Firm growth and its determinants

Abstract

Enterprise growth has been studied by researchers for many years. Different terms have been used by different authors to define the stages of an enterprise growth, but the events through which each enterprise passes remain more or less the same. Most of the researchers suggest that each enterprise has to start, then grow while facing various challenges and crises, and finally mature and decline. There are many factors which will contribute to an enterprise's success. There are many precursors also, which will allow an enterprise to move from one stage to another. There are two sets of thought prevailing among researchers; some suggest that the growth path followed by the enterprise is linear or predictable, and others suggest that the growth is fairly opportunistic or unpredictable. The understanding of the growth of an enterprise depends on the definition of what the firm is, how much has it grown, and what it offers to the market? What assets it controls and what is its legal form. It is critical to study how an enterprise manages its growth transitions and what pattern they follow. In this paper, a framework has been designed to study the path followed by small and medium enterprises (SMEs). This framework considered the influence of internal and external environmental factor on the growth patterns of SMEs. The paper encompasses literature review on various theories of enterprise growth. It highlights that though there are many studies on the stages of enterprise development, there is a dearth of literature on finding patterns of growth followed by the small and medium enterprises. Also, there is lack of literature on the effect of environmental factors in determining growth path. There is a need of a framework which can help the industry to empirically test enterprise growth patterns under different conditions.