The role recovered by small and medium sized enterprises (SME) in the course of economic growth and development, has recently become the subject of revitalized and growing analysis. The aim of this article is to criticize the approach that has commonly been adopted by district economists, and to propose a new way, in which social communities, the social milieu and the relational networks are no longer the point of departure of the analysis, seen as merely as a constraint to private initiative, but become the object of the analysis itself.
The meaning of this paper is two fold. On one side a country like India needs to reinforce its industrial competitiveness after the impressive process of liberalization that has been put in place during the 90s.
Certainly, SMEs are among those economic agents that have suffered the most as a consequence of the reforms introduced under the pressure of the Bretton Woods institutions by Rao's government. A second motivation comes from the need to give to researchers and cluster economists a new point of view on the relevance of industrial districts. The whole literature in this domain is, in fact, based on the idea that clusters are not only an economic phenomenon, but primarily a product of a network of social relations with specific characteristics.
However, even if a better understanding of the linkages within industrial districts and their role in inducing efficient technological development - that is technological development associated with the identification of competitive industries - is vital to the identification of viable technology-related policies for the growing Indian SME sector, it is my opinion that economists have often been too concerned in analysing what social features are at the origin of industrial districts, without considering what strategies focussed on the development of local small entrepreneurship can do for the development of social structures themselves. In other words, the literature on industrial districts is remarkably biased towards a functionalist approach, from society to economy, and doesn't highlight the bi-directional interactions that exist between the two.
The article is organized as follows. First, I will review the role that economic planning in India has reserved to SMEs, having Gibrat's law as theoretical background. The second section will be focused on the literature that treats industrial clusters in developing countries. In particular I will refer to the never-ending debate about the actual existence of a "cluster model". The last part of the paper is finally devoted to the design of a different approach to industrial district development, with particular reference to the effects that a diffused entrepreneurship has on the work culture.