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Organic and Acquisitive Growth: Re‐examining, Testing and Extending Penrose's Growth Theory

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Author Info

  • Andy Lockett
  • Johan Wiklund
  • Per Davidsson
  • Sourafel Girma

Abstract

Edith Penrose's theory of firm growth postulates that a firm's current growth rate will be influenced by the adjustment costs of, and changes to a firm's productive opportunity set arising from, previous growth. Although she explicitly considered the effect of previous organic growth on current organic growth, she was largely silent about the effect of previous acquisitive growth. In this paper we extend Penrose's work to examine how previous rates of organic and acquisitive growth influence current organic growth. Employing a panel of Swedish firms over a 10-year period, our results suggest the following. First, previous organic growth acts as a constraint on current organic growth. Second, previous acquisitive growth has a positive effect on current organic growth. We conclude that organic growth and acquisitive growth constitute two distinct strategic options facing the firm, which have a differential impact on the future organic growth of the firm.

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File URL: http://hdl.handle.net/10.1111/j.1467-6486.2009.00879.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Management Studies.

Volume (Year): 48 (2011)
Issue (Month): 1 (January)
Pages: 48-74

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Handle: RePEc:bla:jomstd:v:48:y:2011:i:1:p:48-74

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380

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Cited by:
  1. Daunfeldt, Sven-Olov & Lang, Åsa & Macuchova, Zuzana & Rudholm, Niklas, 2011. "Firm Growth in the Retail and Wholesale Trade Sectors – Evidence from Sweden," HUI Working Papers 50, HUI Research.
  2. Riaz, Suhaib & Glenn Rowe, W. & Beamish, Paul W., 2014. "Expatriate-deployment levels and subsidiary growth: A temporal analysis," Journal of World Business, Elsevier, vol. 49(1), pages 1-11.

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