Foundations and Trends® in Entrepreneurship > Vol 6 > Issue 2

Small Firm Growth

Per Davidsson, School of Management, Queensland University of Technology, Australia, Leona Achtenhagen, Jönköping International Business School, Sweden, Lucia Naldi, Jönköping International Business School, Sweden,
Suggested Citation
Per Davidsson, Leona Achtenhagen and Lucia Naldi (2010), "Small Firm Growth", Foundations and Trends® in Entrepreneurship: Vol. 6: No. 2, pp 69-166.

Published: 11 May 2010
© 2010 P. Davidsson, L. Achtenhagen and L. Naldi
New venture creation process,  Small business and economic growth
JEL Codes: L26 entrepreneurshipJEL Codes: M13 new firms and start-upsJEL Codes: L1 firm strategy
Small firm growthOrganizational life-cycleGrowth strategiesEntrepreneurshipBusiness strategyOrganizational theoryIndustrial economics

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In this article:
1 Introduction
2 What Is Growth?
3 How Should Growth be Assessed?
4 What Factors Facilitate or Hinder Growth?
5 Modes of Small Firm Growth
6 Growth Stages and Transitions
7 The Effects of Growth
8 Toward an Integrative Framework for Future Research on Small Firm Growth


We review and discuss the literature on small firm growth with an intention to provide a useful vantage point for new research studies regarding this important phenomenon. We first discuss conceptual and methodological issues that represent critical choices for those who research growth and which make it challenging to compare results from previous studies. The substantial review of past research is organized into four sections representing two smaller and two larger literatures. The first of the latter focuses on internal and external drivers of small firm growth. Here we find that much has been learnt and that many valuable generalizations can be made. However, we also conclude that more research of the same kind is unlikely to yield much. While interactive and non-linear effects may be worth pursuing it is unlikely that any new and important growth drivers or strong, linear main effects would be found. The second 'large' literature deals with organizational life cycles or stages of development. While deservedly criticized for unwarranted determinism and weak empirics this type of approach addresses problems of high practical and also theoretical relevance, and should not be shunned by researchers. We argue that with a change in the fundamental assumptions and improved empirical design, research on the organizational and managerial consequences of growth is an important line of inquiry. With this, we overlap with one of the 'smaller' literatures, namely studies focusing on the effects of growth. We argue that studies too often assume that growth equals success. We advocate instead the use of growth as an intermediary variable that influences more fundamental goals in ways that should be carefully examined rather than assumed. The second 'small' literature distinguishes between different modes or forms of growth, including, e.g., organic versus acquisitionbased growth, and international expansion. We note that modes of growth are an important topic that has been under studied in the growth literature, whereas in other branches of research aspects of it may have been studied intensely, but not primarily from a growth perspective. In the final section we elaborate on ways forward for research on small firm growth. We point at rich opportunities for researchers who look beyond drivers of growth, where growth is viewed as a homogenous phenomenon assumed to unambiguously reflect success, and instead focus on growth as a process and a multi-dimensional phenomenon, as well as on how growth relates to more fundamental outcomes.

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Table of contents:
1. Introduction
2. What Is Growth?
3. How Should Growth Be Assessed?
4. What Factors Facilitate or Hinder Growth?
5. Modes of Small Firm Growth
6. Growth Stages and Transitions
7. The Effects of Growth
8. Towards an Integrative Framework for Future Research on Small Firm Growth

Small Firm Growth

Small Firm Growth has two purposes – to review the extant empirical literature on small firm growth by focusing on small and medium-sized firms (SMEs) and to suggest a framework for integrating our knowledge on small firm growth to guide future research. The authors identify a number of key themes: the conceptualization of small firm growth; assessing small firm growth; factors driving or hindering growth; modes of growth (such as organic growth versus acquisitions); growth stages and transition; the effects of small firm growth. Small Firm Growth first discusses the nature of the phenomenon of small firm growth and its relation to entrepreneurship as well as size and age. It then moves on to how growth can best be assessed. A major section is devoted to findings on factors that contribute to or hinder firm growth. Following this it offers a section on how small firms grow, if and when they grow at all. In particular, it examines organic growth versus acquisitions; growth through networking and alliances, and international expansion. The next topic treated is 'growth stages and transitions' and the effects of growth in terms of profitability and job creation. Finally, the authors propose a framework for guiding future research and furthering management theory and practice on small firm growth.