Mixed Consequences of Government Aid for New Venture Creation: Evidence from Italy
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Most countries have designed programsto stimulate the birth and development of new firms.One of the most important issues in evaluating theimpact of public entrepreneurial policies is toanalyze their influence on the post-entry performanceof the new ventures. This paper examines how the mostimportant government program to encourageentrepreneurship in Italy (the Law 44 program) affectsseveral aspects of the early performance of new firms.A sample of new firms receiving government aid iscompared to a matched sample of new firms notreceiving public assistance, i.e., ``control'' firms. The control firms were born in the same year, launchedtheir business in the same geographical area andoperate in the same industry classification. Resultsshow that the public program produces mixed effects.Government aid allows firms to have a higher level oftechnology. However, government funding gives rise toentrepreneurial start-ups, which are not fullyefficient. A discussion of these findings andsuggestions for future research are presented.
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