The paper addresses Fiat's lack of competitiveness in the medium and upper segments of the market. The main empirical finding is that the Italian company unsuccessfully tried to adjust the output mix upmarket as early as the 1970s. This attempt has not emerged from any previous account on Fiat, but it contributes to explain the failure of subsequent attempts to adjust the output mix upmarket in the 1980s and 1990s. The theoretical implication of the Fiat case concerns what in this paper is called ‘intangible specialisation’. This concept revolves around the relationship between routines, path dependence and the uneven level of competitiveness of car manufacturers in the different sectors of the market. Intangible specialisation in the design of small cars locked the company in the lower end of the market and reduced the scope for output-mix flexibility in spite of the technical flexibility of Fiat's production technology.
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