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SMEs performance in public procurement and the Italian Legality Rating
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DOI：10.1007/s11187-026-01259-8.png)
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Abstract
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This study investigates the impact of the Italian Legality Rating (LR) on small and medium enterprises (SMEs) in public procurement. The LR, issued by the Italian Competition Authority, evaluates firms based on fiscal transparency, anti-corruption practices, corporate responsibility, and sustainability. While larger firms are more likely to obtain higher LR scores, SMEs benefit significantly from holding the certification. Using firm-level data and a Regression Discontinuity Design, we find that the LR doubles SMEs’ tender-winning probabilities, highlighting its role as a strong institutional signal. Our findings emphasize the LR’s potential to enhance SMEs’ competitiveness in public procurement. A government-backed legality certificate can almost double a small firm’s chance of winning a public contract. We study Italy’s Legality Rating, which verifies firms’ compliance with standards concerning fiscal transparency, anti-corruption, workplace safety, corporate responsibility, and environmental practices. Using firm and public procurement data and comparing businesses around the €2 million eligibility threshold, we find that small and medium-sized enterprises are less likely than larger firms to obtain therating, but benefit more when they do: their probability of winning a tender rises by about 1.2 percentage points from a baseline of around 1.6%. This suggests that credible public certification can be especially valuable for smaller firms, which generally have fewer established ways to signal their reliability. Thus, governments should make credible certification more accessible to smaller businesses and consider an alternative for firms below the revenue threshold, so that certification promotes fair competition rather than creating an additional barrier to public procurement.
Keywords:
SMEs
Legality Rating
Public procurement
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