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

Massimo G. Colombo, Silvia Giannangeli and Luca Grilli

Industrial and Corporate Change, 2013, vol. 22, issue 5, 1273-1314

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.

Date: 2013
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