The OECD (2001b) Review of Regulatory Reform in Italy acknowledged the vast distance that has been covered since Italy began liberalising product markets at the start of the 1990s. This entailed a sustained programme of privatisation, market opening, and deregulation followed by appropriate re-regulation and institution building. However, there is still considerable scope for further improvement, and raising growth will depend critically on removing the impediments and distortions to competition. Rigidities and protections have a large influence on the structural features of the Italian economy impacting upon, amongst other things, the intensity of product market competition, size and growth of firms, innovative activity, the capacity to attract foreign direct investment and employment growth. Problems with productivity and growth, and low R&D spending, are linked to an industrial structure heavily weighted towards small enterprises. Despite the large number of firms, the intensity of competition and rivalry is particularly weak in retail distribution and in professional services. Without the elimination of entrenched positions and an easing of barriers to entry and firm growth, innovative activity, one of the main engines of economic growth, is unlikely to thrive in Italy.