Abstract

The paper analyses the production upgrading supported by investments in quality and brands by Italian firms. To this aim we use the Bank of Italy's survey on manufacturing firms located in industrial districts. Our results show that: 1) advertising is correlated with a number of firm features (size, export share on total sales, use of market analysis and design, and availability of a firm-owned commercial network); 2) firms that make more use of advertising play a leading role towards small and medium-sized firms in the district; 3) outsourcing from outside the industrial district is common for advertising. Not-withstanding the potential endogeneity problem in cross-section estimates, our results are consistent with the view that firms producing high quality goods advertise more in order to signal the quality of their products.