Enhancing micro‐enterprises performance: The role of the regional environment

Abstract

This paper investigates the impact of the regional environment on firm performance, focusing on a sample of 97,838 manufacturing firms in Italy. Utilizing multilevel modeling, the study reveals several key findings. First, the regional context explains approximately 10% of the variability in firm performance. Second, micro‐enterprises demonstrate lower performance levels compared to larger counterparts. Third, a more competitive regional environment is associated with higher firm performance across all sizes of firms. Importantly, micro‐enterprises tend to benefit relatively more in competitive regions, leading to a narrowing performance gap with larger firms. These findings underscore the importance of policy initiatives aimed at enhancing regional competitiveness, particularly in supporting micro‐enterprises to address their inherent weaknesses and improve overall performance.