Tough on criminal wealth? Exploring the link between organized crime’s asset confiscation and regional entrepreneurship

This paper addresses the question “How does the fight against organized crime affect regional entrepreneurship?” We focus on asset confiscation in relation to alleged connections of their owners with organized crime, a highly debated policy measure against organized crime. Extending work on institutions and regional entrepreneurship, we propose that confiscation has contrasting effects on regional entries. On the one hand, confiscation of economic assets associated with criminal organizations’ legitimate activities in a region reduces competition and triggers renewal, fostering new entries. On the other hand, seizure of criminal organizations’ operational assets weakens their ability to exercise sovereignty, creating an institutional vacuum that lowers founding rates. Our results, based on a longitudinal study of Italian provinces between 2009 and 2013, provide support for both hypotheses. We also find that the negative effect associated with the confiscation of operational assets is mitigated when local governments have policies facilitating asset redeployment.