Institutional failure and financial constraints on firm growth in backward areas of developed countries

This volume gathers together the works carried out within the research project “The role of institutions in regional growth” of the Department of Political Science “Jean Monnet” of the Università della Campania “L. Vanvitelli”. The papers show that the economic growth in areas of slow growth, such as the Italian Mezzogiorno, is hindered by an unfavourable environment that does not contribute to the growth of firms, especially small businesses. Based on very large samples of SMEs, the studies deal with the typical constraints that the SMEs of these areas, particularly small firms, have to face. There are external and internal constraints: the former arise from inefficiency as much as from real failures of the institutions that make firm growth difficult even when there are good opportunities, while the latter are due principally to difficulties in financing firm growth because as access to external finance is more difficult, investment financing must be supported, especially by internal finance. Although the analysis focuses on southern Italian SMES, the conclusions emerging from previous papers can be generalized and applied to small firms operating in backward areas of developed countries.