Small businesses and the effects on the growth of formal collaboration agreements: additional insights and policy implications

The paper studies the impact of formal collaboration agreements (FCA) on firms’ growth in Italy. To conduct a proper evaluation exercise, we started building a novel database of Italian firms where networked firms in 2012 (treated units) are matched with firms that did not subscribe to a formal network agreement (controls units) but possess similar observable characteristics. Then we use difference-in-differences regression models in which we employ time lags in the relationships between objective variables and control ones. We show that FCAs have a positive effect and can be interpreted as a valid means to reduce the cognitive distance from the market of firms. Moreover, the effect is mainly due to a defensive strategy. The effect is stronger for those firms that do not exploit other proximity types, namely geographical and organizational. Finally, structural characteristics play a role: younger and smaller firms avoid a ‘size contraction’ signing an FCA.