Determinants Of Firm Growth Research Articles

Determinants of Firm Growth: The Case of Sachet Water Firms in Minna, Nigeria

Purpose: The objective of this study was to analyze the influence of Entrepreneurial Infrastructure (EI) on the profitability of Sachet Water Firms (SWFs) in Minna.
 Design/methodology/approach: This was done through the use of personal interviews for the collection of qualitative data from owners/managers of SWFs. The population of the study included all the 165 SWFs in Minna and the sample size was 10 which was determined by interview saturation point. Thematic analysis was used in analyzing the transcribed audio recordings of the interviews conducted.
 Findings: Findings revealed that there is an EI deficit in Minna, which has led to increased expenses on the provision of alternative EI by SWFs and has increased their operational costs thereby reducing their profitability.
 Research limitations/implications: Firstly, with thirty-six states in Nigeria, the findings of this study, covering the Capital of only one of the States (Niger) cannot be generalized for the entire country, rather it must be taken within the context of the region covered. Secondly, only one industry out of many that make up the Nigerian economy is selected for investigation. Thirdly, the researcher was faced with the negative attitude of some respondents who were not willing to participate in the research or provide the needed data for analysis. Lastly, not all the SWFs in Minna were included in the study, only those that have operated for up to three years were included. Future studies can bridge these research gaps by carrying out research in other parts of Nigeria on the same subject matter.
 Practical implications: Findings of this study would be of help to the existing SMEs in Nigeria, particularly the SWFs in further understanding the complexities of the infrastructural challenges militating against their growth and how to overcome them.
 Originality/value: This study contributes to the body of knowledge on the nexus between EI and the general performance of SMEs.
 Paper type: Research paper.

Environmental Versus Firm-level Determinants of Firm Growth: A Structural Equation Modelling for Micro-level Analysis of Business Group Firms

The study of the determinants of firms’ growth should consider both internal and external factors: these are the firms’ organizational features and the external competitive environment, which is also named market type, in which the firm operates. Among the internal factors, the organization model is the most important one. Among the factors that define the influence of market structure on a firm’s performance, there is business group affiliation, market concentration and business group heterogeneity. The aim of this study is to determine, in the context of business group affiliated firms, if there exists an influence of these internal and external factors. Using the structural equation model approach, results showed that a firm’s growth is influenced by both factors, and that the internal ones are prevalent.

Quantifying the concerns of Dimon and Buffett with data and computation

Despite considerable efforts, the determinants of firm growth and financial market volatility have not been definitively identified, yet sets of stylized facts – most notably power-law distributions – relating to firm size and market returns suggest both evolve as part of a complex system. This scenario implies that a positive feedback loop between firms and investors exists and may be responsible for prejudicing the way management allocates their resources, with firm, and economic, growth adversely affected. Further, there are growing real-world concerns that the management of publicly listed firms is becoming too concerned with the movement of their firm's share price, which is adversely influencing resource allocation decisions. A related concern is that agents, in general, within financial markets are placing a disproportionate focus on short-term factors. To investigate the ramifications of the proposed feedback loop on firm growth and market volatility, this paper implements a novel agent-based artificial stock market where management can consider the movements of their firm's endogenously determined share price when allocating resources between sales and margin growth. The results highlight an inferior outcome regarding firm growth, and various other financial metrics, if management is overly concerned with share price movements. The growth of the firms (and market) is also affected by the mixture of the investor classes initiated due to the divergent levels of volatility they create. Additionally, the model presents insights into how and why the extent to which agents consider past outcomes in their decision-making process becomes influential. Notably, the model's results emulate an extensive set of global micro-level firm data. By providing significant insights on the effects of the stock market on management decision-making and its ramifications for firm growth, this paper provides crucial insights into the mechanisms responsible for inefficient behavior by market participants.

Determinants of Firm Growth: Evidence from Vietnamese Small and Medium Sized Manufacturing Enterprises

Using data from a survey of small and medium scale manufacturing enterprises (SMEs) in Vietnam, this study investigates the impact of firm and owner characteristics on firm growth. The results reveal that firm size has a negative effect on firm growth, suggesting the invalidity of Gibrat’s Law. Moreover, the results indicate the dependence of firm growth on firm and owner attributes. Regarding firm characteristics, leverage, labor quality, training and export activities all enhance growth, while firm age is negatively associated with the growth of SMEs. As for owner characteristics, the results indicate a negative relationship between owner age and firm growth. Furthermore, female-headed firms have higher growth than male-headed firms; and highly educated owners create higher growth than those with lower levels of education.

Determinants of Growth: Evidence from the Malaysian ACE Market

This paper examines if Gibrat's Law holds for the Malaysian ACE market (access, certainty, and efficiency). It aims to shed light on the empirical determinants of firm growth by extending the literature to include a new variable related to liquidity constraints. Also, the age of the firm is examined for the manner in which it helps explain a firm's growth dynamics. The sample used is a balanced panel data set that covers all firms that managed to survive (84 companies) for the 2008 to 2014 period. By employing panel data modelling (fixed effect), the findings suggest that Gibrat's Law cannot be accepted for the Malaysian ACE market firms as large firms grow faster than small ones. The findings also show that firms listed on this market are extremely financially constrained and that firm growth is mainly explained by firm size, age and liquidity constraints. These results have significant policy implications and require further actions by authorities and policymakers to assess the viability of this market to achieve its objectives.

Small, young, and exporters: New evidence on the determinants of firm growth

This work investigates how the export status of the firm influences the patterns of employment growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results suggest a positive signaling role of the export status that is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data, we also provide, for the first time, evidence on differences in exchange rates pass-through between young and experienced exporters. In particular, we find that early exporters appear to be better equipped than established firms to face exchange rates variations as their exports decrease less following a currency appreciation.

Determinants of Firm Growth: Empirical Evidence from Swiss Listed Companies

There is a wide range of literature on the theory of firm growth with contradictory results. However, hardly any studies touch the determinants of firm growth taking Swiss listed firms into consideration. For this purpose we apply a pooled and fixed effects panel regression to a set of firm specific and macroeconomic variables. The sample comprises 349 Swiss listed firms yielding more than 2,000 observations from 1999 to 2014. We are able to reject Gibrat’s Law stating that large firms grow faster than small ones. Furthermore, we find evidence for significantly larger growth rates in the consumer sector, which includes the pharmaceutical industry, in comparison to other sectors. From a macroeconomic point of view growth rates in GDP and inflation are important determinants of firm growth showing up a positive relationship. The domestic stock market does predict growth rates adequately since there is a significant positive relationship between the Swiss Market Index and the applied dependent variables. On a firm specific level we examine that mature firms tend to grow slower than young companies. Leverage is positively related to firm growth as well as profitability. Finally, we indicate that family owned businesses grow slower than non-family owned firms.

Small, Young, and Exporters: New Evidence on the Determinants of Firm Growth

This work investigates how the export status of the firm influences the patterns of growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results, which are robust to a series of controls, suggest for a positive signaling role of the export status which is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data we also provide, for the first time, evidence on differences in exchange rates pass through between young and experienced exporters. In particular, we find that early exporters appear to be well equipped to face exchange rates variations as their exports decrease less following a currency appreciation.

TO STUDY THE IMPACT OF DETERMINANTS OF GROWTH ON FIRM’S PERFORMANCE WITH RESPECT TO IT INDUSTRY

Firm growth is an important indicator of a thriving economy. Although the determinants of firm growth have been studied in various disciplines, an integrated analysis is still lacking. Many determinants of firm growth are summarized and classified into three dimensions: individual, organizational, and environmental determinants. The present paper attempts to provide an integrated analysis on the determinants of firm growth. It gives an opportunity to investigate the determinants of firm growth in a comprehensive way.
 The close-ended questionnaire was developed from standard questions of relevant literature as a research instrument. The sample size taken for the research is of 110 IT firms entrepreneurs.
 Among the individual determinants, need for achievement, risk taking propensity and self-efficacy are positively conducive to firm growth. Among the organizational determinants, formulation, preparedness to grow, organizational learning, financial performance have positive impacts on firm growth. Market orientation, Entrepreneurial orientation, competitive intensity shows a negative relationship. Among the Entrepreneurial determinants, munificence, heterogeneity has positive impacts on firm growth. Market dynamism shows a negative relationship. Growth Barriers shows negative relationship.
 Our study shows that firm growth is a complex phenomenon. It cannot be explained by one particular dimension or one determinant. The most important determinants have been identified from the individual, environmental and organizational dimensions. Organizational determinants have the greatest influence on firm growth.

Firm growth in the Swedish energy sector: Will large firms become even more dominant?

This paper examines the determinants of firm growth in the Swedish energy sector using a sample of 200 energy firms active from 2000 to 2010. The article has two aims. First, we seek to investigate ...

R&D and Licensing Strategies: Do They Influence US Start-Upss Growth?

The paper analyses the theoretical background regarding R&D and licensing strategies as determinants of firm growth, especially that of start-ups. Summarizing the set of studies relating firms’ R&D intensity to growth, we conclude these studies reveal three approaches that complement each other and are crucial in explaining firms’ performance, namely firms’ investment in R&D activities and in pursuing a corporate R&D strategy, the resource-based view and firms’ innovativeness, either in processes or products, following patenting and exploitation strategies, by using for instance licensing agreements. This paper differs significantly from previous studies in one aspect. It analyses corporate R&D strategy factors (such as R&D intensity, patent portfolio, and licensing strategies, e.g. in-licensing and out-licensing of Intellectual Property (IP) Rights) that are directly connected to start-up growth. The topic of licensing strategies is explored concerning the R&D strategic positioning of start-ups, which is an additional caveat found in the existent literature. Therefore, start-ups should make an economic analysis of licensing strategies and activities, in order to define the best possible IP management. The paper estimates the effects of US start-ups’ R&D and licensing strategies on their growth, based on R&D intensity, start-ups’ patents and in-licensing and out-licensing activities. The sample of the study consists of all firms (818) found in the Kauffman Foundation Survey (KFS) from high-tech and medium high-tech sectors, in the period 2004-2010. In this survey we found three high-tech sectors, 32 (manufacture of radio, television and communication equipment and apparatus) and 33 (manufacture of medical, precision and optical instruments, watches and clocks) for manufacturing firms and 72 (computer and related activities) for knowledge-intensive service firms and 1 medium high-tech sector, namely 31 (manufacture of electric machinery and apparatus).

Firm growth and innovation

In recent years, there has been an increase in empirical and theoretical work that addresses the role of innovation as one of the main sources of firm growth. The purpose of this special issue is to strengthen the role played by innovation as a determinant of firm growth. Despite the emergence of a vast empirical literature on whether innovative firms grow more quickly in terms of sales and employees, a number of crucial questions and answers remain. While a large number of applied papers observe a positive link between innovation and firm growth, the complexity of R&D activities, together with the diversity of innovation strategies and the multiplicity of growth modes, requires a multidimensional approach to examine the contribution of innovations on firm growth. To shed light on the link between firm’ growth and innovation sources, we organized a meeting of leading scholars of firm’ growth and innovation. The papers of this special issue were presented at the workshop on ‘Firm growth and innovation’ held on 28 and 29 June, 2012, in Tarragona, Spain. The papers that compose this special issue deal in depth with innovation activity, firm growth and the interaction between firm growth and innovation.

Growth Development Paths of Firms—A Study of Smaller Businesses

This paper investigates whether firm characteristics that are related to firm growth in the literature are also related to the development path of firms. This means that we test which firm characteristics accompany growth dynamics during a longer period of time, referring to the sequence of growth and decline steps. We examine three variables: firm size, innovation effort, and export share. To this end, we use panel data on 178 erman manufacturing firms over the period from 1992 to 2007. We find that the determinants of growth paths are not the same as the determinants of firm growth at one point in time.

Comparing young SMEs' growth determinants across regions

PurposeThe aim of this study is to advance the understanding of firm growth determinants by comparing the factors influencing young firms' growth in 13 countries corresponding to three contrasting regions.Design/methodology/approachThe authors propose an integrated model of venture growth where entrepreneurs' profile, firm resources and market characteristics are combined. This model is tested using three OLS regressions, one corresponding to each region.FindingsThe results show that compared with the remainder two regions, the less favorable business conditions verified in Latin American countries emphasize the relevance of entrepreneurs' human capital endowments in determining business development and its further growth. On the contrary, market‐related issues and the availability of financial resources are more important in South‐East Asia and Mediterranean Europe. Team size and particularly its growth are positively associated with firm growth in all the studied regions.Practical implicationsThe results of this study confirm that a firm's growth determinants as well as their importance vary across regions. Consequently, policy interventions should take into account the specificity of each region when designing entrepreneurial policies, avoiding the adoption of “one size fits all” solutions.Originality/valueThe main contribution of this paper is twofold: first, it collects empirical evidence about young firm growth in less studied regions; second, by comparing the results for each region differential effects of several determinants of firm growth in quite contrasting contexts are discussed.

Determinants of Firm Growth in the Vietnamese Commercial-Service Sector

Employing the dynamic panel model, this study tests the validity of Gibrat’s law and investigates determinants of firm growth in Vietnam. The empirical study is set up for both simple and multiple regressions with the data of the commercial-service sector. The balanced panel dataset used in this paper is abstracted from the National Census of Vietnamese Enterprises during the period 2000-2007. Applying the system GMM estimator to control unobserved heterogeneity and endogeneity, the findings imply that Gibrat’s Law should be rejected. The results confirm the sen- sitivity of the growth-size relationship to firm attributes. Besides, firm size and labor quality are the main determinants of firm growth.

Age effects, leverage and firm growth

Abstract Recent theories of firm dynamics emphasize the role of financial variables as determinants of firm growth. Empirically examining these relationships has been difficult, since there is a lack of financial data on the small, young, and private firms. Using a unique administrative data set, this paper considers the growth of new firms in Canadian manufacturing from a financial perspective. We find that financial factors, such as leverage and initial financial size, impact growth rates for new firms. Further, the inclusion of leverage has little impact on the economic significance of the conditional age and size relationships with firm growth.

The contribution of sales revenue management to firm growth: a test of two competing models

This paper examines the firm growth-size and growth-learning theories using sales revenue ratios and cost ratios. The results show that: 1) the DJIA firms' focus on the short-term leads to reduced growth rates; 2) low-growth firms are characterised by increasing costs and increasing debt financing; 3) high growth is associated with lower sales and lower costs; 4) in the high growth firms, the consistency of sales revenue ratios reflects the highly likely contribution of revenue management to promote high-growth rates; 5) the explanatory powers of the sales and costs models are relatively low which indicates that firms' growth depends upon other factors; 6) a new measure of firm growth is offered that improves the quality of the estimated models. This paper contributes to the literature by offering extended research possibilities to further examine the contribution of other financial determinants of firm growth.

Determinants and Dimensions of Firm Growth

Firm growth is an important indicator of a thriving economy. Although the determinants of firm growth have been studied in various disciplines, an integrated analysis is still lacking. This paper attempts to provide such an analysis. Many determinants of firm growth are summarized and classified into three dimensions: individual, organizational, and environmental determinants. By conducting an empirical study using 523 Dutch small and medium sized firms, we identify the determinants of firm growth which is measured by employment growth. Our findings show that environmental determinants do not affect firm growth. Individual ones do: entrepreneurs with growth motivation and having technical knowledge are more likely to grow their firms while entrepreneurs characterized by a strong need of achievement are less likely to engage in firm growth. Organizational determinants have the most influence on firm growth: the older the firm, the less likely it is to grow. Availability of financial capital is found to be crucial to firm growth. Finally, the firm’s scalability (its preparedness to grow) is found to have a positive impact on firm growth.

The Pursuit of the Efficient Scale Size: Implications for Firm Growth

The paper examines the longitudinal impact that returns to scale and organisational variables have upon firm sales' growth. To attain this, and using a Spanish data set for the period 1995-2001, we introduce a non-parametric technique (Data Envelopment Analysis) to obtain qualitative information about the returns to scale exhibited by firms. In a second step, we carry out a regression analysis using the GMM technique in order to address endogeneity and firm specific effects. The main contribution of the paper indicates that returns to scale and their dynamics over time are important determinants of firm growth. Our findings reveal that firms that reached the technological interval characterised by constant returns to scale show higher growth rates, where technological change and efficiency improvements are important determinants of this process. In addition, empirical findings indicate that ownership concentration improves monitoring tasks within the firm leading to higher growth rates. However, we also find that ownership concentration may create costs that outweigh its benefits, and this is especially relevant when the main shareholder also serves as chairman.

Influence of Firm Size, Age and Usage of IT on the Growth of Firms: Some Evidence from Hong Kong' s Service Sector

The study uses a sample of FIRB sector firms in Hong Kong to examine some aspects of firm dynamics and characteristics. The most important finding from the model is that usage of information technology (IT) is one of the key factors that explain the variation of growth of modern firms. It also finds that firm size is an important determinant of firm growth: the smaller the firm size, the greater the firm growth. Gilbrat's Law therefore fails, and this finding is consistent with pioneering works of Evans (1987) and Hall (1987). Indicating a close relationship between the usage of IT and the increasing trend of knowledge-based employees in firms, it is also found that skilled employees exert a relatively positive influence on the growth of firm. This finding may be indicative of the situation where new working practices such as team working is practiced, where group space is important rather than permanent territorial offices, where groups of skilled professionals can work together with relatively efficient space usage. Results, however, confirm that location of the firm does not play an important role for the growth.