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

Author

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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)

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.

Suggested Citation

  • Se-Kyoung Choi & Sangyun Han & Kyu-Tae Kwak, 2021. "Innovation Capabilities and the Performance of Start-Ups in Korea: The Role of Government Support Policies," Sustainability, MDPI, vol. 13(11), pages 1-14, May.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:11:p:6009-:d:562856
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    2. Qinghua Fu & Muhammad Safdar Sial & Muhammad Zulqarnain Arshad & Ubaldo Comite & Phung Anh Thu & József Popp, 2021. "The Inter-Relationship between Innovation Capability and SME Performance: The Moderating Role of the External Environment," Sustainability, MDPI, vol. 13(16), pages 1-14, August.
    3. Temitayo Shenkoya & Kyung Yun Hwang & Eul Hyun Sung, 2023. "Student Startup: Understanding the Role of the University in Making Startups Profitable Through University—Industry Collaboration," SAGE Open, , vol. 13(3), pages 21582440231, September.

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