Online from: 1995
Subject Area: Enterprise and Innovation
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|Title:||Differentiating factors of venture growth: from statics to dynamics|
|Author(s):||Hannu Littunen, (Department of Business and Management, University of Kuopio, Kuopio, Finland), Markku Virtanen, (Helsinki School of Economics, Mikkeli, Finland)|
|Citation:||Hannu Littunen, Markku Virtanen, (2009) "Differentiating factors of venture growth: from statics to dynamics", International Journal of Entrepreneurial Behaviour & Research, Vol. 15 Iss: 6, pp.535 - 554|
|Keywords:||Business development, Business formation, Management strategy, Organizational performance|
|Article type:||Research paper|
|DOI:||10.1108/13552550910995425 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||Financial support from the Jenni and Antti Wihuri Foundation is gratefully acknowledged.|
Purpose – The purpose of this study is to analyse which factors differentiate growing firms from the non-growth businesses. It seeks to analyse the start-up factors as well as the changes in the activities and the characteristics during the seven-year period from the start-up stage.
Design/methodology/approach – The study is a part of a longitudinal research project that has followed the development of 200 SMEs in Finnish metal-based manufacturing and business services since their start-up in 1990. The paper uses a contingency approach and concentrates on 86 respondents who have survived after seven years' activity. The paper develops a model for testing the factors that differentiate growing ventures from the non-growth companies.
Findings – Static characteristics of the entrepreneur and the firm other than group management style do not explain the growth of the firm. The factors that differentiate growing businesses from non-growth companies include mainly dynamic variables such as increases in production capacity and external network relations, and changes in adopting a specialised product policy. In most cases extrovert attitude and proactive strategies, particularly with respect to markets, were necessary to achieve growth over an extended period.
Research limitations/implications – The study is restricted to two branches of industry and the period covered included a severe recession in the economy. Thus more branches and development during a less turbulent time period could be included. The most important implication of the study is that analysing growth should concentrate on the dynamics of firm development rather than on static characteristics of the entrepreneur or the firm.
Practical implications – The practitioners, e.g. venture capitalists, could use the results when selecting their portfolio companies, since the findings suggest the variables which should be used in differentiating growing businesses from non-growth companies.
Originality/value – The paper uses a contingency approach together with longitudinal data in the analysis. The results show that the differentiating factors of growing companies are dynamic variables, including especially motivation and strategy factors. Thus longitudinal data are a necessary condition for robust analysis of growth.
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