Assessing the Italian Innovative Start-Ups Performance with a Composite Index

Abstract

This paper aims to assess the profitability and employees’ productivity of Italian innovative start-ups with a new composite index: the Start-ups Performance score (SP-score). In recent years, the Italian government has made several efforts to foster the economy, establishment, and growth of start-ups. Specifically, the issuing of the Italian Start-up Act in 2012 offers a unique opportunity to examine the Italian setting, given the special conditions that the government granted to the start-ups. The latter obtain generic benefits, tax reductions and hiring facilitations if they meet specific criteria granting the status (label) of “innovative” by law. Based on a sample of Italian start-ups firms (ISPs) and financial statement data for the period 2016–2020, we test whether the performance of the Italian start-ups which are granted the status of “innovative” is higher compared to start-ups without the mentioned status (NISPs). We measure the firm’s performance by building a composite index which synthesizes both profitability and employees’ productivity (controlling for the firms’ size), and find that the ISPs report higher SP-score compared to the NISPs. In addition, we examine whether the SP-score is higher (or lower) among Innovative start-ups located in different regional areas. The derivation of the composite indicator (SP-score) allows a clear and effective evaluation of several characteristics, permitting a more comprehensive understanding of the data that support the strategic choices of management and localization entrepreneurship policies. In addition, our study highlights a certain homogeneity of innovative start-ups’ performance among the Italian territories, which overcomes the classic dualistic division between Northern and Southern regions.

Quantitative Insight: Mathematical and Statistical Indices for Income, Profit, Growth, and Business Risk Assessment

“…By building on established research and introducing novel mathematical and statistical approaches, we aim to provide businesses with a set of KPIs that can provide valuable insights, guide decision-making, and ultimately contribute to their success. Through this study, we hope to reinforce the importance of accurate, nuanced, and comprehensive performance measurement and pave the way for future research in this critical area Newbold, 2013;Fabus, 2018;Khazaei, 2021).…”

“…The development of business indices has emerged as a significant area of research, particularly in relation to global competitiveness and business environment analysis (Fabus, 2018;Khazaei, 2021). It is suggested that accurate, comprehensive, and nuanced indices are necessary for effective evaluation of the performance and competitiveness of businesses (Onesti et al, 2022).…”

“…In the realm of statistical methodologies for business and economics, works by and Newbold (2013) underscore their importance.…”

“…In the rapidly evolving landscape of business, with its complex economic dynamics and diverse organizational structures, quantitative analysis has emerged as an indispensable tool. It has been shown that rigorous statistical and mathematical measures of business performance can offer invaluable insights and inform strategic decision-making Newbold, 2013).…”

“…Through our research, we hope to contribute to the ever-evolving field of business performance measurement by developing robust, comprehensive, and practical KPIs. These mathematical and statistical indices, we believe, can not only enhance the understanding of business performance but also guide strategic decision-making for sustained growth and success Newbold, 2013;Fabus, 2018).…”