Designing policy based on entrepreneurial venture type: the effects of innovation, hiring practices and patent ownership on enterprise development

Purpose The Italian government enacted two laws: ruling innovative startups (Law 221/2012) and innovative SMEs (Law Decree 3/2015), respectively. Despite renowned differences between them, the parameters selected and included in these laws are the same: investments in research and development (R&D) activities, hiring specialized researchers and holding patents/property rights. Taking a cue from the Italian case, the following research question emerges: whether small business policies, concerning innovative startups and SMEs, should be differentiated to be effective and support enterprise development. The Italian case is invoked to offer suggestions and recommendations to policymakers around the world. Design/methodology/approach Stochastic frontier analyses (SFA) were conducted by using data provided by the Italian Ministry of Economic Development (MISE) about 14,595 innovative startups and 2,338 innovative SMEs. Findings Statistical results reveal that enterprise development processes are different between innovative startups and SMEs. Innovative startups may start a virtuous model, while innovative SMEs may not. This corroborates the idea that small business policies need to be differentiated in order to be effective. Originality/value Unlike other papers, small businesses are not considered as a whole. Innovative startups and SMEs are two different types of firms, so specific investigations are conducted to remark on the already-known differences and disclose new ones.