Firm Growth and Broad Strategies

Abstract

We empirically explore the effect of broad firm strategies on firm growth using a representative sample of manufacturing firms from the European Community Innovation Survey 2012. We consider broad strategies related to innovation and marketing, cost efficiency, building alliances with other firms and institutions, organizational flexibility, and new geographical markets as explanatory factors of firm growth. Splitting our sample into frontier economies and catching-up countries accounts for different contexts that affect the interplay of strategy and firm growth. We implement quantile regressions to estimate conditional coefficients across the distribution of employment-based firm growth rates. High firm growth in frontier countries is associated with innovation, strategic alliances, and organizational flexibility. High firm growth in catching-up economies is supported by internationalization strategies and strategic alliances. We find in addition that in catch-up countries being part of a foreign owned firm is conducive to high growth. Cost savings are negatively associated with firm growth in both country groups and marketing strategies do not seem to be associated with rapid firm growth.