Picking Winners or Making Them? Evidence from the J-Startup program

Using a longitudinal dataset of Japanese start-ups, this study evaluates the J-Startup program, Japan’s flagship initiative aimed at fostering globally competitive start-ups. We estimate the average treatment effect on the treated (ATT) using propensity score matching, finding that program participation significantly enhances firm growth, particularly in employment and sales, and increases the likelihood of generating high-growth firms. Heterogeneity analysis reveals that these effects are particularly pronounced for younger firms, while evidence on firm size remains inconclusive. To explore underlying mechanisms, we examine financing capacity and network expansion as potential channels. We find that program participation enhances financing capacity, which in turn is positively associated with firm growth, which is consistent with a certification-induced financing channel. While program participation also expands investor and customer networks, these channels show limited association with firm growth. Overall, the findings suggest that while the program exhibits elements of “picking winners,” its marginal impact is strongest for firms at earlier stages of development, and that growth effects operate primarily through certification-induced improvements in financing capacity.