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Growth, Diversification, and Business Group Formation in Entrepreneurial Firms

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  • Donato Iacobucci
  • Peter Rosa

Abstract

Recent empirical research has demonstrated that the growth process of entrepreneurial firms is frequently achieved through the formation of business groups: i.e. a set of companies run by the same entrepreneur (or entrepreneurial team). This has been hypothesised as result of a growth process by diversification of the original activity. This entrepreneurial growth process offers an alternative explanation for the formation of business Groups, than that arising from managerial efficiency and expediency. The main aim of the article is to explore group formation through entrepreneurial diversification using a sample of high growth entrepreneurial firms. The analysis demonstrates that the running of a group of companies by the same entrepreneur is not only induced by the geographical extension of their operation and by diversification but also by the differentiation policy aimed at serving different market segments within the same sector. This seems to contrast with the diversification policy and organisational setting of large, managerial firms Copyright Springer 2005

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  • Donato Iacobucci & Peter Rosa, 2005. "Growth, Diversification, and Business Group Formation in Entrepreneurial Firms," Small Business Economics, Springer, vol. 25(1), pages 65-82, August.
    • Handle: RePEc:kap:sbusec:v:25:y:2005:i:1:p:65-82
    DOI: 10.1007/s11187-005-4258-8
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    References listed on IDEAS

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    1. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-369, June.
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    Cited by:

    1. Akin Fadahunsi, 2012. "The Growth of Small Businesses: Towards A Research Agenda," American Journal of Economics and Business Administration, Science Publications, vol. 4(1), pages 105-115, March.
    2. Donato Iacobucci & Peter Rosa, 2010. "The Growth of Business Groups by Habitual Entrepreneurs: The Role of Entrepreneurial Teams," Entrepreneurship Theory and Practice, , vol. 34(2), pages 351-377, March.
    3. Deschryvere, Matthias, 2008. "High Growth Firms and Job Creation in Finland," Discussion Papers 1144, The Research Institute of the Finnish Economy.
    4. Brush, Candida G. & Ceru, Dennis J. & Blackburn, Robert, 2009. "Pathways to entrepreneurial growth: The influence of management, marketing, and money," Business Horizons, Elsevier, vol. 52(5), pages 481-491, September.
    5. Josep Mª Argilés Bosch & Josep García Blandón, 2011. "The influence of size on cost behaviour associated with tactical and operational flexibility," Estudios de Economia, University of Chile, Department of Economics, vol. 38(2 Year 20), pages 419-455, December.
    6. Giulio Cainelli & Donato Iacobucci & Enrica Morganti, 2006. "Spatial agglomeration and business groups: New evidence from Italian industrial districts," Regional Studies, Taylor & Francis Journals, vol. 40(5), pages 507-518.
    7. Enrico Guzzini & Donato Iacobucci, 2012. "Firm size and unrelated diversification. An empirical test on the ‘survivalist hypothesis’," Working Papers 1207, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    8. McGaughey, Sara L., 2007. "Hidden ties in international new venturing: The case of portfolio entrepreneurship," Journal of World Business, Elsevier, vol. 42(3), pages 307-321, September.
    9. Holmes, R. Michael & Hoskisson, Robert E. & Kim, Hicheon & Wan, William P. & Holcomb, Tim R., 2018. "International strategy and business groups: A review and future research agenda," Journal of World Business, Elsevier, vol. 53(2), pages 134-150.
    10. Vivien Lefebvre, 2024. "Layoffs in SMEs: The Role of Social Proximity," Journal of Business Ethics, Springer, vol. 190(4), pages 801-820, April.
    11. Bamiatzi, Vassiliki & Cavusgil, Salih Tamer & Jabbour, Liza & Sinkovics, Rudolf R., 2014. "Does business group affiliation help firms achieve superior performance during industrial downturns? An empirical examination," International Business Review, Elsevier, vol. 23(1), pages 195-211.
    12. Vivien Lefebvre, 2023. "Business group affiliation in resource-scarce locations," Journal of Organization Design, Springer;Organizational Design Community, vol. 12(3), pages 121-140, September.
    13. Mierzejewska Wioletta, 2023. "Does coopetition pay off? Benefits of intra-organizational coopetition within business groups," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(2), pages 150-167, June.
    14. Pablo Doucet & Ignacio Requejo & Isabel Suárez-González, 2024. "Business groups’ internal labour markets and SME labour productivity," Small Business Economics, Springer, vol. 62(2), pages 707-725, February.
    15. Christian Lechner & Christophe Leyronas, 2009. "Small–Business Group Formation as an Entrepreneurial Development Model," Entrepreneurship Theory and Practice, , vol. 33(3), pages 645-667, May.
    16. Christian Lechner & Florian Kirschenhofer & Michael Dowling, 2016. "The influence of social capital on opportunity emergence and exploitation: a comparison of portfolio and serial entrepreneurs," Journal of Innovation and Entrepreneurship, Springer, vol. 5(1), pages 1-23, December.
    17. Ioanna Deligianni & Irini Voudouris & Spyros Lioukas, 2017. "Do Effectuation Processes Shape the Relationship between Product Diversification and Performance in New Ventures?," Entrepreneurship Theory and Practice, , vol. 41(3), pages 349-377, May.
    18. Yonatan Berman & Eshel Ben-Jacob & Xin Zhang & Yoash Shapira, 2016. "Analyzing the Long Term Cohesive Effect of Sector Specific Driving Forces," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-16, March.
    19. Eduardsen, Jonas & Marinova, Svetla Trifonova & González-Loureiro, Miguel & Vlačić, Božidar, 2022. "Business group affiliation and SMEs’ international sales intensity and diversification: A multi-country study," International Business Review, Elsevier, vol. 31(5).
    20. Ross Brown & Suzanne Mawson, 2016. "The geography of job creation in high growth firms: the implications of ‘growing abroad’," Environment and Planning C, , vol. 34(2), pages 207-227, March.
    21. Giuseppe Calabrese, 2008. "Best performance-best practice nelle imprese manifatturiere italiane," CERIS Working Paper 200808, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    22. Ricky Y. K. Chan & Katherine H. Y. Ma, 2016. "Environmental Orientation of Exporting SMEs from an Emerging Economy: Its Antecedents and Consequences," Management International Review, Springer, vol. 56(5), pages 597-632, October.
    23. Vivien Lefebvre, 2023. "Human resources slack and profitability: SMEs, large firms, and the role of business group affiliation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 611-637, September.
    24. Nguyen, Phuc Canh & Nguyen, Bach & Thanh, Su Dinh, 2022. "The importance of export diversification for national entrepreneurship density," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 114-129.
    25. A. Arrighetti & A. Ninni, 2009. "Firm size and growth opportunities: a survey," Economics Department Working Papers 2009-EP05, Department of Economics, Parma University (Italy).

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    More about this item

    Keywords

    business groups; diversification; entrepreneurship; habitual entrepreneurs; L2; M13;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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