Firm Growth

Our aim is to test if the leverage and the debt maturity of Chilean firms quoted in the stock market are related with their growth opportunities, their ownership structure and the environment in which they operate. We perform an empirical analysis over an unbalanced panel of 169 Chilean firms for the period 1990-2001. Chilean firms growth opportunities are financed with long term debt. However, when firms need external funds they finance their growth opportunities with short term debt. The high ownership concentration, characteristic of Chilean firms, along with the presence of growth opportunities favours debt financing. The largest firms and the more needed of external financing prefer longer maturities for their debt. Finally, our results indicate that the presence of internal capital markets within a group influences firms financing decisions, particularly in those firms within the group with financing deficit. Pecking order theory offers partial explanations of Chilean firms fi...

The properties of the firm are crucial starting points for developing theories on economy and management. The aim of this study is to propose a general theory of the social organization of production, mapping the essential conditions for its creation, development, and growth. In order to do so, we propose an evolutionary theory in which the relations of the organization's sociotechnical system manifest themselves through a self-perpetuating dynamic where leaders take on the role of social attractors and their viable outline is defined by their capacity for regeneration and by the flows of resources and information that pass through them. This goes against the finalist conceptions of the firm, in which the scope is to meet external demands. In this type of dynamics, the objective of the structure is to ensure its own organization and the realization of its identity and autonomy.

Although the small business sector as a whole is achieving phenomenal growth, an important concern in the field has been identifying the problems, challenges, and success characteristics associated with the prudent growth of individual firms. A strategy utilized by many small firms to achieve their growth objectives is one of geographic expansion. This approach involves expanding a firm’s business from its original location to one or more additional geographic sites, and is particularly well suited for firms that cannot expand in their present location but believe that their products or services may be appealing to consumers in other markets.Surprisingly, despite the prevalence of geographic expansion as a means of small firm growth, this is a neglected area of small business research. Although researchers have examined the common challenges associated with small firm growth, a small business that expands from one location to several locations is subject to a number of potentially unique challenges. For example, during the course of opening a new geographic site, a small business manager will be confronted with the task of managing an existing business and a start-up at the same time. The challenge created by this undertaking, along with the other challenges associated with geographic expansion, have not been specifically identified. An improved understanding of these challenges may help small firm managers maximize their changes of leading successful expansion efforts.As a result of the lack of research in this area, this study used a comparative case study methodology to develop a theoretical model of the antecedents of effective small business geographic expansion. The model was developed in two steps. First, a preliminary model of the antecedents of effective small business geographic expansion was developed from the existing small business growth literature. Second, using analytic induction, the preliminary model was compared with the experiences of five small businesses that have engaged in a growth strategy of geographic expansion for the purpose of developing a more thorough and more valid theoretical model. A unique attribute of the sample is that not all of the businesses have been successful in their expansion efforts. Two of the five small businesses included in the study have had failed expansions, providing us the rare opportunity to contrast failed expansion efforts against successful ones.The model that emerged from this approach supports the notion that geographic expansion involves a unique set of managerial challenges. The consistent evidence across the five case studies indicated that effective small business geographic expansion involves the following six major areas of concern: planning for growth, managing growth, reasons for growth, expansion site characteristics, a set of moderator variables, and expansion performance.Among the implications of the study is that the unique nature of the geographic expansion process adds a layer of complexity to firm growth that exacerbates the need for planning. Along with the normal challenges involved with adding structure to accommodate growth, a firm that engages in geographic expansion must do this in an unfamiliar location, where the market potential and legitimacy of the firm’s business concept is untested. The consistent evidence that emerged from the cases is that planning helps attenuate these challenges. In addition, the recruitment and selection of qualified personnel to staff expansion sites is a critical activity, along with networking in the expansion site locations to establish organizational legitimacy. Three variables were found to moderate the relationship between managing growth and expansion performance. Learning and flexibility were found to have a positive influence on the managing growth expansion performance relationship, whereas environmental turbulence was found to have the opposite impact. Finally, a complex set of relationships emerged from the study pertaining to expansion site characteristics. For instance, the evidence generated across the cases suggested that planning helps a firm develop a set of heuristics for expansion site selection, which helps a firm avoid placing a site in an undesirable location.

In this paper, the strategic financing choices of small businesses are examined through the lens of the business life cycle. The growth of small and medium-sized firms, i.e., those most vulnerable to information and incentive problems, is often constrained by the lack of access to external finances. Understanding the financial determinants of small and medium-sized firms at different stages of the business life cycle allows managers and policy-making institutions to correctly support firm growth. Here we argue that the controversy in the empirical literature on the determinants of financial decisionmaking is based on a failure to take into account the different degrees of information opacity, and, consequently, firms’ characteristics and needs at specific stages of their life cycles. The explanatory power of financing theories based on informational opacity is therefore highlighted and tested in this study. The results of an inductive approach based on cluster analysis showed that, ...

Discretionary slack, along with entrepreneurial orientation (EO), are vital to the growth and long- term survival of small firms. This research combines a Penrosian view of growth with structural contingency theory to develop and test a conceptual model of the relationship between slack and growth. Using a survey of Canadian firms with fewer than 50 employees, the study finds that discretionary slack has positive effect on growth which is fully mediated by EO. In addition, the analysis confirms a positive reciprocal effect of a feedback loop between growth and slack. The study controls for, and considers the effects of, firm age, size and industry knowledge intensity. This research contributes valuable insights for further development of firm growth theory, specifically in relation to small firms. The study is also important for policy development given that: a) small firms have the potential to contribute more than larger firms to job creation but may not due to early exit; b) firms exhibiting even modest growth more than double their chances of survival; and, c) those firms that survive grow fast. This study contributes to the literature on firm growth and informs small business leaders. It also provides policy makers with practical insights to facilitate their role in supporting the growth and survival of small firms that make such an important contribution to the economy.

Keywords:  Discretionary slack; entrepreneurial orientation; growth; small firms; resources; Penrose; structural contingency.

In recent years, management scholars and practitioners have been advocating a more prominent role for business in economic and social development at the “Base of the Pyramid” (BoP) where more than a billion people subsist on less than two dollars a day. Yet, in both theory and practice, the development of financially sustainable and scalable business solutions for the BoP has been challenging. By integrating insights from the emerging BoP literature with extant research on the replication of organizational routines and templates, this study examines how the distinctive conditions of the BoP affect the development and replication of scalable business solutions for the world’s poor. In particular, we identify key distinctive conditions of the BoP and develop an organizing framework on the mechanisms that facilitate the development and replication of viable and scalable business templates there. Our analysis contributes to BoP research by advancing understanding of the role of templates in economic and social development at the BoP as well as to research on the replication of organizational routines and templates by delineating the distinctive conditions and mechanisms that affect the development and replication of templates at the BoP.

This study investigated how debt management impacts the performance of small scale enterprises in the Kumasi Metropolis of Ghana. In total, 120 small scale enterprises were interviewed. The study showed that most small scale businesses lacked in-depth knowledge on the issue of debt management. The study further revealed that the major cause of debts among small scale businesses were lack of advice on the business type and finances, lack of knowledge on the type of business and poor methods of keeping financial records. The study therefore recommends that Small scale businesses must hire financial experts to help them manage their businesses through prudent record keeping. Moreover, it argues that small scale businesses should work within their budgets in order to avoid higher expenditure and subsequent incurring of debts which could be detrimental to the running of their business. It posits that financial institutions should strive to give expert advice on business management to their clients.

ABSTRACT. Since 1980, the United Kingdom has experi- enced a dramatic growth in firms and employment in information-intensive business services, such as management consultancy and market research. This article reports the results of the first substantial nation-wide ...

abstract  This paper argues for the important role of customers as a source of competitive advantage and firm growth, an issue which has been largely neglected in the resource-based view of the firm. It conceptualizes Penrose's (1959) notion of an ‘inside track’ and illustrates how in-depth knowledge about established customers combines with joint problem-solving activities and the rapid assimilation of new and previously unexploited skills and resources. It is suggested that the inside track represents a distinct and perhaps underestimated way of generating rents and securing long-term growth. This also implies that the sources of sustainable competitive advantage in important respects can be sought in idiosyncratic interfirm relationships rather than within the firm itself.

Overtime, the policy to enhance financial inclusion at the national and household or individual levels has coincided with the increasing need for non-farm enterprises in addition to mainstream farming due to climate change and as an income diversification strategy. Using data from the sixth round of the Ghana Living Standards Survey, this chapter examines the influence of financial inclusion on growth of non-farm enterprises. We construct a multi-dimensional measure (index) of financial inclusion relying on 14 indicators while employing an instrumental variable approach in examining financial inclusion–firm growth nexus. Our evidence suggests that improvement in non-farm entrepreneurs’ level of financial inclusion is growth-enhancing with higher probability in the urban relative to rural areas. At the policy level, strategies targeted at boosting financial inclusion will not only spur firms’ growth but expand these enterprises and hence improve tax revenue for the economy as a whole.

In this paper, the strategic financing choices of small businesses are examined through the lens of the business life cycle. The growth of small and medium-sized firms, ie, those most vulnerable to information and incentive problems, is often constrained by the lack of access to ...

The overall topic of the thesis is small and medium-sized enterprises and firm dynamics. Mozambique has experienced sustained high GDP growth rates but limited structural transformation and poverty is still widespread.
The Mozambican manufacturing sector – a potential driver of structural transformation – appears to be stagnating. How it could develop is an important question, but the debate is lacking empirical evidence. Using a new data set, this paper seeks to improve the empirical understanding of the Mozambican manufacturing sector by asking the following questions:
1. What affects the performance of Mozambican manufacturing firms? 2. How can the Mozambican manufacturing sector grow faster?

In order to answer the first question, the paper first develops the concept of a “traditional manufacturing firm” based on qualitative field work. It then proceeds to study the determinants of firm exit, employment growth and productivity in a regression framework. The concept of traditional manufacturing firms was developed based on qualitative field work. Traditional manufacturing firms can be thought of as craftsmen in a pre-industrial economy, supplying the local community with essential goods such as food, clothing and building materials. Some two thirds of the firms in the sample are traditional and the proportion is not likely to be smaller for the entire population of Mozambican manufacturing firms. Traditional firms were hypothesized to have low growth rates, low exit rates and low productivity.

The paper uses a new survey data set of 761 Mozambican small and medium-sized enterprises (SMEs) in the manufacturing sector, the Inquérito às Indústrias Manufactureiras (or IIM 2012) to analyze the questions stated. The dataset contains a panel dimension of 216 firms interviewed in 2006 in two different surveys. This data resource was complemented by qualitative field work conducted as part of the validation of the IIM 2012 that consists of qualitative interviews with 85 of the surveyed SMEs. It was found that exit probabilities were not easily explainable by applying the variables commonly used in the literature. This could suggest that exits among Mozambican manufacturing firms to a large extent happen for idiosyncratic reasons. Owner/manager characteristics, especially manager education and owner ethnicity have significant effects on growth. Specifically, higher manager education and ownership by people of minority ethnicity was found to be positively related to employment growth.

This last result was probed using the Blinder-Oaxaca decomposition technique to decompose the difference in growth rates between African and minority-owned firms into an explained and an unexplained component. A very tentative analysis of productivity was also conducted, where the main conclusion was that productivity does not seem to have increased in the period from 2006 to 2011. Following up on the analysis, the paper discusses possible policy recommendations of some of the main results.

Since higher manager education and non-African ethnicity were found to lead to higher growth rates, it was suggested that Mozambique should attract foreign entrepreneurs and improve the state of its own (management) education. It was argued that continued increases in the minimum wage in the face of apparent productivity stagnation could create or exacerbate insider/outsider problems between the small proportion of the labor force in formal wage employment and the majority outside the formal labor market.

This paper presents the research results on the impact of real effective exchange rate (REER) on Indian firm performance. The analysis is based on a multivariate regression model, for the time period from 1 Dec 2011 to 1 Dec 2012 for the top 242 Indian firms of Bombay Stock Market. Our empirical analysis reveals that significant relationships between real effective exchange rate (REER) changes (fluctuations) and firm performance indexes through changes imports as well as foreign exchange liabilities sector. The impact size of imports indexes is different so that stores and spares imports and capital goods imports are more effective than other imports indexes to firm performance. The firm performance indexes such as growth performance (internal growth), profitability (EBIT), firm specifics (Capacity Utilization), and stock performance (P/E) have an obvious relationship to the changes of imports, foreign currency borrowings and total forex spending indexes. Other indexes that decrease...