How Fast Can Firms Grow?
AbstractBuilding on recent research on dynamic, high-growth firms – so-called “gazelles” – this paper explores a simple question that is important in both theoretical and practical terms: What is the fastest rate at which firms can grow? Based on a sample of seven high-growth firms (Cisco, GM, IBM, Microsoft, Sears, Starbucks, and US Steel), we find that 162% is the maximum sales growth rate in any one year that an established company can grow without mergers and acquisitions, while the maximum rate of employee growth is approximately 115% even including some mergers and acquisitions. All of the companies in our sample attained a maximum sales growth rate of above 50%, with most hovering around 75%. Furthermore, the firms’ growth rates exhibit similar patterns. No company experienced its maximum sales growth rate toward the latter part of its history. Every company experienced its slowest employee growth rate after attaining its maximum employee growth rate, usually within a decade of one another. Most importantly, all firms show an average sales growth that exceeds the average employee growth. This finding is an indication that successful growing firms have a superior capability to continuously improve employment efficiency and adjust organizational structures to suit an increasing workforce.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 234 (2014)
Issue (Month): 2-3 (April)
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Organizational growth; organizational size; evolution;
Find related papers by JEL classification:
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
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