Abstract
The purpose of this study is to define characteristics that distinguish high-growth from low-growth companies. In this examination, particular emphasis is focused on characteristics that lend themselves to objective evalnation. In previous studies, great emphasis has been placed upon characteristics related to the personal capabilities of entrepreneurs. Although such characteristics are widely accepted as being of great importance, they are subjective and evaluated only with great difficulty.Two pools of companies were examined in the course of this study. Each company responded to a comprehensive questionnaire and provided longitudinal data related to a wide variety of operating characteristics. The first pool of companies—the “Reynolds data base”—consisted of relatively young, small companies. The second pool—Price Waterhouse clients—included companies that were generally larger and more mature than those in the Reynolds data base. The distinction between the samples permitted us to consider how the set of growth characteristics varies at different stages in a company's development.Discriminant analysis of both samples yielded the following insights. 1. In both pools, it was important that management have substantial industry experience. No other characteristic related to the experience or capability of the entrepreneur or entrepreneurial team was identified as distinguishing between high- and low-growth. 2. An interesting strategic profile became apparent based upon the examination of the two groups. In the Reynolds sample, the high-growth companies were more focused than their low-growth counterparts, with more revenue being generated by a single product. Conversely, in the Price Waterhouse sample, the high-growth companies displayed a greater propensity for market and product diversification than did the slow-growth companies in that pool. These results seem logical in that smaller companies have fewer resources and therefore may perform better by focusing their effort. Conversely, more mature companies need to expand growth prospects and hedge against overreliance on any particular opportunity. 3. Growth companies in the Reynolds data base ran leaner than the low-growth companies in that sample, with fewer managers, slimmer payrolls (as a percentage of sales), and more productive uses of assets. Growth companies in the Price Waterhouse sample were more likely to have balanced management teams than the Price Waterhouse slow-growers. Leanness was not a discriminating variable in this group. As one might expect, more mature companies would require a broader array of talents and would be better able to afford balanced teams. 4. Rapid market growth and the ability to develop close customer contacts were identified as discriminating characteristics in the Price Waterhouse sample. Neither were identified in the Reynolds data base. Companies in the Reynolds data base were not asked to report on market growth and were probably too young to have established much in the way of customer relationships. These companies did, however, report a greater utilization of advanced technology.
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