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Is being small a strength?

Small and medium-sized enterprises (SMEs) represent the 92% of total businesses in Italy and account for 82% of the workforce. Most of them are family businesses.

In Italy, small and micro businesses have a lower productivity than medium and large businesses. Large and medium companies are more productive thanks to economies of scale and their higher level of investments, which enables them to adopt new technologies and innovations. In some cases, small and micro businesses also have difficulties in exporting their products abroad.

Of course, there are exceptions of highly innovative and productive small businesses. However, they are very few in number. Overall, being small does not seem to be a strength in the global context.

Some reasons for low productivity lie in the institutional setting, characterized by a slow bureaucracy and justice system, making the Italian business ecosystem less dynamic than other countries. Other reasons lie in the family nature of businesses. While family ownership is typical in most European countries, Italy also has a high proportion of family owned and managed firms, with a lower propensity to attract external non-family managers.

Recently, the Industry 4.0 National Plan supported SMEs to invest in new technologies, also increasing small and family businesses’ awareness of the new digital and technological opportunities. However, SMEs seem to adopt less Industry 4.0 technologies compared to large firms, increasing the digital divide between large and small companies.

Especially in these pandemic times, we must rethink the industrial policies for SMEs. Developing human capital, lightening bureaucracy, and developing long-term measures are some roads to support SMEs’ growth and productivity.