Principal Topic

In recent years, researchers from several disciplines have attempted to identify the determinants of employment status choice. Among them, some have focused on personal traits of nascent entrepreneurs, others, instead, have focused on social and institutional variables. Clearly, employment status choice is a crucial part of the decision to start a new venture and determines, to a large extent, what kind of strategy the entrepreneur will adopt. This is not the pool from which innovation is usually introduced in the economy. In fact, innovative high-growth companies, quite apart from their commitment to growth, have a well-developed sense of the need to use outside resources, be they financial, human or technological. A managerial mindset of self- sufficiency is incompatible with high growth. Understanding the reasons for this choice is important because the relative distribution of employment and the amount of innovation in different sectors determine the long run growth.

Method

Using detailed data on the nature and characteristics of nascent small firms in Italy, the paper discusses the difference between growth oriented entrepreneurs and entrepreneurs whose goal is the achievement of self-sufficiency. Traditionally, Italy’s productive structure is characterized by the existence of a very large number of small firms. On the other hand, an important trait of most Italian start-ups is their concern with self-sufficiency rather than with growth. That is, the goal of many Italians starting a business seems to be the achievement of financial self-sufficiency rather than the creation and development of new and profitable organizations. As a result, most Italian start-ups are in mature sectors while high-growth sectors lag well behind those of other countries. The paper uses standard econometric techniques to analyze and present the data.

Results and Implications

Within the context of existing literature on employment status choice, the paper identifies the macroeconomic circumstances that cause some entrepreneurs to become organization builders and others to focus on independence. The original contribution of the paper is twofold. First, the paper analyzes Italy’s entrepreneurial characteristics and identifies the reasons why, in a country with a very strong entrepreneurial tradition, entrepreneurs seem to shy away from growth oriented strategies. Second, the paper analyzes the causes and implications of Italian entrepreneurs’ strong tendency toward self-sufficiency and suggests that the lack of clearly defined property rights and of legal transparency are among the most important determinant of employment status choice in Italy. By doing so, the paper contributes to our understanding of the characteristics required for the creation of a socio-economic environment conducive to growth-oriented entrepreneurship and a rate of innovation sustainable in the long run.

CONTACT: Maria Minniti, Babson College, Economics Division, Babson Park, MA 02457; (T) 781-239-4296; (F) 781-239-5239; minniti@babson.edu