innovate of entrepreneurs, who found themselves confronted with the hard-to-resist temptation to
adopt techniques intensively using part-time workers now abundantly available in the labor market
instead of experimenting with (riskier) ICT-enabled innovation.
The other channel through which experience may have been important is on the manager side. The
pace of adoption of ICT-related innovation was also possibly hampered by the unusually high
presence of old, thus very experienced but perhaps possibly conservative (and very powerful)
managers and board members, a reflection of the persisting lack of contestability of firm property
rights in the Italian capital market. As discussed by Bandiera, Guiso, Prat and Sadun (2008), it turns
out that only a fraction of firms - especially the non-family owned and multinationals - adopts a
“performance-based” model, whereby managers are hired through business contacts and head-
hunting activities, undergo regular assessment procedures and are rewarded, promoted and
dismissed on the basis of their assessment results. Most firms - particularly the family-owned ones
and those mainly active in the domestic market - follow instead a “fidelity model” of managerial
talent, hiring their managers based on personal or family contacts, which leaves formal assessment
of performance in the background at best. In many ways, the fidelity model ends up selecting and
keeping in office old managers well connected to their shareholders but only occasionally
connected to market and technological developments. In short, the type of managerial model -
based on performance or fidelity - is tightly associated with the quality, the conduct and the
performance of managers as well as of the firm itself. Firms blessed with faithful managers are
often at a disadvantage when faced with new technological opportunities with respect to foreign
competitors less dependent on family-based modes of running a firm. This state of affairs has been
increasingly perceived as a severe constraint for the Italian economy, particularly when it has been
exposed to the chance of reaping the technological and organizational benefits brought about by the
Internet revolution in other countries.
The story may then be as follows. Labor market reform has channeled an inflow of relatively un-
experienced workers into the Italian labor market. In parallel, the lack of financial market reform