The Costs of Inter-Firm Networks

Scholars and economic observers suggest, almost unanimously, that inter-firm networks may possibly be a way to overcome the obstacles to the competitiveness of Italian industry represented by the small size of the firms. This paper points out that the same mechanism (i.e. the network) that favours cooperation among firms in achieving scale and scope economies and enjoying the benefits of agglomeration and information dissemination may have negative effects on agents inside and outside the network and decrease the static and dynamic efficiency of resource allocation.