Arriving at the High-Growth Firm

Abstract

This study explores heterogeneity in how firms have achieved high growth.Using the population of all firms in Sweden with more than 20 employees in existence in 1996 (n= 11,748), we analyzed their development for each year of the previous 10 years (1987 to 1996).From this population of all firms in Sweden, multiple criteria were used to define a sample of high growth firms (n = 1,501).Using nineteen different measures of firm growth (such as relative and absolute sales growth, relative and absolute employee growth, organic growth versus acquisition growth, and the regularity and volatility of growth rates over the ten year period) we identified seven different types of firm growth patterns.These patterns were related to firm age and size as well as industry affiliation.Implications for research and practice are offered. Executive SummaryThe focus of this research is to offer a variety of ideas, measures, and empirical facts on how organizations grow.This paper presents evidence that organization growth can be achieved in a number of different ways, and the pattern of firm growth, over time, can look very different across all growth firms.We use a data set that covers all firms in Sweden with more than 20 employees in 1996 tracing their development back to 1987.The data allows us to: assess growth in sales as well as in employment, separate organic from acquired growth, identify new entrants, compare independent firms with firms in company groups, and track their subsequent growth over time.In addition, the paper explores whether there is differential representation of these growth patterns for firms of different demographic affiliation in terms of firm size, firm age, industry, and ownership/governance.A review of prior academic scholarship on firm growth suggests substantial heterogeneity in a number of factors that characterize this phenomenon.Failure to recognize this heterogeneity appears to have lead to some confusion and conflicts in current theory and research findings.There is variation in the kinds of growth measures used in previous research studies on firm growth.Comparison between studies is difficult as the time frame, the growth indicator, and the growth formula often differ.There is heterogeneity in the choice, validity, and reliability of different growth measures as determined from theoretical and methodological perspectives.Different growth measures and calculations affect model building and theory development differently.Scholars have recognized this as an important issue, and have suggested that research should strive towards one single, or a few possible ways, of calculating growth.We believe that the goal of a "one best way" of measuring growth has diverted researchers from acknowledging that firm growth is fundamentally a multi-dimensional rather

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