The Engine of Productivity? Established Companies, More than Startups

If we want to improve the productivity of the economic system, we should pay more attention to established companies and reduce the emphasis on startups, explained Nicolai Foss at the Lectio Inauguralis of his Rodolfo Debenedetti Chair in Entrepreneurship.

The widespread and exciting narration (following the David-Goliath archetype), according to which startups create more innovation, is contradicted by data, said Foss. Productivity, moreover, increases with the age of the firm and is therefore higher in established companies, while the contribution of startups to employment, although not negligible, is small. "This does not mean that we don't want startups", said Prof. Foss, "but that in thinking about entrepreneurship we also need to think about the already-established company. If entrepreneurship can be defined as the ability to shift economic resources out of an area of lower and into an area of higher productivity and greater yield, well, that is what established companies do".

The Danish Professor also dwelt on the state of the Italian economy, saying that "it is tempting to link this to low levels of entrepreneurship and to certain features of the Italian economy that indicate that the climate is not optimal for entrepreneurship".

In 2014, Italy recorded the lowest level of venture capital investment as a share of GDP of any major European economy, enterprises' death rate is higher than the birth rate and Italy is currently ranked at number 45 on the World Bank's Ease of Doing Business Index, and almost at the bottom in the EU and at number 111 for contract enforcement. Under these conditions, the so-called transaction costs of engaging in entrepreneurship are very high, preventing resources to be allocated and reallocated to better uses, which would increase productivity.

The Rodolfo Debenedetti Chair in Entrepreneurship was established thanks to a personal donation of € 3 million from Carlo De Benedetti, who thus intended "to honor the memory of the father Rodolfo through a philanthropic act in memory of the abilities and teachings passed onto him, which were at the basis of his own professional growth and his entrepreneurial path". Entrepreneurship has been chosen because it is "a central discipline for Italian growth hopes".

Nicolai Foss, appointed Rodolfo Debenedetti Professor of Entrepreneurship this year, has been a Full Professor at Bocconi since 2016. From 1989 to 2016 he worked at the Copenhagen Business School, where he founded and directed the Department of Strategic Management and Globalization until 2015. He was a panelist of the European Research Council and member of the Board of Directors of the Strategic Management Society. He has published 23 books and nearly 300 scientific articles and chapters.