An expensive aid: the cost of creating new businesses
Public incentives for innovative start-ups have indeed encouraged the birth of new companies, but at a surprisingly high cost: over €230,000 per new job created. This is the key finding from the analysis conducted by the Unimpresa Research Center, which examined the impact of the 2012 regional program launched by the Lazio Region. With a total budget of €14 million, the program financed 134 projects out of 270 applications, granting subsidies covering up to 80% of eligible costs, with funding ranging between €35,000 and €150,000 per project.
A staggering 96% of the funded projects successfully turned into companies, compared to only 27% of non-funded projects. This means that 52% of the funded start-ups would never have been created without public support. However, the average cost per new business created was approximately €210,000, while the cost per new job exceeded €234,000. In total, the program generated about 60 new jobs.
Funded start-ups: slower growth compared to independent ones
Despite the initial boost, funded start-ups showed slower growth than those created without public support. Data reveals that their average revenue was €130,000 lower, their number of employees was 0.7 units lower, and their asset value was €115,000 lower compared to non-funded businesses.
One possible explanation for this trend is the tendency of public entities to select lower-risk, and consequently, less ambitious projects. Essentially, public funding seems to favor stability over exponential growth.
A good survival rate, but little innovation
Despite their slower growth, funded start-ups had a survival rate comparable to non-funded ones. After two years, 90% of funded companies were still operating, compared to 92% of non-funded businesses. After five years, the survival rates stood at 72% and 73%, respectively.
However, the impact on innovation was quite limited: the number of patents registered was almost the same between funded and non-funded companies. This suggests that public funding did not significantly foster technological or product innovation.
Public funds: a real boost or financial dependency?
One major side effect of public funding was the increased ability of funded start-ups to obtain additional public contributions. Within five years, 25% of funded businesses received further public funding, compared to less than 10% of non-funded companies. This indicates a possible dependency on public funds, rather than an incentive towards financial autonomy.
According to Giuseppe Spadafora, vice president of Unimpresa, public funding policies have successfully increased the number of innovative start-ups, but their economic impact remains limited. The solution may lie in revising the selection criteria, prioritizing more ambitious and higher-risk projects. Additionally, a closer integration between public and private funding could enhance long-term business sustainability.
