Equivalent ERDF innovation subsidies, divergent firm performance: Micro-evidence from an impact evaluation in Northern and Southern Italy

This paper compares two regional innovation incentive designs in Italy and their footprints in beneficiary firms’ financial statements. We analyze pre- and post-award accounts (2010–2018) for 129 firms (Lombardy n=60; Sicily n=69) and estimate simple regressions on absolute and size-normalized changes. The study is observational: results are associations, not causal effects. In Lombardy, after normalizing by firm size, higher subsidy intensity is consistently associated with subsequent growth in revenues and intangible assets—concentrated in manufacturing—and with higher personnel costs across sectors. Links to tangible assets, a capital-turnover proxy, and profitability are weak or unstable over the eight-year horizon. In Sicily, coefficients cluster around zero for assets, revenues, labor costs, profitability and productivity, and occasional signals fade across specifications—consistent with grants that acted mainly as liquidity buffers under de minimis caps and slow reimbursements. The contrast suggests that instrument mix and administrative capacity matter: Lombardy’s blended finance and digital, milestone-based delivery correlate with clearer balance-sheet traces, while a compliance-heavy, grant-only regime does not. Policy implications are to calibrate instruments to firm readiness and sector maturity (grants for exploratory R&D and services; soft loans and guarantees for scale-up in manufacturing), pair funding with capability-building services (managerial mentoring, technology transfer, market and export support), streamline procedures with milestone-linked tranches and automatic advances to close liquidity gaps, deploy end-to-end digital monitoring that tracks outcomes beyond compliance (intangibles, hiring, commercialization), and combine cluster-targeted calls with inclusive pathways for smaller, lower-capacity firms.