Innovation Capabilities and the Performance of Start-Ups in Korea: The Role of Government Support Policies

Se-Kyoung Choi, Sangyun Han and Kyu-Tae Kwak
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Se-Kyoung Choi: Division of Shared Growth Research, Korea Small Business Institute, Seoul 07074, Korea
Sangyun Han: Department of International Commerce, Daejeon University, Daejeon 34520, Korea
Kyu-Tae Kwak: Department of Global Culture Industry, Soonchunhyang University, Asan 31538, Korea

Sustainability, 2021, vol. 13, issue 11, 1-14

Abstract: What kind of capacity is needed to improve the performance of start-ups? How effective are government support policies in improving start-up performance? Start-ups are critical firm group for ensuring the prospective and sustainable growth of an economy, and thus many countries’ governments have established support policies and they are likely to engage more widely in forward-looking political support activities to ensure further growth and expansion. In this paper, the effect of innovation capabilities and government support policies on start-up performance is examined. We used an unbalanced panel data analysis with a random effect generalized least squares. We investigated the effect of government support policies on 4368 Korean start-ups. The findings indicated that technology and knowledge capabilities had positive effects on the sales performance of start-ups, and government financial support positively affected the relationship between knowledge capability and firm performance. However, when government financial support increased, marketing capability was negatively associated with firm performance. These results demonstrate the significant role of government financial support, including its crowding in but also its crowding out effect. Practical implications: To be more effective, governments should employ innovation-driven entrepreneurship policy approaches to support start-ups. To improve their performance, start-ups need to increase their technology and knowledge capabilities. This study extends recent efforts to understand more fully the effect of government support policies on start-ups differing in their technology, knowledge, and marketing capabilities.

Keywords: start-ups; government support policy; technology capability; knowledge capability; marketing capability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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