A Way Towards Relaunching Growth: Becoming Essential along the Supply Chain

Our paper analyzes the growth potential of the Italian industrial system, in order to devise a more efficient allocation of the limited available public resources for R&D. Our focus lies mainly on two topics. At first, in the current global economic environment, enhancing the value of goods and services produced is a priority over abating production costs. Secondly, supply chains play an increasingly significant role in the market for high-tech goods and services. Hence, the economic development of any geographical areas is likely to require the specialization in some of the nodes of the supply chain rather than the presence in all of its stages. Therefore, being essential in the links of the chain that display the most prominent growth potential is key to economic development. Two theoretical models conceptualize the idea of essentiality and examine its welfare implications. Then, we illustrate some economic and statistical indicators that enable us to proxy the degree of essentiality of a given sector. We use these indicators to actually measure the essentiality level across sectors of the Italian economy. Based on the results, we draw policy implications on the criteria to allocate public funds for R&D.