The Local Government’s Role in the Internationalization of Italian Small and Medium Enterprises*

This paper focuses on analyzing the innovation of public services, as begun by Local Government Authorities in Tuscany for the internationalization of Small and Medium Enterprises. The first part of the essay will highlight the service innovation process consisting of several overlapping phases and related both to the delivery dimension and to the outcome dimension. In view of this, the second part of the paper will concentrate on how the competitive approach of the service sector has ultimately persuaded the Local Government to take on a strategy inspired by competitive quality based on customer-led service innovation. As a final point, the paper will examine the empirical evidence provided by two cases offering significant proof of the modernization process undergone by public utilities in Tuscany. Such analysis will define how pubblic service delivery and outcome dimension have been innovated by two different bodies (Promofirenze and Toscana Promozione), created by the Local Government Authorities for the internationalization of Italian SMEs, and more specifically, of Tuscan Businesses. In such instances, the process of innovation has been found to activate the creation of new public services aimed at encouraging the circle ‘perceived quality-satisfaction-loyalty’ of customers -. 1. Service Innovation: The Theoretical Reference Model In order to address the process of innovation that is taking place within local service, it is appropriate first of all to clarify the meaning of innovation as the concept is used in this paper. We will then attempt, in the subsequent paragraphs, to delineate a model of innovation, among possible models, that can be applied by the Local Government Authorities (LGA) entrusted with provision of public services. We will analyse the theme of service innovation by drawing a distinction between two main alternatives: radical innovation versus extension of existing services (1). By radical innovation we mean the creation of an offer whose components are entirely new (core services, peripheral services) and creation of the corresponding delivery system (contact staff, physical environment and support system, client participation, internal organisation, relations with other clients) (2). By extension of the existing service offer, on the other hand, we mean the addition of new peripheral services or changes in the service offer while leaving the core services unchanged. In the case of service innovation undertaken by LGA, both of the above described innovation typologies may coexist. However, we will focus specifically on radical innovation as we believe it has greater potential for a positive outcome in terms of “perceived quality-satisfactionloyalty” than is the case with mere extension of existing services. It is widely recognized that independently of the sphere of activity, the innovation process in service enterprises is characterized by special features that lead to difficulties in implementation. This phenomenon, well acknowledged and documented in service marketing studies (3), is due to the characteristics of the services themselves such as intangibility, simultaneity of production, distribution and consumption stages, heterogeneity, client participation. In our view, such characteristics imply that service innovation should be conducted according to pathways that must be set in a combined process. This is quite different from the situation within manufacturing enterprises, where the physical product is clearly quite distinct from a given production process, even though the physical product cannot be created without the latter. By contrast, in service enterprises the outcome dimension (the service) and the process dimension (the delivery system) are inextricably linked. It follows that in service enterprises the innovation processes concerning the outcome dimension evolve hand in hand with delivery system innovation: whenever the one is affected, the other will also inevitably be modified. In this sense, the combined process of service innovation generates an offer whose components are new, that is to say, a radical innovation. Debate on innovation process phases has led to the proposal of a number of different approaches (4). Here, since we are focusing on the nature of service innovation as a combined process, we will refer specifically to the ensuing concept of “combined design” (5). This approach will allow a straightforward and realistic analysis of the form of innovation undertaken by LGA. The combined design model involves a series of steps: a) selection of the needs and participation skills (in the delivery process) of the target segment ; b) definition of these needs and skills in terms of outcome and delivery attributes of the service; c) competitive analysis of client perceptions of the attributes; d) translating the attributes into “technical”