Defining a Startup - A Critical Analysis
8 Pages Posted: 21 Apr 2021
Date Written: April 9, 2021
Abstract
The word “startup” has become a buzzword in contemporary policies and public debate. Every year, a whopping 100 million startups begin their operations worldwide and hence have a profound impact on the economy they are operating in. Hence, there lies a dire need for governments to foster the growth and fruition of startups since it directly correlates to economic growth.
This salient need to support startups highlights the question – “what constitutes a startup?”. This paper analyses past literature to arrive at a quantifiable definition of "startup". The paper identified 4 overlapping variables used to define a startup.
While past literature fixated on the “newness” of a startup, contemporary scholarly papers show a growing consensus of classifying a startup as being innovative due to the increasingly complex requirements of both domestic and foreign markets9 and is reflected in the change in definitions used by researchers.
This paper identifies “innovation” as being the key differentiator of a startup and growth/risk being the following outcome of said “innovation”. While this paper develops a cut-off point based on the “age of incorporation”, it uncovers a more significant need for researchers to define and measure “innovation” in more absolute, universal and quantifiable terms.
Keywords: Startup, Entrepreneurship, Business, Investment, FDI
JEL Classification: M10, M13, M20, M21, M38
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