The Influence of Institutions on Entrepreneurship as Occupational Choice : A Study about the Emergence of Young Entrepreneurs in South Korea

Schüler, Diana GND

Research on entrepreneurship in South Korea has largely focused on family-owned business groups, the so-called Chaebol, neglecting new business foundations, since young Koreans were often described as too risk-averse to start their own business.
However, the recent increase in the number of young Korean entrepreneurs calls for a more thorough investigation.
Research has shown that the occupational decision to become an entrepreneur is driven by internal factors like risk preferences, but scholars have recently also turned to institutions as external factors influencing the individual decision to start a business.
Thus, building on individual decision theory and institutional theory, this dissertation aims to explain how changes in the institutional environment for entrepreneurship in South Korea influenced the entrepreneurial decision of young Koreans, which is conceptualized as the occupational choice to found a business entity as opposed to seeking employment in established companies.
The decision between entrepreneurship and employment is an individual decision under uncertainty, and institutions are guidelines for behavior in situations of uncertainty.
In particular, this thesis follows the common approach in entrepreneurship research that distinguishes between regulative (i.e., formal), cognitive and normative (i.e., informal) institutions.

To answer the research question, a mixed-method approach was applied. Semi-structured interviews with experts and entrepreneurs formed a basis for the qualitative analysis. Quantitative data were collected through a survey on the perceived institutional environment for entrepreneurship among business students, and an economic experiment as the main methodical contribution simulated the influence of informal institutions on the entrepreneurial decision via a priming within an endogenous entry into contest design.
The results indicate that changes in regulative institutions – especially in bankruptcy regulations and government policies – diminished the financial uncertainty related to entrepreneurship, which positively influenced business foundations.
While changes in cognitive institutions in the form of entrepreneurship education are still under way, normative institutions are inert and detrimental for entrepreneurship, pushing young Koreans toward conventional career paths. However, the results also indicate that young Korean entrepreneurs – stimulated by favorable regulative institutions and internal motivations – challenge these occupational norms, suggesting future normative institutional change.
Further research is needed to investigate how policy makers address the remaining deficits in regulative and cognitive institutions, and whether normative institutions will follow suit.

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Schüler, Diana: The Influence of Institutions on Entrepreneurship as Occupational Choice. A Study about the Emergence of Young Entrepreneurs in South Korea. 2020.

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