The integrated resource-based and transaction cost approach to the growth process of firms

Abstract

PurposeThe purpose of this paper is to discuss the process of entrepreneurial growth from the perspective of the resource-based view (RBV) of the firm and transaction cost theory (TCT) and to formulate propositions regarding the entrepreneurs’ decisional rules and structural elements in this process.Design/methodology/approachThe argumentation draws upon three fields of academic research, namely, entrepreneurship studies on firm growth as well as strategic management and organization science studies on company scope and size (boundary). A systematic review of the literature was performed that combines the RBV and TCT to explain a firm’s boundary.FindingsThree levels of entrepreneurial decisional rules in the process of growth were identified. The first level includes main decisional criteria. The second level approaches the structural elements of growth process, namely, its motives, rationale, mechanism and modes. The third level assumes evolutionary approach to decision making, namely, feedback relationships among transaction costs, governance and capabilities to create value from growth.Originality/valueThe paper broadens the early stream of research in the process of entrepreneurial growth. It contributes to explaining the way growth is realized, instead of identifying its predictors, which has dominated in to-date studies. The entrepreneurs’ decisional rules and choices in the process of expansion were suggested. Moreover, the integrated RBV-TCT approach was proposed as a theoretical background for studying this phenomenon.