Financial structure and profitability of innovative SMEs in Italy
University of Perugia, Italy
The size and degree of innovation of a company strongly affect its profitability and financial structure: literature has extensively investigated the causal links between innovation and profitability of firms; moreover, many authors have studied the peculiarities of the financial structure of innovative companies. In both topics, however, the conclusions are not unambiguous. The paper aims to make a contribution to reducing the literature gap providing further evidence on these issues by evaluating Italian small and medium-sized innovative enterprises (SMEs). The case of Italy was considered as an example of the introduction into the legal system of a country of a specific entity for innovative companies. The study presents the main structural data referring to these firms, based on last updated statistics by the Italian Innovative Business Register (1,024 firms). This verification was furthermore deepened using the tools of balance sheet and profit and loss account analysis of innovative SMEs, with available data for the period 2010-2017 on Orbis database by Bureau Van Dijk (433 firms). The results confirm the reversal of the traditional hierarchy of funding sources for innovative firms, as firstly theorized by Berger and Udell; profitability is negative, according to literature underlining that innovation is positively associated with turnover and employment growth, but not necessarily with higher profitability. This also confirms that the benefits of innovation can be appreciated in a medium-long term period.
Keywords: innovative firms; capital structure; firm performance