Fast-growing Firms Research Articles

A comparison of the personality type dimensions of the 1987 Inc. 500 company founders/CEOs with those of slower-growth firms

A popular misconception holds that most new businesses experience similar growth stages of start-up, rapid growth, maturity, and decline. Yet, business statistics show that only a small number of firms grow into large organizations. A few experience some growth, but the majority have such small growth that they provide only a marginal income to the founder. While market conditions impact on the growth of the firm, they do not explain growth differences when they occur under similar market conditions. In this paper, the authors have compared psychological type preferences of founders/CEOs of fast-growth firms with those of slow-growth firms under the assumption that differences in psychological preferences, as they relate to gathering, assimilating, and processing information, would have an impact on the strategic or growth orientation of the firm. The results are based on the administration of the Myers-Briggs Type Indicator to the founders/cofounders of 143 firms included in the 1987 Inc. 500 list of the fastest-growing private companies in the United States and the comparison of these results with those of an earlier study of 150 founders/CEOs of successful, yet slower growing firms. The primary personality traits under consideration were an individual's preferred method of gathering information from the environment, making decisions, and drawing conclusions from the information. The results indicate that founders of rapid-growth firms have psychological preferences that are significantly different from those of their slower-growth counterparts. Growth oriented founders prefer an intuitive approach or consideration of future possibilities when gathering information, and a thinking or planned and organized approach to drawing conclusions. These preferences represent those facets most frequently used in strategic or growth planning. Investors in new firms that place importance on the capabilities and orientations of the management team as an evaluation criteria are currently limited to consideration of past experiences. An awareness of the management team's experiences can provide an indication of management ability, but unless their experience involves management of growth, the information related to growth propensities or orientations is limited. A measure of a person's preferences in gathering, assimilating, and processing information can indicate their desires for strategic and/or growth planning. Hence, investors may have another tool that can be used in the investment decision making process. In addition, government policy makers may have the opportunity for increased effectiveness in assistance programs by recognizing that the needs and preferences of founders of rapid-growth companies are significantly different from those of their slower-growing counterparts, and that these differences should be considered in the development of assistance programs.

Entrepreneurship and growth: the strategic use of external resources

A common characteristic of entrepreneurial farms is fast growth. A common problem for their managers is obtaining enough resources to accommodate that growth. A typical entrepreneur (either individual or corporate) often desires to pursue a detected opportunity but lacks the necessary resources to make it happen. Again, gaining access to those resources becomes the “first” entrepreneurial problem. One of the most efficient weapons used by entrepreneurial firms to gain market share from larger, more powerful corporations is their flexibility. But the progressive accumulation of resources that growth often entails brings almost necessarily a loss of that very flexibility that made the firm successful in the first place. This can be termed the “second” entrepreneurial dilemma. “Networking” practices are a way to overcome these problems. Essentially, networking is a system by which entrepreneurs can tap resources that are “external” to them, i.e., that they don't control. In its simplest form, networking consists of the use of all personal relationships to obtain advice, financing, “insider” sales, etc. (Birley 1986). In its most sophisticated form, entrepreneurs set up an elaborate web of relationships between companies, most of them of similar entrepreneurial characteristics, that are extremely efficient and flexible at delivering a product or service. In all cases, we find that the ability to exploit resources that are outside the entrepreneur's control is a constant of entrepreneurial, high-growth management. This is why entrepreneurs have been defined as being primarily motivated by the pursuit of opportunities, as opposed to those managers exclusively concerned with the proper management of the resources already controlled by their firm (Stevenson 1983; Stevenson and Gumpert 1985). This paper proposes a view whereby the essence of entrepreneurship is seen precisely in the ability and willingness to use external resources. A statistical validation of the main hypothesis, i.e., that entrepreneurial, fast- growing firms do use more external resources than their competitors, is then attempted. The results strongly support the hypothesis. It is found that the fastest-growing firms in a very large sample of public companies are much less integrated (make more use of external resources) than their competitors; in addition, those firms that are at the forefront of using external resources grow, on average, much faster (more than 10% every year) than their competitors over a long period of time (ten years). This study's implication for managers seems clear. It constitutes yet another piece of evidence in favor of the efficiency of networking arrangements. Being flexible enough to use external resources allows the entrepreneurial firm to break through the limits to sustainable growth and, at the same time, lowers its risk, for it taps into someone else's experience and know-how. Entrepreneurs and entrepreneurial managers must not be deterred by the lack of resources in the pursuit of opportunities.

Quality control procedures in small businesses

This paper describes the results of a face-to-face interview survey with 40 owners of small businesses in northeast England: 20 were fast-growth firms and 20 were ‘matched’ firms. As part of that survey, respondents were asked about the extent to which they used statistical methods for quality control and new product testing. Their use was very limited indeed in either context, but was appreciably higher for the fast-growth firms than for the matched firms. Limited use in the testing of new products was explained by the fact that nearly 40 % of firms have introduced no new products in the last two years. Slightly more use was made of statistical methods in quality control, but in these cases the initiative generally came from the customer, rather than the firm. Nevertheless, most firms did not feel they lacked advice on these matters, but rather that statistical methods were inappropriate for the needs of their business.