The entrepreneurial renaissance after Covid-19 in Italy

Maurizio Sobrero, Riccardo Fini 31 Agosto, 2020

Where do new ventures come from? Silicon Valley garage-based entrepreneurship has become iconic, but different times and places have their versions of the garage story to share, starting from James Watt and Joe Black tinkering with what would lead to the Industrial Revolution.

Yet, to appreciate how entrepreneurship unfolds, it is key to understand what drives entrepreneurial choices and how these choices come into play, combining individual traits and characteristics with contextual elements.

First, let us focus on individuals who enter the job market for the first time. These young adults cannot postpone their job-related decisions and need to choose between salaried-jobs and entrepreneurship. According to the latest AlmaLaurea report on students’ entrepreneurship, in the 2008-2018 decade, over 2.2M individuals graduated from Italian universities. Of the 150 thousand (7%) who started a company, around two thirds did it within two years of graduation. The total number of companies established are about 170 thousand. Evidence from a range of countries suggests that the vast majority of entrepreneurs worked in a company before starting their ventures, and some of them retained their salaried positions while commencing their new endeavor.  Policymakers and administrators across the globe, and in Italy as well, have implemented legislation to stimulate universities and public research institutions’ involvement in the commercialization of research. An essential part of this effort is dedicated to fostering the so-called academic entrepreneurship, the creation of spin-off companies by researchers to commercialize technologies developed in university labs. Academic spin-offs play an important role in economic growth, contributing to transforming scientific knowledge advancements into new products and services, but they are not the only source of innovative entrepreneurship.

Incumbent firms play a crucial role in nurturing technology-based corporate spin-outs in the automotive, biomedical, biotechnology, and laser industries. The Italian context is rich in such stories, and the role of leading firms in training generations of employees that eventually leave at different stages of their careers to create their own companies. The history of IMA is exemplary of how small family-owned companies evolved to become the backbone of current Italian manufacturing. It all started in 1961 when Andrea Romagnoli partnered with his brother-in-law Renato Taino. At the time, Romagnoli was the Chief Technology Officer of GD, following a stint at ACMA, two of the pioneers in industrial automation in Italy. A couple of years later, the Vacchi family joined forces with the founders to develop a core business in the production of food packaging machines. Over the years, IMA has successfully navigated several technological transitions within the packaging industry and became a recognized leader in the global markets.

Family businesses, i.e. firms owned and controlled by members of the same family, are another typical and iconic form of entrepreneurship, and Italy is not an exception. In 2019, they accounted for 66% of Italian companies of the same size. About 75% were located in the North of Italy, 15% in the Centre, and 10% in the South and on the Islands.

All these different forms of entrepreneurship might draw attention to other important ones. If we take another look at the overall distribution of Italian companies reported in section two, we need to consider that 95% of firms have less than €2M in revenues. These figures suggest that the vast majority of firms operate as ordinary businesses, generating sustainable incomes for a few households only.

Italy has experienced a decreasing level of entrepreneurship in the last decade, albeit characterized by different patterns depending on the perspective used to analyze the cumulative evidence. Despite all the efforts to support new innovative companies, they are still playing a limited role in the economy, and the contribution of science-based initiatives is lower compared to other countries. University graduates tend to delay firm creation until completion of their masters but pursue opportunity-based entrepreneurship at a higher rate compared to national trends. Family-businesses are representative of medium-large firms and play a significant role in the economy but still seem trapped in the “small is beautiful” stereotype.

Besides, women entrepreneurs are fewer than in other comparable countries, but their innovative companies grow faster than male-led ones. The number of foreign-born entrepreneurs is much greater, disproportionally so, when looking at the foundation of new firms, although their companies are smaller and operate in less advanced sectors. Finally, the number of social enterprises is increasing and are more relevant than ever, offering a distinctive contribution in many parts of the country.

Authors: Riccardo Fini and Maurizio Sobrero

part 1: Entrepreneurs: born or raised?

part 2: Who is taking care of entrepreneurship after Covid-19

This is the third of three articles from “Why Italy needs an entrepreneurial renaissance after COVID-19” published in the recently released book The italian economy after COVID-19: Short-term Costs and Long-term Adjustments edited by Giorgio Bellettini and Andrea Goldstein. Credits Bononia University Press / Fondazione Policlinico Sant’Orsola.

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