What Do We Know About Small Firm Growth?

Abstract

Abstract: Studies of small firm growth are no longer short in supply. On the contrary, as demonstrated by recent reviews, dozens and dozens of empirical research studies on this topic can be compiled. This does not necessarily mean that we know everything we want to know about small firm growth. In fact, all of the authors of recent review articles complain that a coherent picture is not easy to distil from the material. This is likely due to differences in theoretical and epistemological perspectives and interpretations; operationalizations; empirical contexts; modelling and analysis approaches, as well as the inherent complexity of the phenomenon itself. Thus, not only a superficial but also a rather deep reading of the extant literature easily leaves the reader confused and wondering. Admitting that, we will focus in this paper on the fact that significant progress has been made and that we do actually know quite a bit now about the phenomenon of small firm growth; its antecedents and effects, and how it can or should be studied. It is not possible within the confines of a conference paper—and possibly outside the capacity of these authors—to give a complete account of that knowledge. What we will attempt is a summary of points of convergence within some key themes. We first discuss the nature of the phenomenon of small firm growth and its relation to entrepreneurship. Here we discuss the fact that the concept ‘growth’ is used both for ‘change in amount’ and for the process that leads to that change. We also note that part of the reason for lack of coherence in previous research is the heterogeneous nature of growth; firms can expand along different dimensions and show many different growth patterns over time. As regards the relationship between growth and entrepreneurship we conclude that at least early growth of new ventures is part of the entrepreneurship phenomenon. We then move on to how growth can best be assessed. This involves decisions about number of time periods; choice of specific indicator(s) and growth formulae, and the like. We conclude that ideally, growth should be assessed as size changes over multiple periods, preferably in a concurrent, longitudinal design. While sales growth is the most generally applicable measure, theoretical and industry-specific concerns should also influence the choice of indicator(s). A major section is devoted to the long list of internal and external factors that have been hypothesized and shown to influe…