The OECD Evaluation of the Italian Start-up Act
Wednesday, 17 October 2018
The first independent and comprehensive report on the Italian national policy for startups
The Organisation for Economic Co-operation and Development (OECD), with the contribution of the Bank of Italy, has carried out and published the first evaluation report of the Italian national strategy for innovative startups, "The Evaluation of the Italian Start-up Act".
This work represents the first independent and comprehensive evaluation of the package of measures introduced by the Italian Government with Decree-Law 179/2012, in a view of support the creation and growth of new innovative firms. The Italian Startup Act (ISA) encompasses, among other things, important cuts through red tape, a tailor-made set of corporate and labour regulations, and substantial facilitations in access to credit finance and venture capital (see background note for an overview of the ISA measures and reporting system). The use of counterfactual methodologies has made it possible, for the first time since the entry into force of the ISA, to estimate the direct causal effect of the policy on startups’ economic performance.
The results show that the ISA has a considerable positive impact both on input and output variables of the companies involved: the book value of capital, turnover, added value, and tangible and intangible assets of innovative startups are about 10-15% higher than other new companies with similar characteristics that have opted not to enter the policy, or that accessed it at a later stage. Labour productivity and the propensity to file a patent application also increase.
The positive effects of the policy are even stronger for startups that have had access to bank credit through the Public Guarantee Fund for SMEs (which startups can access free of charge and through a streamlined procedure): innovative startups have better opportunities to obtain loans (the probability of acceptance is about one third higher), for a higher amount (the net flow of loans increases by about 14 percentage points), and with lower interest rates (about 1 p.p.). The effects on the propensity to invest – especially in intangible assets such as patents – are also very significant.
Startups that did not use the credit guarantee scheme show a relative increase in their net worth, suggesting a greater inclination to obtain venture capital financing. In fact, empirical analysis shows that the participation in the policy by startups is strongly correlated to a higher probability of receiving financing from VCs in their first three years of life.
The OECD concludes that, in order to amplify the impact of the Startup Act, the Italian Government could consider measures aimed at strengthening the VC market, also through greater public support for the creation and growth of funds specialized in this segment.
- “The evaluation of the Italian “Start-up Act”, OECD, Directorate for Science, Technology and Innovation, 26 September 2018 (policy paper no. 54)