Perceived organized crime risk, R&D investment, and Technical efficiency: Evidence from Italian firms

This study examines the relationship between perceived organized crime risk and firms’ research and development (R&D) expenditures and technical efficiency. Drawing on a representative sample of more than 2600 Italian firms from the 2020 Bank of Italy Survey, we exploit substantial regional variation in crime risk within a unified national framework. We construct a composite risk indicator using the multi-directional benefit of the doubt methodology and evaluate its association with two central firm dimensions: knowledge investment and productive efficiency. Using instrumental variable (IV) methods for R&D analysis and stochastic frontier analysis and data envelopment analysis for efficiency estimation, we find that higher crime risk is negatively associated with both outcomes. The IV estimates reveal a robust negative relationship with R&D expenditure, while both parametric and nonparametric models indicate a consistent inverse association with technical efficiency. Overall, the findings suggest that greater criminal pressure reduces innovation and weakens firm performance, highlighting the importance of targeted policies aimed at protecting and strengthening local business environments.