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FIRMS¿ SURVIVAL, TURNOVER AND PRODUCTIVITY IN ITALY: LOCAL AND GLOBAL DRIVERS

This work is placed in the wake of the work of Ferragina et al. (2011), Amendola et al. (2012), Ferragina and Mazzotta (2013) which explore to what extent the probability of Italian firm’s exit from the market in Italy is related to its own form of internationalization, to agglomeration economies, to spillovers effects from FDI due to both backward and forward linkages. Here we adopt a new unique dataset at firm level recently built by the authors. More specifically, we carried out: 1) merging Aida data with other administrative dataset from ISTAT providing information on subcontracting, exporting, delocalisation, inter firms linkages at global level; 2) testing for other classifications and for different features of industrial districts; 3) investigation of the link between firms global activities and local links (multinational and ID and other localization and external economies); 4) checkING for input-output relations between firms /industries. Now we intend to carry out the analysis upon the following important issues. We wish to investigate whether over recent years the process of entry and exit has contributed to improve industries' productivity in Italy and we check whether improvement took place either through exit of the less productive firms, entry of more productive firms or both. The effect on industries' productivity might operate through entry and exit in their own and not through impact on the productivity of survivors. The starting point of the analysis is the confrontation of results in the literature concerning the impact of crucial variables related to the global and to the local context on firm's turnover and on efficiency in terms of TFP. TFP is measured by two indicators widely adopted in the literature, one based on semi-parametric estimates and the other upon non parametric tecnique. The first semiparametric proposed by Levinsohn e Petrin in 2003 (LP) allows to estimate the firm production function by checking by the use of intermediate inputs the productivity shocks not observable. We also adopt the non parametric methodology proposed by Caves in 1982.On the one hand, evidence show that the main manufacturing industries in which Italian firms are specialized suffer high degree of inefficiency. On the other hand, the recent trade literature on firm heterogeneity (Meltiz, 2003) suggests that the major channel by which trade and FDI liberalization affects firms' efficiency is natural selection in the same industry: less efficient firms restructure or exit while more efficient ones enter or expand in the market. Exit seems to clean industries from their less productive plants while entry allows replacing these plants by more productive one. Productivity is also driven by other factors such as factors of production availability (especially capital) and actual competition. Although the process of entry and exit may have improved productivity, the question remains about the relative persistence of inefficiency in the corresponding manufacturing sector. The response might be found in the intensity of the process. Comparing the intensity of entry and exit in Italy with other EU economies (both at the sector and at the industries level), allow a preliminary understanding of the intensity and check whether a limited impact on industries' productivity is due to a weak intensity of these processes. It is, then, important to study the determinants of entry and exit. We aim to regress the intensity of entry and exit rates on a series of firm, industry and country specific characteristics, and check whether entry is higher in those industries offering some opportunities (sales or productivity improvement, trade openness and FDI), and lower in industries with high natural (capital intensity and wage level) and strategic barriers (concentration of incumbents).