Controlling Unintended Growth: An Exploratory Study of Coping with Unintended Growth in Small and Medium-sized Firms

Abstract

IntroductionA significant number of studies on firm growth based on small and medium-sized enterprises (SMEs) have been published (Davidsson, Achtenhagen, and Naldi, 2010; Senderovitz, 2011). Similarly, much is known about the external and internal drivers of firm growth-and about the barriers that prevent firms from realizing desired growth (Storey, 2011; Davidsson and Wiklund, 2000; Goffee and Scase, 1995; Reynolds, Bygrave, and Autio, 2003). Studies show that growth intentions and organizational capabilities as well as favorable, external, contextual circumstances are among key drivers of growth. Conversely, lack of growth is mainly due to internal lack of resources and/or capabilities or unfavorable, external, contextual circumstances that hinder the (desired) growth of the small firm. The underlying belief is that SMEs and their owner-managers do, indeed, have a desire to grow their business if and when they have the means and opportunities to do so (Davidsson and Wiklund, 2000; O'Regan, Ghobadian, and Gallear, 2006; Storey, 2011). However, other studies reveal that it may be equally relevant to examine socio-cultural factors to determine why some SMEs stay small. Studies show that a large number of small firms remain small and that the owner-managers of a large share of these firms have no desire to grow (Penrose, 1959/95; Burns, 1989; Birley, 1996; Vickery, 1989). These firms deliberately avoid growth and thus stay small (Davidsson, 1989).In contrast to these well-documented situations, there is an additional growth situation that has not previously received much attention in the literature: the situation in which growth in SMEs occurs without explicit growth intentions and when growth is perceived as being problematic. Through an explorative, in-depth case study (Eisenhardt, 1989; Yin, 2003) this study shows how SMEs may tackle growth in situations in which their organization is growing organically despite lacking growth intentions, and in which the firm perceives growth as problematic and unwanted. In these situations, owner-managers employ different coping strategies in their efforts to control or constrain growth.Growth literature has demonstrated that small, growing firms face a wide range of organizational and managerial challenges (Greiner, 1972; Churchill and Lewis, 1983; Hofer and Charan, 1984). Moreover, despite numerous theoretical arguments in favor of firm growth, growth may not always be perceived as a positive development by the management of smaller firms (Davidsson, Steffens, and Fitzsimmons, 2009; Senderovitz, Klyver, and Steffens, 2015). This study supports the notion that there may be good and sound reasons why an SME/owner-manager may see growth as unwanted and problematic. However, it also shows how unintended and unwanted growth can be handled successfully or at least constrained so that the perceived obstacles and challenges associated with growth can be overcome.The results of the explorative case study show that more knowledge is needed about how growth-reluctant SMEs tackle firm growth they perceive as problematic and therefore endeavor to limit or even prevent it. Investigating this situation will allow researchers to explore on what grounds growth occurs. This need for more knowledge is also in line with recent research findings indicating that firms that grow successfully first secure profitability and only then embrace growth (Davidsson, Steffens, and Fitzsimmons, 2009). The authors agree with Davidsson and colleagues that caution is warranted whenever a universal and uncritical growth ideology is proposed, and that recent findings allow us to see the widespread reluctance of small-firm owner-managers in a different light (Davidsson, Achtenhagen, and Naldi, 2010). Not all types of growth are attractive. In line with Achtenhagen and colleagues (2010, p. 298), the authors of the present paper also see a need for broadening of the scholarly discussions that have so far taken place in the growth literature so that a closer link can be forged between how researchers conduct growth studies and how practitioners perceive business growth. …