Conceptual and Empirical Challenges in the Study of Firm Growth

Abstract

When the first author reviewed the literature on small firm growth in the mid 1980’s for his disserta-tion work, he noted that surprisingly few studies had focused on that specific problem (Davidsson 1989a; 1989b). Today, this is no longer true. In recent years ever more comprehensive lists of studies have been compiled and reviewed. Storey (1994) compiled results from more than 25 studies. Delmar (1997) scrutinized the operationalizations of growth in 55 studies. The second author of the present manuscript recently reviewed and classified close to 70 studies for his dissertation work (Wiklund, 1998), while Ardishvili, Cardozo, Harmon & Vadakath (1998) included in their classification a full 105 published and unpublished studies focusing on new and/or small firm growth. However, rather than presenting a set of solid generalizations on the causes and effects of growth, these reviewers all tend to come up with relatively critical accounts. These criticisms concern both theoretical and methodological shortcomings. (Storey, 1994, p. 5; 125, Cooper, 1995, p. 120; Delmar (1997, pp. 205; 212; Wiklund, 1998, pp. 6-7; 19; Ardishvili et al, 1998, p. 1) In addition to the above evaluations of research specifically on growth, we also have the observation that longitudinal designs are generally lacking in entrepreneurship research (Cooper 1995, p. 112; Wik-lund 1998, p. 7). In the latest ‘State-of-the-Art’ volume, several authors mentioned the lack of longitu-dinal studies in entrepreneurship research as a major impediment (Aldrich & Baker, 1997, p. 389; Sex-ton, 1997, p. 407) As a result of the shortcomings pointed out by the critics, it is still true today that knowledge about what facilitates and hinders growth is still scattered and limited. The same is true for insights into the process of firm growth. Apparently, the large number of empirical studies has not given a very high yield of generalizable knowledge. This suggests that researchers who set out to contribute meaningfully to this line of empirical research have a number of challenges to deal with. On the basis of the criticism summarized above we would suggest that some of the more important challenges are the following: • to develop a satisfactory basic research design • to apply a well-founded conceptualization of growth, which in turn requires a well thought-out con-ceptualization of ‘the firm’ • to adequately match this conceptualization with the purpose of the study, the theories used, and the operationalization of growth. In the remainder of this chapter we will elaborate our views on these challenges. In the next section we will argue that growth studies need to be longitudinal, and why this is so. We will then turn to the conceptualization of the firm and the unit of analysis in growth studies, which turns out to be a really difficult problem. After that we discuss theoretical perspectives and how these match with different conceptualizations of the firm. Finally, we turn to operationalization issues, i.e. the choice of growth indicators, specific ways to model growth trajectories, and the distinction between organic and acquired growth. Throughout, we also discuss how these issues relate to different purposes, i.e. whose knowl-edge interests the study aims to satisfy.