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Public subsidies and the employment growth of high-tech start-ups: assessing the impact of selective and automatic support schemes

Author

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  • Massimo G. Colombo
  • Silvia Giannangeli
  • Luca Grilli

Abstract

The aim of this article is to assess the impact of public subsidies on the employment growth of new technology-based firms (NTBFs), contingent on (i) the type of policy scheme (either selective or automatic) and (ii) the age of the firms at the time of receipt of the subsidy. For this purpose, we analyze a sample composed of 536 Italian independent NTBFs observed during a 10-year period (1994--2003). We estimate augmented Gibrat law-type dynamic panel data models using different techniques aimed at controlling for the potentially endogenous nature of public financing, namely the Generalized Method of Moments System, Fixed Effect Instrumental Variable, and Inverse Probability Treatment Weights estimators. The results of the estimates show that selective support schemes had a larger impact on employment growth than automatic ones, but only if they were awarded in the very early period of the recipient firms' lives. However, selective subsidies awarded to young NTBFs are rare in Italy, calling into question the capability of the Italian industrial policy to sustain the growth of the high-tech entrepreneurial sector. Copyright 2013 The Author 2012. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Massimo G. Colombo & Silvia Giannangeli & Luca Grilli, 2013. "Public subsidies and the employment growth of high-tech start-ups: assessing the impact of selective and automatic support schemes," Industrial and Corporate Change, Oxford University Press, vol. 22(5), pages 1273-1314, October.
  • Handle: RePEc:oup:indcch:v:22:y:2013:i:5:p:1273-1314
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    File URL: http://hdl.handle.net/10.1093/icc/dts037
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    Citations

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    Cited by:

    1. Colombo, Massimo G. & D’Adda, Diego & Pirelli, Lorenzo H., 2016. "The participation of new technology-based firms in EU-funded R&D partnerships: The role of venture capital," Research Policy, Elsevier, vol. 45(2), pages 361-375.
    2. Alex Coad & Julian Frankish & Paul Nightingale & Richard Roberts, 2014. "Business experience and start-up size: Buying more lottery tickets next time around?," Small Business Economics, Springer, vol. 43(3), pages 529-547, October.
    3. Dirk Czarnitzki & Julie Delanote, 2015. "R&D policies for young SMEs: input and output effects," Small Business Economics, Springer, vol. 45(3), pages 465-485, October.
    4. Fabio Bertoni & Diego D’Adda & Luca Grilli, 2016. "Cherry-picking or frog-kissing? A theoretical analysis of how investors select entrepreneurial ventures in thin venture capital markets," Small Business Economics, Springer, vol. 46(3), pages 391-405, March.
    5. Boneu, Franco & Giuliodori, David & Maffioli, Alessandro & Rodríguez, Alejandro & Stucchi, Rodolfo, 2014. "The spillover effects of the ICT cluster support in Córdoba," MPRA Paper 60307, University Library of Munich, Germany.
    6. Giuseppina Testa & Katarzyna Szkuta, 2018. "Improving access to finance for young innovative enterprises with growth potential: evidence of impact on firms' output - Part 2. R&D grant schemes: lessons learned from evaluations," JRC Working Papers JRC109879, Joint Research Centre (Seville site).
    7. Grilli, Luca & Murtinu, Samuele, 2014. "Government, venture capital and the growth of European high-tech entrepreneurial firms," Research Policy, Elsevier, vol. 43(9), pages 1523-1543.
    8. Matteo Bugamelli & Luigi Cannari & Francesca Lotti & Silvia Magri, 2012. "The innovation gap of Italy�s production system: roots and possible solutions," Questioni di Economia e Finanza (Occasional Papers) 121, Bank of Italy, Economic Research and International Relations Area.
    9. Colombo, Massimo G. & Croce, Annalisa & Guerini, Massimiliano, 2013. "The effect of public subsidies on firms’ investment–cash flow sensitivity: Transient or persistent?," Research Policy, Elsevier, vol. 42(9), pages 1605-1623.
    10. BEDU Nicolas & VANDERSTOCKEN Alexis, 2015. "The Effects of Regional R&D Subsidies on Innovative SME: Evidence from Aquitaine SMEs," Cahiers du GREThA 2015-13, Groupe de Recherche en Economie Théorique et Appliquée.
    11. Erol Taymaz & Yesim Ucdogruk, 2013. "The Demand for Researchers: Does Public R&D Support Make a Difference?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 90-99, June.
    12. Thomas, Sebastian, 2014. "Blue carbon: Knowledge gaps, critical issues, and novel approaches," Ecological Economics, Elsevier, vol. 107(C), pages 22-38.
    13. repec:eee:respol:v:47:y:2018:i:7:p:1344-1365 is not listed on IDEAS
    14. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press, vol. 22(6), pages 1453-1495, December.
    15. Areti Gkypali & Vasileios Kokkinos & Christos Bouras & Kostas Tsekouras, 2016. "Science parks and regional innovation performance in fiscal austerity era: Less is more?," Small Business Economics, Springer, vol. 47(2), pages 313-330, August.

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