Abstract
This paper addresses the question “How does the fight against organized crime affect regional entrepreneurship?” We focus on asset confiscation in relation to alleged connections of their owners with organized crime, a highly debated policy measure against organized crime. Extending work on institutions and regional entrepreneurship, we propose that confiscation has contrasting effects on regional entries. On the one hand, confiscation of economic assets associated with criminal organizations’ legitimate activities in a region reduces competition and triggers renewal, fostering new entries. On the other hand, seizure of criminal organizations’ operational assets weakens their ability to exercise sovereignty, creating an institutional vacuum that lowers founding rates. Our results, based on a longitudinal study of Italian provinces between 2009 and 2013, provide support for both hypotheses. We also find that the negative effect associated with the confiscation of operational assets is mitigated when local governments have policies facilitating asset redeployment.
Highlights
Organized crime nowadays plays a prominent role in a variety of illicit and legal markets
We hypothesize that the following: responsiveness typically entails concrete, operational acts of sovereignty, rather than appealing to broad principles. It assesses local institutions’ capacity to handle the legal practices related to operational asset confiscation, to finance asset refurbishment, to reduce credit uncertainty, to increase presence and governance on the territory, or to reduce uncertainty in the redeployment process. We argue that such provisions can contribute to filling the institutional voids and favor resource redeployment, reducing the negative effect of operational asset confiscation: H2: The responsiveness of local institutions reduces the negative effect of confiscation orders targeting organized crime’s operational assets in a region on entrepreneurial entries
We examined the entrepreneurial implications of asset confiscation in relation to alleged organized crime connections of their owners, a widely used judiciary tool to fight the interests of organized crime in a region
Summary
Organized crime nowadays plays a prominent role in a variety of illicit and legal markets. Organized crime manages illicit businesses such as drugs, firearms, counterfeiting, cargo theft, human trafficking, illegal gambling, extortion, racketeering, and usury (Raab and Milward 2003). In Sicily (Italy), workers and unions reacted against the decision to seize assets worth 700 million from Giuseppe Grigoli, founder of 6Gdo Srl, a retail chain employing about 500 employees and encompassing 12 companies, 220 real estate assets, and 60 ha of land (Galullo 2013). Despite evidence regarding Grigoli’s connections to Matteo Messina Denaro, the current head of the Sicilian Mafia, employees and unions challenged the confiscation because the business was Bwell run.^ Such conviction is backed by statistics showing that 85% of the companies seized from criminal organizations do not survive the confiscation (Dell’Olio 2014)
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