Innovative Start-Ups in Italy: Their Special Features and the Effects of the 2012 Law

Abstract

In 2012 the Italian Parliament introduced into Italian law a special section in the Companies Register and a large number of financial incentives to create a favorable environment for the development of 'innovative start-ups' (ISUPs). In this paper we compare ISUPs with other start-ups. In accordance with the eligibility criteria established by law, ISUPs show a striking capacity for innovation apparent in a higher incidence of intangible assets and the longer time it takes to begin selling their products. ISUPs also report higher investment rates and stronger growth in sales and assets, while their financial structures are characterized by higher capitalization and greater availability of liquid assets. Based on propensity score matching, we also highlight some direct effects of the 2012 law on their financial structures, almost exclusively on ISUPs operating in the service sectors: their external funding, either debt or equity, increases more than for other similar firms; a stronger rise in investment rates is specifically associated with a larger upsurge in their capital.

Financial constraints and the growth and survival of innovative start‐ups: An analysis of Italian firms

“…Directly related to our paper are the studies by Finaldi Russo et al (2016), Giraudo et al (2019), and Biancalani et al (2020) investigating the effects of the 2012 Italian law on YICs’ financial structures. Using propensity score matching, Finaldi Russo et al (2016) find that external funding (either debt or equity) has increased more for YICs than for other similar firms since the 2012 law.…”

“…And has it increased firm life expectancy and growth rate? Despite the relevance of the policy for innovation and growth in Italy (one of the causes of Italy's productivity slowdown is its low rate of innovation), to our knowledge, the only studies evaluating the impact of the 2012 law policy measure are those of Finaldi Russo, Magri, and Rampazzi (2016), Giraudo, Giudici, and Grilli (2019), and Biancalani, Czarnitzki, and Riccaboni (2020).…”

“…Based on propensity score matching, Finaldi Russo et al (2016) find that external funding (either debt or equity) has increased more for YICs than for other similar firms since the 2012 law was enacted. Focusing on the effectiveness and potential interrelations of different policy instruments offered to YICs at the same time and in the same institutional context, Giraudo et al (2019) highlight a sort of ‘institutional division of labor’ between the two main 2012 law facilities: firm access to a government‐guaranteed bank loan and fiscal incentives for venture capital (VC) equity investments.…”

The Italian Start Up Act: a microeconometric program evaluation

“…We furthermore use our results of the treatment effects estimation to conduct a cost-benefit analysis in terms of public cost of the program and its associated results. Our analysis contributes to the debate on the motivations and objectives of policies supporting innovative entrepreneurship (see also Finaldi et al 2016 ; Giraudo et al 2019 ; Menon et al 2018 ).…”

“…This literature covers different aspects of the Italian Law 221/2012. Finaldi et al ( 2016 ) analyze program participants of the years 2013 and 2014 and compare them to similar firms that did not enroll in the Innovative Start Up Act. They apply nearest neighbor propensity score matching based on covariates in the year 2012 and conduct a difference-in-differences regression in order to uncover possible treatment effects as changes in outcome variables between 2012 and 2014.…”