Italian study shows impact of counterfeiting on companies

A study has investigated the effect of counterfeiting on companies formed in Italy around 20 years ago, and the factors that may affect their survival as viable businesses.

Perhaps unsurprisingly, the analysis by Rosanna Pittiglio of the University of Campania found that counterfeiting was a factor in companies going bust. But it also shows that smaller companies – and particularly those operating in lower-tech sectors – were disproportionately affected by counterfeiting and more likely to fail.

The survival of more than 10,000 companies in the cohort was charted between 2008 and 2014 and found an overall failure rate at the end of that period of just over 14%. During that period, the study estimates that there were more than 114,000 seizures carried out during the period, which sized over 365 million fake items worth an estimated €4.1 billion, based on data from the IPERICO report.

For those operating in sectors known to have a counterfeiting problem – some 3,800 firms in categories like clothing, accessories, electrical/electronic equipment and cosmetics – the failure rate was 16.6% in 2014, while those in largely unaffected sectors was 13%, pointing to a role for counterfeiting in the disparity.

The study suggests that the finding that counterfeiting is more likely to be seen in low-tech sectors may reflect their relative lack of investment in innovation compared to higher-tech sectors which means their products are more easily imitated.

“Firms investing in innovation are more able to mitigate the negative effects of counterfeiting,” writes Pittiglio in the paper, which has been published in the journal Economic Systems.

The findings point “on the one hand [to] the need to strengthen measures to combat the trade in illegal products, and on the other, the need to implement policies aimed at stimulating firms to enhance their innovation activities.”

A 2021 report on global counterfeiting by the Organisation for Economic Co-operation and Development (OECD) estimated that in 2019 approximately 2.5% of traded world merchandise was counterfeit – with a value of around €412bn - and predicted this would increase in future years.

Image credit: lia aramburu via Vecteezy