Formal and informal support and the performance of new start-ups: a quantile regression analysis

Using survey data from the Japan Finance Corporation, we investigate whether formal or informal support contributes to the performance of new start-up enterprises. We apply ordinary least squares (OLS) and quantile regression to explain the achievement rate of monthly sales. The results of the OLS estimation suggest that formal support has negative effects on the achievement rate, whereas informal support has positive effects. From the results of the quantile regression analysis, the estimated coefficients by quantiles indicate that high-performing enterprises are not affected significantly by formal and informal supports in positive or negative directions, whereas low-performing enterprises are affected strongly in positive or negative directions. These results imply that encouraging the start-ups through formal/informal supports has negative/positive effects on achieving their expected performance. Although it is difficult to predict whether entrepreneurs will perform well before they start an enterprise, informal support has little effect on high-performing enterprises.