Small-firm growth-enabling capabilities: A framework for young technology-based firms

Abstract

Acknowledging the importance of capabilities for growth and the non-linearity of young technology-based firms' (YTBFs’) growth trajectories, we adopt a dynamic-states perspective to investigate how YTBFs can leverage internal capabilities to enable the critical transitions of their dynamic growth process. We suggest that such transitions are characterized by three inherent types of challenges—entrepreneurial, orchestration, and legitimation challenges—that YTBFs are confronted with throughout this process. Given common liabilities of smallness, newness, and volatility these firms face, we argue that YTBFs can benefit from a better understanding of which capabilities are critical for, and what role they may play in, tackling these challenges. Using a qualitative, systematic combining approach we find six growth-enabling capabilities: learning, absorptive, adaptive, networking, innovation, and individual capabilities. Although each is equally important for enabling dynamic growth transitions, the importance of a capability for a YTBF depends on where and how it is positioned in its growth process. Our study contributes to the strategic entrepreneurship literature by isolating and exploring how and when growth-enabling capabilities are relevant to YTBFs and how they can be applied. We develop a comprehensive framework to illustrate these relations and provide practical implications for YTBF managers.