The rise of Milan as a global fashion hub: a demand-driven theory of agglomeration (1960-1980)
We investigate how Milan emerged as the Italian fashion hub by the early 1980s, even though the context favored competitive cities such as Florence, Turin, and Rome. Existing theories of industry hub emergence, such as Marshallian agglomeration, Klepperian spinoffs, institutional intervention, early technological advantage, or focus on complementing existing hubs, so far did not explain Milan's rise. We argue that Milan responded to unsatisfied demands, unlike hubs such as Detroit, Silicon Valley etc., where organizations created the demand, often through innovative technologies.
Thus, we complement existing theories focusing on supply-side dynamics to propose a theory of industry hub emergence based on demand-side dynamics. We suggest that Milan became a fashion capital due to fundamental shifts in demand that were subsequently satisfied by innovative organizational structures. We show that the elevation of Milan to a hub is an outcome of the ability of local firms to match the changing fashion needs. Evidence from articles in leading Italian fashion magazines indicates that after World War II, the increasingly professionally employed population demanded stylish, high-quality clothes that were affordable. Traditional Italian firms failed to satisfy this growing demand focusing on traditional expensive haute-couture (Rome, Florence), or on mass-produced textiles competing on low prices (Turin). Instead, Milanese firms followed the demand and created the ready-to-wear "Pret-a-porter" that fell in the mid-price segment.
We offer evidence that Milanese firms could create this segment because of their innovative organizational structures that gave prominence to the designers instead of the manufacturers, a revolutionary change at the at the time. Archival sources suggest that Milanese firms' structural innovation enabled them to give the city a celebrity status by creating a positive emotional response that affected stakeholder choices.
