A piece of research from the Bank of Italy analyses reactions from businesses faced with recession on the basis of their age and size
Companies produce goods and create employment. It is, however, necessary to have an in-depth understanding of the modes of growth and job creation in order to identify potential paths to later development. It is a question of both organisational and managerial technique, but also of company culture, with approaches towards business varying according to the type of company concerned.
“Net Employment Growth by Firm Size and Age in Italy” by Francesco Manaresi (a researcher at the Bank of Italy) is a useful analytical starting point for understanding the issue of company growth in relation to job creation.
The paper – recently published by the Bank of Italy in Questioni di economia e finanza (Occasional Papers) – is a study of how growth in employment can change between companies of varying age and size. The research was carried out by assessing all private Italian companies with at least one employee (covering the period 1991 to 2009 and using data from INPS, the Italian social security agency), and shows that the size of the company is not a significant determinant of business growth, once controls have been made by correlating this parameter to the age of the companies.
The crux of Manaresi’s reasoning is that companies have a higher rate of growth in the first three years and have slightly higher departure rates than older businesses. At the same time, during periods of crisis older companies see a greater reduction in employment growth, whereas the impact of recessions on younger companies is in part limited by them being more selective during the formation of the company. With age taken into account, the size of the company has no significant correlation with employment trends during recessions.
The analysis of INPS data by the Bank of Italy supplies “quantitative proof” of the difference significance that the impact from a crisis can have on companies, and that this significance depends on both the company’s structure and its history, but under which there lies variations in the configuration of the culture of production.
Questioni di economia e finanza, Bank of Italy, no. 298, 2015