A Comparison of Determinants for Business Start‐Up in the U.S. and Korea

This study compares Korean and U.S. small businesses in terms of (1) owner/manager and firm characteristics and (2) the relative importance placed on determinants of business start-up. The U.S. and Korean firms were each further divided in terms of the type of business (that is, general/opportunistic or technical/craftsman) to see whether this distinction influenced the importance placed on start-up factors. Prior studies in Korea have shown a significant difference in the behavior of these two types (Lee 1998). Research Background The literature regarding international comparisons of entrepreneurship practice is limited. To help fill this gap, this study compares factors in Korea and the U.S. that are essential for the successful small business. Most of the prior studies were based on the experience of small firms operating either in North America or in European countries (Luk 1996) and concluded that business success is the result of a web of factors (Hills and Narayana 1990; Duchesneau and Gartner 1990; Keely and Roure 1990; Hatton and Raymond 1994). Steiner and Solem (1988) investigated factors crucial for success of small manufacturing firms in the U.S. and found that relevant managerial background and experience, flexibility in operations, availability of labor, and possession of identifiable competitive advantages are factors significant to determining success. When Huck (1991) investigated competency factors for small business success in Jamaica, he found that 12 competency areas (starting a business, planning and budgeting, management, marketing/selling, advertising and sale promotion, merchandising, financing and accounting, personnel relations, purchasing, production, facilities and equipment, and controlling risk) are needed for small business success. Yusuf (1995) discussed critical success factors that are perceived by South Pacific business operators as being necessary for successful operation of small business. They found that business operators believe both individual factors, such as possession of certain skills and good character, and env ironmental factors, such as governmental support, political and traditional demands, and the need for balancing these demands with business concerns are considered critical to small business success. Ibrahim and Goodwin (1986) identified entrepreneurial behavior and managerial skill as key success factors in small business. In this study, the determinants that U.S. and Korean business operators consider necessary for a successful start-up are identified. Because factors to be considered in starting a new business are many trying to establish a priority list is difficult. However, Grieco (1975) suggested the following: (1) determining the capital requirements; (2) obtaining legal assistance; (3) researching the market; (4) locating the business enterprise; (5) securing personnel; (6) providing physical facilities; and (7) creating a profit plan. Lee (1998) suggested and validated the determinants to be considered for successful start-up businesses in Korea by querying 87 Korean consultants to small businesses. Table 1 shows the determinants of successful start-up businesses in Lee's study. Research Method After a pilot survey in the U.S. and Korea, a four-page questionnaire was prepared and randomly sent to 240 business operators in each country. The names of the operators were drawn at random from the membership in the Jim Moran Institute in the College of Business at Florida State University, the Korea Productivity Center (KPC) entrepreneurship school, and the University in Korea. Sixty-two responses from the U.S. and 53 from Korea were received, for a total of 115 responses, yielding an average return rate of 23 percent. Surveys were discarded if they were not complete (n = 18). Characteristics of respondents and their firms. In a categorical format, respondents were asked to indicate their sex, age, major at college, education level, previous job field, previous position, and years of experience with the current business. …