The Role of the Entrepreneur and Government in the Development of Korean Information Technology Firms

The Role of the Entrepreneur and Government in the Development of Korean Information Technology Firms

Seungwha (Andy) Chung (Yonsei University, Korea), Youngkeun Choi (Sangmyung University, Korea) and Ji Sun Lim (Yonsei University, Korea)
DOI: 10.4018/978-1-4666-4753-4.ch007
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Abstract

This chapter examines how an entrepreneur’s strategic choice influences corporate development leading to the initial public offering. The data comes from Korean startups in the information technology industry. The authors consider the dynamic interplay between an entrepreneur’s attributes and government's institutional support as key factors. An empirical analysis of 615 listed companies shows that an entrepreneur’s attributes play a significant role in market entry, especially in the information technology industry, which tends to have shorter lead time to the initial public offering. Government certification and venture capital investment also facilitate corporate growth toward the public company status.
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Theoretical Background And Hypotheses

An entrepreneur plays the role of a strategic leader in corporate development (Sharma, Seth, & Niyazi, 2012). As we have observed rapid and unpredictable changes in entrepreneurial activities especially from 1990s and on, the personal characteristics and background of entrepreneurs became prominent. Entrepreneurs’ attributes and experiences have played critical roles in determining which industry they would choose to enter. Their role is critical not only in the initial development of a business idea, but in their business growth to the initial public offering (IPO).

Although research regarding management team has been ongoing (Child, 1972; Hambrick & Mason, 1984; Miller, Kets De Vries, & Toulouse, 1982), previous research have centered on the management team as a unit. Hambrick (1989), however, suggested strategic leadership theory, integrating the manager, business strategy, and organizational performance as interrelated factors. Hambrick & Mason (1984) pioneered the concept of the upper echelon, incorporating ideas about the top management team, business strategy and performance. According to the upper echelon perspective (UEP), organizational outcomes such as strategy and financial results are usually determined by the attributes of the chief executive officer (CEO).

In an uncertain and complicated decision making situation, it is difficult for the CEO with bounded rationality to grasp and interpret core information within the environment (Cyert & March, 1963; Hambrick & Mason, 1984; March & Simon, 1958). In these circumstances, CEO reconstructs the decision making situation with a simplified view of the world based on their background (Barr, Stimpert, & Huff, 1992; Duhaime & Schwenk, 1985; Finkelstein & Hambrick, 1990; Schwenk, 1984: Walsh, 1988). So, the actual decision tends to be consistent with the attributes of CEO. The attributes reflect cognitive and motivational features as well as objective and observable facts such as age, years of service, and educational and career background.

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