To what extent do young innovative companies take advantage of policy support to enact innovation appropriation mechanisms?

Abstract

Innovative entrepreneurship is at the heart of economic development in all modern economic systems. However, we observe in several developed countries - especially Europe - a languishing in the capacity to foster creative destruction (i.e. Schumpeter Mark 1, SM1) dynamics and to create young innovative companies (YICs), capable to establish themselves as leaders in markets or become successful innovators. One key issue that is often advocated in this respect is the deficit suffered from YICs in fully protecting their innovations and appropriating (at least in part) returns from them. The usage of formal (e.g., intellectual property rights) and informal (e.g., secrecy, lead time, access to complementary assets) instruments to protect intellectual property assets has the potential to overcome this difficulty. Different types of policy mechanisms have been put in place to help YICs. However, high implicit and explicit costs and barriers prevent YICs’ use of protection strategies, limiting the ability to generate SM1 dynamics or accessing market for ideas, even upon policy support. By relying on the resource-based view of the firm, our paper investigates to what extent a comprehensive set of policy measures recently introduced in the Italian context and focused on alleviating the hurdles suffered by YICs is associated with the choice of YICs to protect their innovations. The econometric analyses based on more than 1,600 Italian YICs show how the use of financial policy measures are associated to both formal and informal instruments, while labour policy measures are only related to formal ones.