Business Growth Models

Structural Growth Model

The relationship between entrepreneurial structure or attitudes and firm growth is important for at least three reasons. First, it is widely believed that the entrepreneurs of a firm place a lasting stamp on their companies that influences the cultures and behaviors of their firms (Mullins, 1996). Second, investors and others often assess the potential of a new venture by evaluating the attributes of its entrepreneurs. One of the most important criterions used by venture capitalists, for example, in deciding whether to fund a firm is their perception of the entrepreneur's or the entrepreneurial team's ability to successfully launch the venture. Third, launching a new firm is a challenging process. As a result, individual difference variables, such as educational attainment and prior industry experience, have in many instances been found to be critical in successfully launching a new firm (Barringer et al., 2005).

Strategic Growth Model

Entrepreneurial strategy is an important factor for difference between rapid-growth firms and lower-growth firms (Wiklund, 1998). First, SME strategy is different from the strategy taken by large firms. Entrepreneurial strategy may affect all business activities in the progress of firm growth. Second, after a firm gets established and starts growing, the smaller firms usually are under bigger influence from entrepreneurs. And larger firms are in need of more professional management. Entrepreneurial strategy functions all the time. Hence, it is important for entrepreneurship researchers to recognize the importance of entrepreneurial dimensions of strategy in addition to individual level entrepreneurship (Miller, 1983). Wiklund (1998) suggests that entrepreneurial dimensions of a firm's strategy are seen as a combination of risk-taking, proclivity, and innovativeness.

Financial and Human Growth Model

Financial and human resources are basic inputs in the production process, whereas capabilities refer to the capacity for coordinating resources to perform certain tasks or activities. However, it is difficult from a measurement perspective to separate financial resource availability from the capacity to utilize these resources (Chandler and Hanks, 1993). The resource typology used in business growth is the one outlined above: fianacial capability, present size, number of employees that hold university degree, involvement of employees in decision making, present size (sales), formal professional cooperation, day-to-day advisors cooperation, decision making, and creating unique value for customers, product superiority, innovation (Barringer et al., 2005).

Organizational Growth Model

Wiklund suggests that task organizational characteristics in terms of dynamism, hostility and heterogeneity have been argued to be critical for suitable strategic choices, i.e. particular strategies are likely to lead to better performance depending on the level of organizational dynamism, hostility and heterogeneity. These dimensions are frequently used in small business growth and performance literature (Brown and Eisenhardt, 1996). Furthermore, Zahra (1991) suggests that each of these three dimensions should influence entrepreneurship orientation (EO), i.e. depending on the degree of organizational dynamism, hostility and heterogeneity; firms with a higher or lower degree of EO may perform better or worse.

Reference

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