The latest edition of the publication that analyses the economic results of medium size companies was presented at the end of April, a research project that a joint Mediobanca-Unioncamere working group has been developing for many years. The structure of this research has been well tried and tested over the years and it closely monitors a universe of companies that is of particular interest for the Italian economy and development: the average Italian industrial company, i.e. those with a workforce of between 50 and 499 employees and sales of Euro 15 to 330 million.
An average Italian company of about 4,000 employees is "worth" 16% of Italian industrial added value (which increases to 24% if we include the supply sector) and 17% of total Italian exports.
The history of medium size Italian companies in the last decade has been one of success. Compared to large corporations, medium size enterprises have boosted their employment levels at a faster rate, they have recorded better growth, they have boosted exports more and they have developed increasingly effective and extensive internationalisation programmes.
The facts are unequivocal: in the decade 1999-2009, medium size companies have increased their added value by 28% (while that of large companies has decreased by 7.8%), they have boosted exports by 58.9% (+32% for large companies), and they have achieved ROI (Return on Investment) profitability of 10.4% (large companies achieved 5.9%).
Financial statement analysis, breaking down the various indices, confirms that medium size enterprises are concentrated primarily in the manufacturing sector, and compared to large companies they have less recourse to financial activities to build up their profitability. Italian medium size companies tend to have a "leaner" structure, focused above all on the various aspects of output.
Although capitalisation is less advanced than that of their German and Spanish "counterparts", their financial structure remains solid. 53.7% of medium size enterprises merits an "investment grade" rating, the highest credit rating, while the Italian average for all SMEs is 34.3%, and 39.3% for manufacturing SMEs. Recourse to the Stock market and to private equity remains negligible. Listed medium size companies only account for 0.5% of the total.
In spite of their excellent growth and soundness, Italian medium size enterprises have a "tax rate", i.e. direct and indirect tax liability, of 45.5% (average for the decade), much higher than that of Italian large companies (32.9%) and of European multinationals (27.9%).
(export sales, 1999 index number = 100; 2009 results estimated for medium companies)
The history of medium size enterprises is also the history of Italian family-owned capitalism, which never breaks its links with its regional and local territory in spite of international expansion. Medium size enterprise has been aptly described as "dialectal and polyglot". The average Italian company has grown, but does not generally aspire to become too large or to lose its characteristic flexibility. The results support this choice: in the last decade, 654 companies have grown into large companies, but there has been an increase in the number of defaults for these companies. The bankruptcy rate rises significantly in the case of medium size companies that have grown beyond average size, although they remain sounder than the average for the system. The highest concentration of medium size companies is in the North-East- Centre of the country and in Lombardy. This region is the most densely populated (it accounts for 31%, with 330 in the province of Milan alone); two other regions with a large number of medium size companies are Emilia Romagna and Veneto.
There are 354 medium size industrial companies in Piemonte, which employ over 46,000 people and record sales of over Euro 13.3 billion. In spite of this concentration, the territorial gap seems to be slowly closing: there was a net increase of 366 companies, or 10.3%, drawing together the +5.4% in the North West, +10.4% in the North-East-Centre and +34.7% in the Centre-South and Islands. The latter increase is significant and is the result of constant annual increases, except for 2008, the year in which the universe of medium size enterprises contracted significantly as a result of the crisis in the financial markets.
Approximately 40% of the medium size companies also have their headquarters in districts or similar areas. These companies revealed a greater propensity for exports: this reaches 44.3% of sales for medium size companies that operate in recognised districts and 36% for those located in the other local manufacturing systems, compared to 33.1% located in other areas.
When the great global economic crisis began in 2009, medium size enterprises were among the first to be affected. But they were also the first to start to grow again and to look to 2011 with reasonable optimism. In a very recent investigation, medium size Italian industrial companies got their breath back in 2010 and for this year they forecast a further improvement in all economic indicators.
There was also good news on the employment front: last year, 30.5% of medium size enterprises began to expand their workforces again, gradually reducing recourse to "social shock absorbers". And to give a further injection of "quality" to their output, these companies have focused in particular on hiring skilled technicians.
Medium size enterprises have for some time identified internationalisation as their development model, sustaining it robustly as a way to recover from the crisis of 2009. Whereas in 2008 one third of medium enterprises exported only to the European Union, in 2010 this was down to 3%. Last year, 88% of medium size companies operated both in the EU and outside the EU (13% with the USA, 11% with Russia and Eastern Europe, 9% with Brazil, India and China, and 7% with Mediterranean and Arab countries). This year, medium size companies can see improved prospects in the USA and in emerging countries in particular, while there are clouds over Russia and the Arab countries.
In order to survive the hardship of the crisis and to recover efficiency even through organisational changes, medium size companies are also adopting a strategy of network contracts, which are an important instrument to increase the critical mass for certain corporate aspects (research, innovation, internationalisation, etc.) while maintaining the necessary flexibility of a leaner structure. Two medium size companies in three have recently declared that they have entered into network contracts, or intend to do so in the near future.