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

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  • Koo, Ja Hyun

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.

Suggested Citation

  • Koo, Ja Hyun, 2018. "Does Early Incubating Improve the Performance of Start-ups?: Evidence from TIPS in Korea," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 40(2), pages 75-96.
    • Handle: RePEc:zbw:kdijep:200824
    DOI: 10.23895/kdijep.2018.40.2.75
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    References listed on IDEAS

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    More about this item

    Keywords

    Accelerator; Venture Capital; Business Incubator; Start-up; TIPS (Tech Incubator Program for Start-ups);
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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