Does Institutional Reform Attract Skilled Entrepreneurs And Help Them Build High-Growth Ventures?

Prior research shows that entrepreneurship enhances economic development. However, it is becoming increasingly evident that it is not the number of new startups that matter for that goal, but rather their quality. This paper studies whether institutional change can facilitate the transition from quantity toward quality of entrepreneurship. We investigate the effect of the Italian policy intervention targeting Young Innovative Companies on the human capital of entrepreneurs, and how that influences entrepreneurial performance. We exploit a quasi-natural experiment setting by decomposing the impact of lowering entry and growth barriers. The findings indicate that the reform, and in particular, lowering growth barriers attracts founders endowed with the most valuable experience in the same sector and/or management functions, who are also able to capitalize on the introduced benefits the most.