Mixed consequences of government aid for new venture creation: Evidence from Italy

Most countries have designed programs to stimulate the birth and development of new firms. One of the most important issues in evaluating the impact of public entrepreneurial policies is to analyze their influence on the post-entry performance of the new ventures. This paper examines how the most important government program to encouragement repreneurship in Italy (the Law 44 program) affects several aspects of the early performance of new firms. A sample of new firms receiving government aid is compared to a matched sample of new firms not receiving public assistance, i.e., "control" firms. The control firms were born in the same year, launched their business in the same geographical area and operate in the same industry classification. Results show that the public program produces mixed effects. Government aid allows firms to have a higher level of technology. However, government funding gives rise to entrepreneurial start-ups, which are not fully efficient. A discussion of these findings and suggestions for future research are presented. © 2000 Kluwer Academic Publishers.