Capabilities and firm growth: the role of formal collaboration agreements

The paper presents an empirical analysis of the effect of formal collaboration agreements on growth of firm in Italy in the years 2011-2013. Evolutionary theories assign a key role in determining the ability of firms to capture business opportunities to internal capabilities and to external knowledge and capabilities. We suggest that firms establishing formal relationships with other firms can extend the set of capabilities, so that they are able to capture opportunities and grow. The study is based on a novel database of Italian firms that matches networked firms in year 2012 with firms that did not subscribe a formal collaboration agreement but possess similar structural characteristics. To deal with possible self-selection phenomenon, we combine the pre-selection phase with difference-in-differences regression models. Moreover, to study the effect of characteristics of network we employ two stage Hackman regression models. Results show that firms with a collaboration agreement show higher growth rates and that the size of the network plays a role. Nonetheless, heterogeneity is present. Results are in line with the evolutionary interpretation and suggest that formal collaboration agreements can function as long-range antennas for firms that are more constrained from the geographical point of view.