Entrepreneurial Capabilities and the State: The Emergence of Korea's on-Line Gaming Industry

Why do entrepreneurs sometimes fail, yet other times survive and prosper? Scholars have long observed and debated the role of entrepreneurship in industry emergence and have offered varying and partial explanations of this heterogeneity (Townsend et al 2010; Unger et al 2011; Kim et al 2006). Is it the entrepreneurial human capital, skills and prior experiences that create substantial advantages (Hmielesk et al 2009; Taylor et al 2012), or is it the capability to provide and make use of related complementary assets (Teece 1986; Tripsas 1997)? This paper explores this question by analyzing the emergence of the Korean on-line games industry. Drawing up on original and secondary data of this industry, this paper traces the nature of technological change, entrepreneurial responses and market performance.

Our research addresses an intriguing puzzle: Following the tradition of Schumpeter’s early work (Schumpeter, 1934), entrepreneurial research (Colombo et al 2010; Unger et al 2011; Townsend et al 2010) places strong emphasis on the role of small firms, on entrepreneurship and on turbulences within the economy (see also Audretsch et al 2000). It focuses on the founder’s human capital, skills and experiences as robust predictors for the decision to enter an industry or not (Colombo et al 2010; Unger et al 2011). In contrast, other research has built on Schumpeter’s later works (Schumpeter 1950), arguing that incumbents possess advantages towards smaller firms due to complementary assets they may possess (Teece, 1986). A somewhat integrating view between these two perspectives has been taken by the comparative capitalism literature. This literature has focused on how the logic of national business systems differently affects industry emergence across countries (Casper and Whitley 2004; Casper and Storz 2014; Storz, Lechevalier, Nishimura 2014). While this literature is not primarily interested in how capabilities and complementary assets affect the emergence of new industries, it argues that the overall institutional structure (Hall and Soskice 2001) and differences in state-business relations (Whitley 1992, 2005; Amable 2003) affect the strategy of firms and their innovative performance.

This paper sheds light on these three different perspectives by analyzing the factors that drove the emergence of the Korean on-line gaming industry, and by comparing it to other patterns of entrepreneurship among the leading countries in on-line gaming.