Abstract
In this study, we test for the effect of public policies supporting entry in Italian regions on actual rates of new firm formation. To assess the effectiveness of entrepreneurship policy, we investigate the dynamics in six different sectors at the local level: Manufacturing, Construction, Commerce, Hotels and Restaurants, Transportation, and Financial Services . In addition, we investigate whether structural unemployment has an independent effect on new firm formation. In our analysis, we take into account other local factors, including economic growth, per capita value added, presence of an industrial district or a large metropolitan area in the province, and wage level. Note that regional economic characteristics may not only explain firm entry but also firm exit, and therefore net entry. In case of adverse economic conditions, self-employed workers may decide to prolong their entrepreneurial experience and do not close their business, particularly if they have no other way of earning a living. Hence, unemployment may not only exert a positive effect on gross entry but also have a negative effect on the exit rate. Findings indicate that entrepreneurship policy does not have an important impact on industrial dynamics, and that the positive effect of unemployment on net entry is mainly driven by a negative effect on firm exit. The latter result suggests a lack of dynamics in the Italian regional labor markets, where individuals are not able or willing to adjust their occupational preferences and switch between professions. The remainder of this study is structured as follows. We start with a review of policies favoring new firm formation in the Italian regions in Sect. 2.2, and a presentation and discussion of differences in unemployment rates across provinces in Sects. 2.3 and 2.4. Subsequently, we present a model to determine the impact of entrepreneurship policies and unemployment, as well as other relevant regional factors, on gross entry, net entry, and net exit for the 103 Italian provinces. Finally, in Sect. 2.6, we discuss the empirical results for the period 1997–2003, and Sect. 2.7 is the conclusion.
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Notes
- 1.
With industries dominated by SMEs and characterized by low entry barriers in which a positive impact of the unemployment rate on the rate of new firm formation should be detected (Audretsch and Fritsch 1999).
- 2.
The “Camera dei Deputati” is the Italian parliament. The “Normeinrete” web site is managed jointly by the Ministry of Justice and the CNIPA (the National Center for the Informatization of the Public Administration).
- 3.
In some instances, regional governments use the annual Budget Act for the regulation of a broad range of issues (Arabia and Desideri 2005). Generally, using the Budget Act for promoting entrepreneurship results in a less-frequent use of specific laws for new firm creation.
- 4.
See Appendix for a complete list. We refer to Piergiovanni et al. (2007) for a detailed description of the laws in Italian.
- 5.
L.R. n.41 of 6/6/1977 (region Valle d’Aosta) for Handicraft; L.R. n.34 of May 4, 1981 (Campania region) for Commerce; L.R. n.4 of April 3, 1981 (autonomous province of Trento) for Manufacturing; L.R. n.16 of August 11, 1983 (Sardegna region) for Social Cooperatives; L.R. n.26 of March 9, 1984 (Calabria region) for the development of tourism.
- 6.
Cf., for example, L.R. n.28 of August 31, 1993 (Campania region) or L.R. n.3 of January 22, 1993 (Liguria region).
- 7.
Prior to the Bersani Law, retail establishments were required to have a permit from the town council. The Bersani Law abolished this permit for smaller firms, which now must only give notice of their activity. See Carree and Nijkamp (2001) for the estimated effects of a similar deregulation on entry and exit rates in Dutch retailing.
- 8.
Studies by Garofoli (1994) and Santarelli and Piergiovanni (1995) found contrasting evidence.
- 9.
Provinces with at least one important “traditional” (according to the definition used by Unioncamere ) industrial district are Ascoli Piceno (shoes), Arezzo (golden jewelry), Avellino (leather), Bari (footwear), Biella (textiles – wool), Brescia (metal household artifacts and machinery for textile industry), Como (silk), Ferrara (mechanical engineering), Macerata (leather products), Mantova (stockings), Modena (knitwear and biomedical industry and ceramics), Pisa (leather), Pordenone (cutlery), Prato (textiles), Parma (ham), Pesaro-Urbino (furniture), Pavia (machinery for the footwear industry), Siena (furniture), Treviso (sporting footwear), Vicenza (leather), Verona (furniture), and Viterbo (ceramics). Note that the definition of industrial district used here excludes local systems dominated by “focal” or leading firms occupying strategic and central positions due to their extensive network of customers and suppliers (for a further specification, cf. Lazerson and Lorenzoni 1999).
- 10.
These are coded as sectors D, F, G, H, I, and J in the database Movimprese provided by Unioncamere .
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Appendix: List of the Regional Laws Supporting New Firm Formation
Appendix: List of the Regional Laws Supporting New Firm Formation
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Carree, M., Piergiovanni, R., Santarelli, E., Verheul, I. (2009). Policies Fostering New Firm Formation and Self-Employment in Italy. In: Baptista, R., Leitao, J. (eds) Public Policies for Fostering Entrepreneurship. International Studies in Entrepreneurship, vol 22. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-0249-8_2
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