piedmont and Tuscany, regions that were affected by the slowdown caused by a penalizing structural composition, as they are rich in activity in those economic sectors proving less dynamic and did not grow as much as others in the period of reference. It is not by chance that the areas of the country where the manufacturing base is still relevant were less dynamic, as mentioned in the previous paragraph. Veneto, despite the considerations just made, recorded an added value in the decade a little lower than the national average, thus proving to have a positive local component, behind which lies a stable productive system, able to maintain the territory at a relatively solid level of economic development compared to the national trend, fuelling a sign of strong productivity in the area. (Figure 3.2.2)
The same analysis was made on the years hit by the economic crisis which started in 2008, and combined with the ten-year analysis, thus the behaviour of the local and structural components over a long period and over a period of recession could be compared.
The added value trend of the last three years shows the opposite situation compared to that of the whole decade: the period suffered from a sharp decline in the trend component, which expressed a generalised decrease in production value throughout the entire country. This basically led to a contraction in added value in almost all Italian regions: in most cases, the contributions to growth of the other two components remained consistent with those of the entire decade, except for some cases, for example, territories which mostly had a positive local component and then in the three-year period 2008-2010 the contribution of this to the overall dynamic was negative. In the last three years, Emilia Romagna and Lazio suffered a weakening of the local component; on the contrary, Abruzzo and Puglia benefitted from a local component in strong recovery compared to the national trend. In Veneto, the local component continued to give a positive contribution, demonstrating that in difficult times, the territorial network is of help. (Figure 3.2.3)
With regards to the structural composition of the production fabric of Veneto, the transport sectors, the property businesses and other services to businesses and people, in addition to covering a large share of the total regional added value, were among the sectors which grew the most from 2000 to 2010 and they continued developing even in 2008-2010.
The consolidated growth of businesses proves the centrality of these activities to the regional economy, essential because of their transversal nature and the support they give to the entire economy.
The other service sectors, trade, ICT, accommodation and catering and monetary and financial intermediation, grew throughout the entire decade, but maintained the equilibrium in the three year period 2008-2010.
The analysis showed that the agricultural sector was in decline over the entire decade under examination, a result of the restructuring that is still affecting the regional productive system, but not only.
In line with what was described in the previous chapters, in which it was described how the industrial sector was the most affected by the economic difficulties of recent years, the added value of few industrial sectors grew between 2008 and 2010: the only manufacturing sector to grow was the food industry, with an increase of over two per cent between 2008 and 2010, fuelled, as further explained in the following chapters, by wine-growing production. The extraction of minerals and water supply, two non-manufacturing sectors with quite a reduced weight out of the total industry in the strict sense, both grew in the same period by 10 per cent.
The metallurgy industry and the building sector were those most affected by the crisis which started in 2008: in the first few years of the 2000s, they were among the most dynamic manufacturing sectors but in 2008-2010 they recorded sharp reductions, -14.6% and -9.4% respectively. This same trend of decline in the last three years compared to the previous years, even if less significant, was observed for mechanics as well as optics and electronics, overall decreasing by 6 per cent between 2008 and 2010.
The manufacture of transport means, the chemical, textile and leather industry saw a reduction in the added value of production throughout the entire decade 2000-2010.

Figure 3.2.1

Growth of added value: local and structural component of the trend of added value per region - Years 2000:2010

Figure 3.2.2

Added value growth: local and structural component of the added value trend per region - Years 2008:2010

Figure 3.2.3

2010/08 percentage variation and 2010/00 percentage variation of added value per sector of activity and share of sectors out of the total added value. Veneto - Year 2010(*)

3.3 The drivers of change: Trade flows

Opening up to foreign markets is considered one of the pillars of regional economy. The changes that have taken place over the last twenty years which most influenced the structure and operation of businesses were the reduction of trade barriers and the revolution of logistics and communications. Therefore businesses had to start operating in a much more integrated manner on a global scale, whilst those that operated on a purely local scale found themselves in difficulty. This analysis describes the changes occurred in international trade that determined and still continue to determine a change in the strategies implemented by the businesses of the territory, in order to seize new opportunities created by the development of market globalisation.
Over time there have been profound changes in the dynamics of international trade flows, both in terms of sector and geography. Trade expansion is strongly associated with strong growth in the export of manufactured goods, particularly in production with high technological and knowledge content. Furthermore, the increase in the fragmentation processes of production cycles among more countries has led to a growth in the trade of intermediate products (Note 9) and instrumental goods (Note 10). (Figure 3.3.1)
From a product type point of view, the contributions most relevant to world trade growth in the first few years of the new Millennium can be attributed to trade in chemical and pharmaceutical productions and oil refining (22.1%), raw materials (14.1%) driven by the sustained dynamic of their international prices, transport means (10.5%), largely due to car sales (7.9%), electronic production (9,6%), agri-foods (8.3%), mechanical production (7,9%) and metallurgy (7.7%). With regards to the average annual growth rate of the period considered, the sectors that recorded a better dynamic than the average were the raw materials sector - reaching a 19% share of the world trade of goods - the chemical-pharmaceutical sector, the steel sector and agri-food production. (Figure 3.3.2)
The significant growth of some emerging countries has led to a shift of world trade that has generated a new equilibrium of global wealth distribution. The formation and dissemination of international production networks has allowed some new emerging economies to notably increase the technological content of their exports. This process has led to the export of these countries coming close to that of advanced countries, gaining sectors with higher added value of exported goods.
Between 2000 and 2011, the main contribution to world import growth was from countries of the European Union (35.9%), even if the weight of their import decreased by around five per cent, going from 37.5% in 2000 to 32.8% in 2011. The second geographical area for contribution to import growth was East Asia (26.7%), which reached almost a share of 28% out of the total world trade, followed by North America (10.8%), which, like the EU, recorded a decrease in its share, equal to around eight per cent. The contribution to world import growth of European markets not belonging to the EU is expected to be around seven per cent, whereas for Latin America and the Middle East, it was a little higher than 5%. The importance of the role that new economies play in international trade was further confirmed by the calculation of the average annual growth rate of import: all geographic areas, with the exception of North America and the European Union, recorded annual increases higher than the world average with a peak by 19.3%, with +19.3% attributable to the Central Asian markets.
At a national level, the three regions which contributed the most to the growth of foreign sales in the last twelve years, explaining over 55% of the increase of national export, were Lombardy (+27.7%), Emilia Romagna (+16.4%) and Veneto (+11.5%). However, the increase in foreign sales of these three regions, the top three with regards to export value, have slightly different dynamics: the average annual growth of Lombardy is in line with the national figure, Emilia Romagna recorded a higher annual growth rate, while that achieved by Veneto exporters was a little less than the national average rate. These three leader regions were also affected by the international crisis in the period 2008-2012, always maintaining however a positive annual average variation.
The highest average increases were experienced by two insular regions, that benefitted from the increase in the price of raw materials. (Figure 3.3.3)
Veneto exporters' adaptability to the changed conditions of world demand is fuelled by the continuous efforts of diversifying commercial outlets. Foreign sales performances in the last few years have been linked to good projection on the most dynamic markets. Between 2000 and 2012, a growing presence in the markets of emerging economies was associated with the gradual decline of specialisation to the EU area. In fact, if the contribution to Veneto export growth in the last twelve years was still closely related to sales to mature markets, in the period in question, about 55% of new export generated can be attributed to the EU markets; however, the markets of the new emerging economies recorded the highest average growth rates.
Veneto export to all the geographic areas of the new economies, with the only exception of Latin America, recorded higher annual growth rates than the regional average, with peaks in Central Asia (+13.2%), Eastern Europe (+8.2%) and the Middle East (+6.5%). In the last five years, Veneto export to Latin America, although demonstrating a lower growth than average in the long term, experienced a large recovery, recording one of the highest average growth rates (+4.5% per annum). (Figure 3.3.4)
Greater propensity to serve the moat dynamic markets is associated with placement on the medium-high end range of exported products, especially with regards to precision mechanics (Note 11)- for many years one of the flagships of high-tech regional production. By observing the dynamic of export in the manufacturing sector and aggregating the basic sectors into classes based on the technological content of the goods, we see that the sector of goods with medium-high technological content has become the most representative of regional export, absorbing more than 39% of the entire value of regional foreign sales. Furthermore, in the last twelve years more than half of the increase of export generated by businesses in Veneto can be attributed to this type of goods. The increase of export of this type of goods significantly affected the products of the mechanical sector, electrical appliances and the optics industry. In these last years, following the high automation of production processes and its high capacity to innovate products, mechanical engineering in Veneto has been able to offset the lesser demand from advanced markets with a more favourable trend in the demand for machinery from emerging countries. The other component of intermediate content goods has also increased: the share of export of the medium-low technological content goods sector increased from 15.9% in 2000 to 19.2% in 2012. This sector, boosted by the export of metal machining, contributed to the increase of regional export seen in the last twelve years with a share a little higher than 30%, recording an annual growth rate equal to 4.2%.
The share of export of low technological content goods in twelve years lost more than five per cent, falling from 41.21% in 2000 to 36% in 2012. Its contribution to the growth of Veneto export, in the period in question, was 17.4%. While the exploit of the agri-food sector, driven by wine export, and the stability of the fashion sector is of note, a sharp decrease of production related to furnishings was recorded, with a negative contribution to export in the last twelve years of around seven per cent.
The contribution to the negative growth of high-tech goods was due to the sharp contraction of export in the aeronautical and aerospace sector: the positive contributions of the electronic sector and pharmaceutical industry were not able to offset the decline in foreign sales experienced in aerospace production. (Figure 3.3.5)
Specialisation in some production sectors characterised by a higher growth of world demand sharply increased, such as that of the mechanical sector and the metallurgy sector. Foreign sales of machinery represent the top sector in regional export (19.5%) and contributed to 27.5% of export originated in the last twelve years. The share of metal machining export grew by around five per cent, increasing from 7.6% in 2000 to 12.4% in 2012, and contributed by 26% to the export of the twelve years in question. The metal sector became the third sector for regional export, recording an annual growth rate among the highest. The development of the export of products in the agri-food sector was positive and higher than the average, the companies of which have been rapidly increasing their international presence to overcome the prolonged deterioration of domestic consumption. In the last twelve years, export of the sector has grown by seven per cent on average pro annum and has generated 17% of the total increase in regional foreign sales.
The composition of foreign sales of Veneto businesses, compared with the structure of world trade, continues to be influenced by some sectors distinguished by the lowest global demand growth rates. For example, regional exports of the fashion industry and furnishings sector, which are affected by the increasingly stiff competition of countries with low labour costs, continue to be significant in the composition of regional export. However, in the last twelve years, they have recorded an average annual growth of less than one percentage point, leading to a slight reduction of the weight of this sector. The success on the international markets of these products should therefore be connected with the combination of brand and design, which has become crucial when facing the competitive challenges presented by new emerging countries. (Figure 3.3.6)

Figure 3.3.1

Average annual percentage variations of world trade (*) per sector - Years 2000-2011

Figure 3.3.2

Average annual percentage variations of world import per geographic area - Years 2000:2011

Figure 3.3.3

Average annual percentage variations of export per region - Years 2000-2012

Figure 3.3.4

Average annual percentage variations per geographic area - Years 2000:2012

Figure 3.3.5

Veneto export variations per technological level of good: average annual growth rate percentage 2012/2000, contribution to the growth percentage 2012/2000 (*) and percentage share 2012

Figure 3.3.6

Average percentage variations of Veneto export per sector - Years 2000-2012

3.4 The agents of change: the businesses

The dynamic of the active Veneto businesses in the last three years confirms that the change of the regional production system is still in full swing: in fact, the service sector still represents over 54% of the regional production system (over 65% excluding the agricultural sector). The businesses that suffered the most from the recession in 2009-2010 are definitely manufacturing companies, -1.9%, followed by those operating within the building industry which fell by 1.7%. The transport sector is next with a decrease of -1.8%, followed by trade, -0.2%. The other sectors have kept increasing, especially the 'services to businesses' (+1.9% in the three-year period), companies operating within the voluntary sector 'social and personal services' (+1.5%), those that work within tourism, 'hotels and restaurants' (+1.4%) and the banks and financial companies (+1.2%). (Figure 3.4.1)
The difficulties affected all the manufacturing businesses in Veneto: metallurgy, fashion, the timber industry, the printing industry, the furniture sector as well as jewellery and sporting goods, which together make up over 70% of Veneto manufacture; they all closed the period 2009-2012 with negative average annual variations of at least 2 or 3 per cent.
The food industry was better able to handle the difficulties than the other industrial sectors, remaining quite stable in the three-year period considered (-0.5%). (Figure 3.4.2)
Businesses founded in 2005 and still active in 2010: how have they changed? Studying a panel of businesses founded in the same year, in 2005 in our case, and still active, is useful for understanding their performance and the changes occurred over time.
From the analysis of the percentage of businesses with employees still operating in 2010, 5 years from their establishment in 2005, it showed that Veneto was among the regions with one of the highest survival rates, 55.1% compared to the national average of 49.9%.
For Veneto, this percentage is greater than the national average in the sector of industry in the strict sense 55.1% and in services excluding trade, 56.1%, whilst it is lower in the sectors with greater turnover: building 48.6% and trade 51.4%. Survival one year after establishment is generally very high; it should be pointed out that the rates of companies founded in 2009 are relatively the lowest, further proof of the particularly unfavourable economic situation in which they had to take their first steps.
In a comparison of the provinces, survival rates were not that different from Veneto, only the provinces of Padua and Belluno were higher. (Table 3.4.1)
The average size of businesses with employees, both in the year of establishment and the subsequent years, is an important performance indicator able to reveal the growth of the businesses in employment terms.
Businesses with employees, still surviving five years after their establishment, increased on average by an initial value of 1.4 employees in 2005 to 2.3 in 2010 (Note 12) .
In industry in the strict sense, there was a bigger size in the year of establishment and a greater growth in the five years of survival analysed (from 2.0 to 4.2 average employees). It should be noted that, overall, in 2009, size growth immediately slowed down compared to 2008, and continued in 2010; this phenomenon is more intense with regards to industry and building, while it is now less evident for trade. (Figure 3.4.3) (Table 3.4.2)
In terms of employment, the increase in the average number of employees of surviving businesses did not offset the mortality rate of businesses during the period. Businesses born in 2005 had 34,116 employees and the surviving businesses in 2010 employed around 30,854 employees; with regards to this panel of businesses, 3,262 jobs were lost equal to 9.6% of personnel in the year of birth, despite the surviving businesses having employed 12,313 employees, equal to 66.4% of the initial allocation. This demonstrates the strong structure of those who survive in the five year period. The only sector which experienced an increase in employment compared to the year of birth is industry in the strict sense (+21.7%); all the other sectors recorded a negative figure compared to 2005. It is clear that the loss of employees for all sectors, except for trade, coincides with the international crisis initiated in 2008.
These figures seem to confirm that the Veneto manufacturing sector, although hit hard by the current economic phase, has a sturdy entrepreneurial base and is even able to expand by dealing with the uncertainties. (Table 3.4.3)

Figure 3.4.1

Average annual percentage variations in the period 2009-2012 of Veneto active businesses per economic category

Figure 3.4.2

Average annual percentage variation of the period 2009-2012 of the Veneto active businesses per economic category

Table 3.4.1

Survival rates of companies established in 2006, 2007, 2008, 2009 in 2006-2010 per macro sector. Veneto

Figure 3.4.3

Survival rates and average size of businesses set up in 2005 and surviving in 2010 per sector of economic activity. Veneto

Table 3.4.2

Average size of surviving businesses: established in 2005 and surviving in 2010 per sector of economic activity. Veneto

Table 3.4.3

Employees of businesses established in 2005 and those surviving five years later, per sector of economic activity (number and percentage variation). Veneto

3.5 The levers of triggering change: Research & Development

In this historic time, research is a multiplier of productivity and as such it is a strategic lever essential for kick-starting mature economies towards recovery. The current phase is not only one of cyclic downturn but it is also one of systemic change, and there will be even more 'technological leaps' to give impetus to the recovery and to the development of a different economic structure. Aiming towards innovation is a real strategy against the crisis, also focussing on the macroscopic issue of the scarcity of some non-renewable resources on a global level and the pressure that this is placing on the prices and availability of some goods.
In the 2020 European Strategy the 'smart growth' priority axis promotes knowledge and innovation as the engines of our future growth. Europe encourages innovation and the transfer of knowledge in the whole Union, the optimal use of information and communication technology and supports the transformation of new products and services of innovative ideas. It has been recognised that in order to overcome the challenges that our society faces today, from energy efficiency to demographic changes, investments in research and innovation must be strengthened so as to guarantee a more efficient and more sustainable future, for society and for our territory.
A recent analysis conducted by the European Commission (Note 13) showed that despite the ongoing financial crisis, large EU-based businesses continue to use R&D to maintain their competitive advantage. Investments in R&D increased by 9% in 2011, compared to 6.1% in 2010. This increase matches that achieved by companies in the United States (9%), is higher than the world average (7.6%) and far exceeds the figure relative to Japanese businesses (1.7%). Intensive sectors of R&D showed a higher than average employment growth. Máire Geoghegan-Quinn, European Commissioner for Research, Innovation and Science, said: 'Knowledge is the lifeblood of European competitiveness, so the increase in R&D investment by EU companies is a call to arms in our battle for growth and jobs. We now need to match private sector ambition with increased investment in R&D at national and European levels. EU leaders should send a strong signal by approving an ambitious budget for Horizon 2020, our future programme for research and innovation.' In the European Union, the figures relative to the increase in R&D in 2011 are mostly related to the automotive industry (growth equal to 16.2%), which represents the biggest growth in investments in R&D in the EU (25%). Businesses based in Germany, which represent around a third of overall R&D investments in the private sector in the EU, recorded an increase in R&D investments equal to 9.5%. Companies in the United Kingdom and in France, which also represent a large portion of research in the private sector, recorded growth of 13.1% and 7.6% respectively.
The European Union is thus gradually going ahead towards its own goal, to invest 3% of GDP in R&D: in 2010 expenditure in R&D of the Union reached 2.01%.
In Italy, in 2010, 1.26% of Gross Domestic Product was intended for Research and Development, a value that led our country closer to the national objective fixed for 2020, equal to 1.53%.
However, in Veneto the effects of the crisis were felt: universities and public institutions cut activities deemed additional to minimum standards more so than companies, and therefore reduced spending on research. The incidence of spending of the GDP in Veneto in 2010 was equal to 1.04%, slightly lower than the year 2009, 1.08%.
The Veneto private sector, to which two thirds of spending on research can be attributed, in 2010 maintained the level of investments of the previous year (-0.2%); the public sector, however, that represents 8% of the whole expenditure, suffered a negative variation, -11.8%, while universities, accounting for one quarter of the total amount, recorded a decrease of 2.7%.
In 2010, overall spending on research and development in Veneto amounted to 1,502 million Euros, putting our region in fifth place in the Italian regional ranking, after Lombardy, Lazio, Piedmont and Emilia Romagna. Overall in Veneto, in full-time equivalents, there are 21,326 employees working in research and development, which is equivalent to 4.3 out of every 1,000 inhabitants in relation to the whole population, a value a little higher than the national average of 3.7 employees out of every 1,000 inhabitants. (Figure 3.5.1) (Figure 3.5.2)

Figure 3.5.1

Incidence of R&D expenditure out of GDP (percentage). Veneto - Years 2000-2010

Figure 3.5.2

R&D expenditure per institutional sector (million of Euros). Veneto - Years 2009-2010

3.6 Some reflections

The analysis carried out in this chapter provides some indications on the peculiarity of the Veneto production system. The metamorphosis from a mainly agricultural economy such as that prior to the second world war, to the high post-war industrialisation, until the tertiarisation trend that begun in the 1980's, allows us to understand the flexibility of the Veneto system that continues to adapt itself to the structural changes and different conditions of the national and global economy.
The Veneto industrial system, although hit hard by the international recession, still remains an important backbone in terms of labour force as well as wealth production boosted by the international trade of goods produced in Veneto. Furthermore, it should also be noted that the service sector, in addition to the large component related to tourism, is mainly composed of businesses that operate in services to support industry.
Being a region with such a strong international vocation, it has become important for Veneto to follow the recommendations of the European Commission identified through the flagship initiative on industry that promotes an 'integrated industrial policy for the globalisation era.' Such policy should improve the environment in which the industry operates through optimising the access to funding for businesses, strengthening and developing the single market, actively defending the rights of intellectual policy, improving infrastructure, activating new industrial innovation policies, regulating international trade and agreements and ensuring access to raw materials and critically important products; all this without forgetting environmental sustainability, thus addressing the issues of energy-intense industries, as well as social sustainability, with the expansion of the business' social responsibility.
Veneto manufacture has changed over time: since the mid 2000s Veneto has experienced a differentiation in production activities, with changes in the relative weight of the sectors, in line with the transformation process of Veneto production which sees some traditional sectors making way for new sectors with higher technological and knowledge content.
Thus this is why the more traditional low-tech manufacturing (Note 14) was subject of slow but steady reduction, going from 9.4% of Veneto businesses in 2005 to 6.4% in 2011, whereas the manufacturing sectors distinguished by specialised supply grew, in marked contrast to the general trend of manufacturing, from 1.8% of Veneto businesses in 2005 to 2.9% in 2011. The weight of such 'strategic' sectors in the regional production landscape is higher than the national average, which saw activities distinguished by specialised supply cover 2.1% of active Italian businesses.
Furthermore, the traditional industrial sectors in Veneto often produce medium-high end goods of ancient tradition and craftsmanship but innovative in design and cutting-edge technologies (Note 15). These products are finding important markets abroad and especially in emerging countries or recently developed countries which find owning a made in Italy product a new 'status quo'.
The service sector obviously remained strategic, especially in the recessive periods of the economic cycle. Even here there are big differences between the businesses that were heavily affected by the crisis of consumption in recent years and other sectors. For example, the high knowledge content service sector (Note 16) in recent years has been approaching a higher level of active businesses at the expense of other sectors: in Veneto, in fact, the proportion of such businesses in 2005 was 11.8%, increasing to almost 14% in 2011. In Italy, in the same year, 12.4% of businesses carried out service activities with a high knowledge content.
In all sectors, innovation played an important role in determining increases in productivity, greater efficiency in the use of energy and materials as well as in production processes and services, an improvement of both material and immaterial products.
Innovation can stimulate a much more rapid development and commercialisation of goods and services, as well as ensure great competitiveness in all sectors.
Both from the analysis relative to economic sectors and that on social factors point out the need to coordinate the education system with R&D activities and initiatives to encourage innovation more effectively, to guarantee greater consistency in scientific, technological and innovative cooperation, offering better access to funding and venture capitals and focusing the right attention on both competitivity and social challenges.