IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

A classification model for firm growth on the basis of ambitions, external potential and resources by means of decision tree induction

Listed author(s):
  • LIMÈRE, Arthur
  • LAVEREN, Eddy
  • VAN HOOF, Koen
Registered author(s):

    The model that was presented by Ahlström (1998) is a simple basic growth model in which three pillars of firm growth are identified, namely growth competence and resources, growth potential and growth ambitions. In this article, this model will be empirically tested using quantitative data from annual reports of a sample of Belgian SMEs as well as qualitative data from a mail survey. The model is empirically tested by means of a datamining technique, namely decision tree induction. In our empirical model, the three pillars of Ahlström’s model are present. The goodness-of-fit measures clearly indicate that the model is good. Validations of the model for other time periods show that the model can be considered as stable over time. All hypotheses of the Alhström model are confirmed in the expected direction with a high hit ratio of 77.7%. Profitability and solvency (which were used to measure the resources and competence factor) turned out to be the most important growth related variables. The relationship between profitability and firm growth is positive, while solvency seemed to be negatively related to growth. The relationship between (perceived) growth potential (measured by a benign environment factor) and firm growth turns out to be positive. Growth ambitions are also positively related to firm growth. If the average profitability (measured over a period of 6 years) is above a certain percentage, firms are classified as strongly growing firms. If the average profitability is below this percentage, firms with the right conditions for resources and competence as well as for potential are classified as weakly growing firms when the growth ambitions are low and as strongly growing firms when the growth ambitions are high.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2004027.

    in new window

    Length: 23 pages
    Date of creation:
    Handle: RePEc:ant:wpaper:2004027
    Contact details of provider: Postal:
    Prinsstraat 13, B-2000 Antwerpen

    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ant:wpaper:2004027. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joeri Nys)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.