Do economic performance and innovation have a relationship? Evidence from Operational Groups in the Italian agri-food sector

This study aims to investigate the potential mutual interdependence between an environment that fosters and encourages innovation and the economic performance of agricultural businesses operating in the sector. Specifically, it seeks to determine whether the economic performance of farms in regions with established Operational Groups (OGs) is better than that of farms located in regions where OGs have not yet been implemented, using the European Innovation Partnership for Agricultural Productivity and Sustainability (EIP-AGRI). We combine data on OGs collected from the Innovarurale website, with financial information from the ORBIS database for the period 2013-2022, to assess farm performance. Our estimation strategy employs three staggered difference-in-differences models and an event-study to validate the parallel trends assumption. The results show a positive association between the presence of OGs in a region and an improved economic performance. Our findings suggest that the diffusion of innovation tends to be related to the characteristics of the local economic environment, which should be a critical factor in future policy discussions.