Small banks and innovative entrepreneurial culture in Italy: A historical perspective

Based on provincial (NUTS 3) data from a comprehensive survey conducted in 1927 by the Italian National Statistical Institute (ISTAT), this paper investigates the effect of the historical presence of small financial institutions on current start-up rates. It finds evidence that their presence positively affects current start-up rates in high and medium-high technology manufacturing sectors. In contrast, it does not find any significant effect in low and medium-low technology manufacturing sectors. These results suggest that the local presence of small financial institutions may have been essential in promoting the development of entrepreneurship in those sectors that are intrinsically more opaque and riskier.