Firms Growth, Size and Innovation

This article aims at understanding the determinants of Italian small- and medium-sized enterprises’ (SMEs) turnover growth having in mind the fact that the Italian economic system relies substantially on small firms which have traditionally managed to stay competitive by adopting strategies such as the creation of well-integrated social and institutional clusters or specialising in the production of quality goods (the so called Made in Italy). However, the growing pressure coming from the Far East has rendered this production system vulnerable, challenging its international competitiveness. Building on a conceptual model, we found that, on average, young firms are more likely to experience positive growth; moreover, turnover growth is positively associated with firms’ size, process innovation, product innovation and organisational changes. In contrast, marketing innovation does not considerably affect Italian SMEs growth. When restricting our focus to a sub-sample of innovative firms, we found that those firms investing directly in innovating activities are almost 30% points more likely to experience positive growth, which is significantly affected also by workers and managers’ re-qualification. Finally, among innovative firms, process innovation and organisational changes are, by far, the most influential innovating strategies. The model was tested using a unique database which collects data for the year 2004, over a sample of 2600 SMEs