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Growth as evidence of firm success: myth or reality?

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  • Niklas Kiviluoto

Abstract

The purpose of this paper was to explore the widely acknowledged assumption of sales growth being evidence of firm success. Theoretically, the focus is on the existence of entrepreneurial myths, the multidimensionality of growth and the practical and theoretical implications of this. Empirically, the paper relies on both quantitative and qualitative methods to explore facts about sales growth being evidence of firm success. Quantitatively, the convergent validity of sales growth and 14 other performance measures is assessed. This is done both between industries (bio and IT) and firms of different ages (three age categories). The qualitative study explores the perceptions of 23 key stakeholders (entrepreneurs, policy-makers, public investors and venture capitalists) concerning growth, profitability, performance and firm success. Results show that relative sales growth, the most widely used measure of growth, shows no convergent validity to any other performance measure, regardless of industry and regardless of firm age. The stakeholder views complement these findings, and show that sales growth alone tells too little of a complicated phenomenon and hence cannot be considered a measure of firm success. More holistic research approaches are recommended for fully understanding the complexity of firm success.

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  • Niklas Kiviluoto, 2013. "Growth as evidence of firm success: myth or reality?," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 25(7-8), pages 569-586, September.
    • Handle: RePEc:taf:entreg:v:25:y:2013:i:7-8:p:569-586
    DOI: 10.1080/08985626.2013.814716
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    References listed on IDEAS

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    1. Per Davidsson & Frédéric Delmar & Johan Wiklund, 2006. "Entrepreneurship and the Growth of Firms," Books, Edward Elgar Publishing, number 3971.
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    Cited by:

    1. Javier Sevilla-Bernardo & Blanca Sanchez-Robles & Teresa C. Herrador-Alcaide, 2022. "Success Factors of Startups in Research Literature within the Entrepreneurial Ecosystem," Administrative Sciences, MDPI, vol. 12(3), pages 1-24, August.
    2. Canarella, Giorgio & Miller, Stephen M., 2018. "The determinants of growth in the U.S. information and communication technology (ICT) industry: A firm-level analysis," Economic Modelling, Elsevier, vol. 70(C), pages 259-271.
    3. Simpy Malhotra & Ravi Kiran, 2023. "Examining the Relationship between Entrepreneurial Perceived Behaviour, Intentions, and Competencies as Catalysts for Sustainable Growth: An Indian Perspective," Sustainability, MDPI, vol. 15(8), pages 1-19, April.
    4. Minghao Li & Stephan J. Goetz & Mark Partridge & David A. Fleming, 2016. "Location determinants of high-growth firms," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 28(1-2), pages 97-125, January.
    5. Nigel Driffield & Jun Du & Jan Godsell & Mark Hart & Katiuscia Lavoratori & Steven Roper & Irina Surdu & Wanrong Zhang, 2021. "Understanding productivity:Organisational Capital perspectives," Working Papers 013, The Productivity Institute.
    6. Mansikkamäki, Susanna, 2023. "Firm growth and profitability: The role of age and size in shifts between growth–profitability configurations," Journal of Business Venturing Insights, Elsevier, vol. 19(C).
    7. Jan Henrik Gruenhagen & Sukanlaya Sawang & Scott R. Gordon & Per Davidsson, 2018. "International experience, growth aspirations, and the internationalisation of new ventures," Journal of International Entrepreneurship, Springer, vol. 16(3), pages 421-440, September.
    8. Robert Wapshott & Oliver Mallett, 2018. "Small and medium-sized enterprise policy: Designed to fail?," Environment and Planning C, , vol. 36(4), pages 750-772, June.

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