Why Study Business in Italy?
By Ray Shaw and Michael Chiariello, Founders, Internships Italia
There is little doubt of the value of studying abroad. This is particularly true for U.S. students who are aware of emergence of a new order in the Third Millennium. As a recent federal study reports, “Modern science, technology, and the internationalization of labor and commerce are changing the established order of things.”
Consequently, undergraduate participation in study abroad programs has doubled twice in the last 20 years and is expected to increase five-fold in the next decade. With 1 in 6 American jobs tied to international trade, corporate leaders—and Human Resource officers—seek applicants with global skills to cope with the challenge of globalization. The growth of study abroad is a response to that challenge.
This new reality is best described by the federal study, “Global Competence and National Needs,” as follows: “Graduates who prosper in this new environment will be those who leave school with an appreciation of global issues and cultures and . . . the new ways of the world. Study abroad should be the norm, not the exception, for American undergraduates, one of the signs of a well-educated college graduate.”
However, this needs to be more carefully delineated. Christa Olson, of the American Council on Education, argues that it is not sufficient “to encourage students to study abroad with the assumption that an ‘international experience’ ipso facto prepares students for a globalized world and a diversified society.” We know that not all study abroad programs are equal. So the assumption that there are no identifiable outcomes to differentiate programs needs to be challenged. Michael Vande Berg, vice president for academic affairs at the Council on International Educational Exchange, made a case for programs that emphasize mentoring, stating, “The research simply doesn’t point to having students participate in any old study abroad program and coming back with positive results.”
So we need to specify what we want students to learn and how we can demonstrate real achievements. Where and what to study become crucial questions. If the object of study is to learn more about another culture and language, there is no need to read further. However, if one desires to develop “the skills to operate effectively in multicultural and intercultural environments,” to quote a 2008 study by the Teagle Foundation, then perhaps a more practical engagement with the workday world of a different country is a better course to pursue. In this light, there is no better way to develop and demonstrate the attainment of such skills than a mentored internship of some sort. And, further, if one wishes to be challenged to adapt to a cultural and professional environment that contrasts significantly with North America, we suggest Italy as an option.
Italy as a Laboratory for Gaining “Global Competence”
Many American students come to Italy to study art and Italian culture or perhaps, in order to experience the culture more directly, participate in internships. In addition to areas of study specific to Italy, perhaps the most valuable experience Italy offers to students from U.S. universities is gained from working in a business environment with a national business culture and business style very different from that found in North American corporations. Sharp contrasts exist and, as preparation for living and working in an increasingly globalized environment, it is well worth American students’ effort to become not only familiar but comfortable with a business climate markedly different from that in which they are living and studying.
As such, we will examine these contrasts in several domains: cultural; legal; marketing/production; college/career preparation; and, human resource management.
Compared to the U.S., Italian culture is more “particularist.” There are rules and laws, but these can be applied differently depending on the relationship that exists with the person. In addition, Italians tend to have greater “uncertainty avoidance”; that is, they are less comfortable with ambiguity than their American counterparts. At the same time, they have a greater “power distance” than Americans, who tend to see their superiors and dependents as similar to themselves.
Italian businesses operate in a business environment that offers little protection from the legal system. As a consequence, Italians tend to be relatively risk averse. For example, banks only lend against collateral regardless of the merits of the purpose for which the loan is requested. Moreover, Italians put greater value on the relationship with their trading partners than is usual for U.S. businesses.
The legal environment offers a further contrast. While the U.S. has approximately 400 basic laws, and the UK has approximately 550, Italy has 2,000! Very few new laws in Italy abrogate existing laws, with the consequence that there are many cases of conflict among existing laws. (Although overwhelmed with bureaucracy and legal red tape, Italy has the highest rate of tax evasion in Europe at nearly double the rate of France, Germany, and the UK, and nearly four times that of Austria, The Netherlands, and Ireland.)
The average time for the conclusion of a civil case in Italy is between 12 and 15 years, and this can make debt recovery difficult, especially for a small company with tight financial resources. The slow legal processes create further difficulties such as when a manager who initially caused the problem is no longer in place to face the eventual legal consequences when a conclusion finally is reached.
In 2006, the World Bank placed Italy at No. 82 in an index of the difficulty of establishing and running companies in 175 countries compared to the U.S. at No. 3. The study took into consideration such factors as starting a company (Italy 52th most difficult), obtaining the required licenses: (Italy 104th most difficult), difficulty of hiring and firing staff (Italy 101th most difficult)), bureaucratic procedures and registrations (Italy 53rd most difficult), availability of credit (Italy 65th most difficult), protection of investors (Italy 83rd least protected), taxes (Italy 117th highest), difficulty of conducting international commerce (Italy 110th most difficult), strength of contracts (Italy 141st weakest) and closure of operations(Italy 49th most difficult). In contrast, Samoa went from being No. 183 on this table to No. 20 within one year.
It is worth noting that in 2001 the Italian economy with a GDP/Capita (ppp) , including submerged economy, was the fourth highest among the most important economies in the world, just a shade behind that of Germany. Since then, Italian business has had to switch production from price-sensitive products to less price-sensitive products with limited success.
Italian businesses lag behind U.S. business in the transition from the Industrial Era to the Information Age, and have a greater preponderance of artisan rather than entrepreneurial company owners/managers.
With regards to globalization, Italian businesses still tend to market their products in developed countries, with little success in expanding their sales to the more buoyant BRIC and other emerging economy markets.
Italian universities put more emphasis on students acquiring a knowledge of the facts, while U.S. universities place greater importance on the application of facts. In the U.S., career advancement tends to be more meritocratic, placing greater value on performance, whereas Italian companies place greater importance on loyalty and personal connections.
Human Resource Management
Human resource management in the vast majority of Italian companies lags practices common in U.S. companies. For example, there is still too much emphasis on financial incentives and little emphasis on the intrinsic incentives. As a consequence, Italian business is unable to realize the levels of innovation required to regain the position it enjoyed in 2001. In effect, Italian leaders tend to be “transactional” rather than “transformational” and Italian corporations tend to have either a “power culture” in the case of small to midsized businesses or bureaucracies in the case of larger corporations. Neither culture is conducive to the atmosphere of creativity necessary to produce fewer price-sensitive goods. This was not a problem when Italy had the lira as its currency, because the government was skillful in maintaining a weak exchange rate, which guaranteed the competitiveness of Italian-made goods on the world market.
In a 2004 study by Richard Florida of George Mason University, Italy ranked 10th or less for each factor: human capital, technology, and tolerance—all critical to the potential for high technology development. At the same time, investment in R&D as a fraction of GDP was approximately 20 percent of that of the U.S., which corresponded to 12 to 15 percent in terms of the real GDP, including the submerged economy GDP figure for Italy.
If one considers the attractiveness of Italy as a destination for investments from sources outside of Europe, even though Italy had the fourth highest GDP/capita of all the more important economies, its share was only 2 percent compared to 23 percent for the UK, and 19 percent for Sweden.
As a consequence, Italian business offers American undergraduates a different experience from working in a U.S.-based company. The difference is so great, even without consideration of the more scandalous problem of corruption, that any graduate who is able to do business in the U.S. and Italy is well prepared to do business in any country in the world.
Michael Chiariello, Ph.D. (email@example.com) is a professor of philosophy at St. Bonaventure University and director of a study abroad program in Italy, and Ray Shaw, Ph.D. (firstname.lastname@example.org) consults and teaches business subjects at John Cabot University, Rome, Italy. Together they formed Internships Italia,http://gb-lf.com/internships-program.html,which provides internship placement, supervision, and liaison to American students in Italy.