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Does Early Incubating Improve the Performance of Start-ups?: Evidence from TIPS in Korea

Ja Hyun Koo

KDI Journal of Economic Policy, 2018, vol. 40, issue 2, 75-96

Abstract: Recently, the government has been pursuing various policies to create new industries and jobs through the invigoration of start-ups. For the sustained growth of start-ups, it is necessary to look not only at the supply of risk capital but also at policies for venture capital firms that nurture and foster start-ups. The purpose of this study is to estimate the effects of the nurturing and fostering role of risk capital, such as mentorship on the performance of start-ups, and to do this we analyzed the effects, as a newly introduced form of venture capital, of mentoring by an accelerator and investor ties on the performance outcomes of start-ups. We find that mentoring and investor ties for start-up enterprises positively influence follow-up investment in start-ups. In addition, this study finds that with a younger CEO of a start-up, it is more likely that the performance of the start-up will improve. Meanwhile, when examining increases in employment as a measure of the business performance of start-ups, mentoring and investor ties are found to have a positive effect on the increase of employment at start-ups. These results suggest that there is a need to promote policies that strengthen the mentoring role of venture capital in Korea's equity finance policies and in the government's SME support policies.

Keywords: Accelerator; Venture Capital; Business Incubator; Start-up; TIPS (Tech Incubator Program for Start-ups) (search for similar items in EconPapers)
JEL-codes: G24 G32 (search for similar items in EconPapers)
Date: 2018
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