Abstract: Quality Control and Collective Reputation: The Case of Madeira Embroidery
Quality is one element of non-price competition, and the decision to produce quality items has various implications according to whether the means adopted is by incorporating added value or by introducing technology. Since quality control was not treated distinctly from the process of production, the case of embroidery on the Portuguese island of Madeira between 1850 and the 1950s is of particular interest as it presents stability of process of production (via the putting out system), yet was subject to different quality control mechanisms. Particular emphasis is given to a situation of market failure (1924-1934) which revealed itself in the form of a drop in the price, demand and reputation of the product and which led to governmental regulation of the quality of the output (1935). The traditional difficulty faced by governments of enforcing regulations was resolved by the intermediary action of an institution (a guild). Acceptance of the quality regulation came from the efficient firms which, since they sold speciality goods, were prepared to share the collective reputation based on aggregate quality. Severe informational asymmetries between consumers and producers explain the idea behind the creation of a regional brand. The sector of production and the functioning of the business structure as an industrial district, in the Marshall sense, explain the level of conflict and bargaining that arose between the firms and the Government which forced them to make investments. By doing so, the traditional form of organization of production was altered. How far and in what way the initial aims were achieved is one of the issues under analysis.