Traditionally, Italy's productive structure has been characterised by the existence of a very large number of small firms. According to the last Italian census, for example, about 95% of all firms in the country employ less than ten people each for a total of 6.5 million workers (ISTAT, 2002). Together, small firms absorb 47% of the Italian labour force, more than twice the European average for firms of similar size (ISTAT, 2002). Also, while in recent years Italy's public sector and large firms (more than 500 employees) have undergone major restructuring and reduced their labour force, smaller firms have increased their share of employment (Banca d'Italia, 1999).
In addition to absorbing a large portion of the labour force, Italian small firms tend to be more productive than larger ones reporting gross profit margins 827% higher than the average across all firms (Banca d'Italia, 1999). Finally, in 2000, a large cross-country study of entrepreneurial behaviour involving 21 countries has shown that in Italy, 5.7% of all adults 1864 years of age are actively trying to start a business. Figure 1 shows that this placed Italy ahead of any other European country in the study except Norway.
Figure 1 Total entrepreneurial activity prevalence rate
Source: Reynolds et al. (2000, p.10).
Although major improvements have been achieved toward the socio-economic integration of the country, significant differences still exist in Italy and clearly affect the environment faced by existing and nascent entrepreneurs. For example, considering a synthetic index of socio-economic development, and given a national average of 100, the regions in the Center and North of the country show an average index of 118.6, whereas the South of the country plus the Islands show an average index of 67.5 (SIPI, 1999).
The geographical distribution of small firms in Italy is also characterised by the existence of many industrial districts. In Italy there exist about 200... [continues]
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