| Summary: | The main objective of this thesis is to analyse output flexibility and innovation in industrial districts by framing the central ideas of the industrial district literature within a rigorous neo-classical theoretical framework without losing sight of the intangible factors characterising industrial districts. A more formalised analysis of the dynamics of flexibility and innovation in industrial districts will enable a generalisation of the main findings to clusters of firms that have some key features in common with industrial district, namely district-type clusters. One of the main results of the model and of the empirical analysis is that in the case where firms need to be flexible to respond to demand changes, then firms prefer to be less vertically integrated and alternatively to be part of dis-integrated production system. The other important result, in support of the model, comes from the empirical study which shows that there is a strong link between networking along the supply chain (between suppliers and buyers) and innovation.
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