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A long-standing stance argues the Italian industrial system does not comply with the 'correct development process' because of its innovativeness shortage due to the skewed firm size distribution of its SMEs (Small and Medium-sized Enterprises). Such an approach, backed by innovation statistics, stems from the idea that 'a firm's growth equals innovation, which in turn equals competitiveness'. Yet these arguments both rely on a narrow concept of innovation and fail to match with historical facts. By putting the Italian industrial history into a Langlois's (2003) perspective, this article suggests that 'the Italian exception' actually represents one among several possible outcomes of the co-evolution among knowledge, technological progress, institutional development and aggregate demand dynamics. We further provide an analysis with very recent descriptive statistics showing that, even during the current crisis, 'not so big' has not meant 'not so competitive'. Therefore, innovativeness must be channeled in the right direction, because it concerns all those strategies allowing firms to 'buffer risks'. What the Italian industrial system really lacks is consistent institutional and structural policies facilitating firms' efforts toward new technologies. [ABSTRACT FROM AUTHOR]