Innovation policy and corporate finance: The Italian automotive supply chain and its transition to Industry 4.0

This work investigates the SMEs of the Italian automotive supply chain, testing the impact of an innovation policy created with the target of supporting investments in Industry 4.0. In detail, the authors examine the impact of this policy on SMEs' access to the capital market (i) and their financial performance (ii). The former is an appropriate proxy to measure the effectiveness of such policy; while the latter is a good candidate to evaluate the sustainability of this program after its conclusion. According to our results, SMEs with access to the incentives of this innovation policy are those observations with higher rates of admission to external financial resources (i.e., 0.3 higher debt ratio) and higher financial performance (i.e., 2 times the odds of having a positive profit, and 0.01 higher financial indexes). Hence, evidence suggests a positive evaluation of this public intervention, as well as positive expectations on its sustainability. In view of these insights, several policy implications are formulated to lead governments into the fourth industrial revolution.