Italian knitwear firms use an ancient method of production by which homeworkers use their own tools and workplaces to convert raw and semi-finished materials owned by large manufacturers into finished goods. This is quite different from the factory-oriented output used by other clothing and textile industries in modern industrialized nations. Lazerson (1993) notes that within both the Marxist and liberal paradigms of economic development, this sort of small-scale production would eventually give way to larger and more complex organizational forms, yet these firms persist in following the old ways. Lazerson finds that this is true in Japan as well, and in both countries "small firms dominate important production activities from numerical control machine tools to textiles" (Lazerson, 1993, 403). The issue is how efficient can this method be, and it is argued that Italian home production in this industry has shown that it can be as efficient as the factory production of knitwear represented by Benetton.
Can Italian home production compete with the factory methods of Benetton? The Benetton Group, with sales of $2 billion, is the largest Italian producer of casual wear. The Benettons entered the clothing industry 25 years ago, and 20 years ago they opened their first store. There are four Benetton brothers who run the company. In Italy they built their company into the country's most dynamic and successful apparel exporting company. In 1987 Benetton sold merchandise world $1 billion to 4,500 franchised stores in 60 countries, and these stores produced retail sales of $2.5 billion. The Benetton's have a stake of 87 percent in the publicly traded retail company Benetton SpA that alone is worth $950 million. The company has continued to grow through the development of new businesses as well as through increased sales. In the 1980s the brothers added stakes in several Italian banks, a mutual fund business, an insurance company,...