The dominant view about Italian Industrial Districts (IDs) suggests that firms within IDs finance themselves through internal sources alone. This view, based on Northeastern IDs - on which the mainstream literature concentrates - implicitly denies any potential role played by state subsidies available to small firms within the framework of national and regional industrial policies from the 1950s onwards. This thesis, focusing on a Southern ID, tests whether IDs can also emerge within the context of state intervention, and whether Southern IDs relied heavily on state funding in contrast with North-eastern IDs, which drew on public funds to a much smaller extent. The thesis employs a two-pronged approach, analysing the issue from the perspective of both the lending institutions and the recipient firms. It discusses the development of the 'Extraordinary intervention for the South' - designed to overcome Southern backwardness - and compares it with the national industrial policies. It moves on to provide a detailed breakdown of the extent to which firms in Southern Italy benefited from subsidised loans and grants more than firms in the North-east, where far fewer firms sought subsidies. The importance of subsidies for the recipient companies is studied using two samples of small manufacturing firms, within the Southern ID of Barletta and the North-eastern ID of San Mauro Pascoli. The analysis of the capital structure of the two samples confirms the greater reliance of Southern companies on subsidies, whereas private finance was more important for the North-eastern counterparts. However, subsidies to companies in the North-eastern ID appear to be more effective. The thesis concludes that the received interpretative framework regarding the types of finance used by companies within IDs is severely limited, in that the role of state subsidies cannot be neglected, particularly for Southern IDs, but also for the more prosperous North-eastern IDs.