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.
Highlights
This study empirically investigated the innovation-related business types and capabilities affecting the financial performance of start-ups and whether government support improved the performance of those start-ups
The aim of this study was to identify the role of government support policy as one of the factors influencing the relationship between start-up innovativeness and financial performance
This study examined the impact of innovation characteristics and government support on the financial performance of start-ups
Summary
Business creation is an important topic related to national economic policies. The assumption that start-ups contribute positively to the growth of the national economy has been steadily emphasized by the Global Entrepreneurship Monitor (GEM), which surveys and publishes the entrepreneurial ecosystem in a national level. The level of dynamism of entrepreneurship is closely related to the level of development of the national economy. [3,4] This GEM hypothesis is based on the view that start-ups increase dynamics of the market and contribute to the growth of the economy, creating and forming new markets. The pull motivation of start-ups is extremely private factors, such as wanting to run one’s own business, be recognized by others, etc. The pull motivation of start-ups is extremely private factors, such as wanting to run one’s own business, be recognized by others, etc. [5], the aggregate of these motivations could make the economies of many countries more innovative and dynamic
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