Why some small and medium enterprises grow and others do not?

Amr AbdelShafy, A.G.L. Romme, B. Walrave

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Abstract

Why some SMEs grow, and others do not is one of the key questions that largely remains unanswered in entrepreneurship research. We develop a new opportunity-centric process theory that seeks to explain the growth, stagnation and collapse of a firm as well as the processes by which these changes occur. We draw on case studies of three fast-growing SMEs that experienced different episodes of growth, collapse, and stagnation. We investigated opportunity exploration and exploitation, capacity acquisition and capacity utilization over the entire history of these firms. Our findings suggest growth is enabled (or interrupted) by (mis)balancing capacity acquisition and sales volumes. The firm’s capability to balance exploration and exploitation determines its growth pattern and sustainability over time. We explained different growth curve patterns, including staged growth, stagnation, dwarfism, and collapse. Our study contributes to the literature by developing a dynamic framework that links the SME's strategic orientation, entrepreneurial orientation and growth curve. Our theorizing offers a dynamic alternative to the conventional stages model, and as such will enable large-scale quantitative studies of SME growth processes.
Original languageEnglish
Title of host publicationProceedings of the 33rd International Conference of the System Dynamics Society, 19-23 July 2015, Cambridge, Massachusetts
Place of PublicationCambridge, Massachusetts
PublisherSystem Dynamics Society (SDS)
Publication statusPublished - 2015
Eventconference; International Conference of the System Dynamics Society; 2015-07-19; 2015-07-23 -
Duration: 19 Jul 201523 Jul 2015

Conference

Conferenceconference; International Conference of the System Dynamics Society; 2015-07-19; 2015-07-23
Period19/07/1523/07/15
OtherInternational Conference of the System Dynamics Society

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