Limit's to a Firm's Rate of Growth: the Richardsonian View and its Contemporary Empirical Significance
The work of the Oxford Economic Research Group under the chairmanship of George Richardson is taken as the starting point for a new analysis of the limits to small firm growth. Following Richardson's emphasis on costs of organisational change within the growing firm, caused by the need to train and assimilate new managerial recruits, a transactional efficiency explanation is developed emphasising three small business types: sole proprietorship; partnership; and private company. These types are identified from a contemporary database of new small firms, and their growth and performance characteristics are compared both by descriptive statistics and econometric evidence. The importance of business type to the growth/profitability trade-off relationship is confirmed, thus supporting Richardson's analysis. More complex organisational forms reduce short-term performance. A new finding is the additional importance of capital structure to this trade-off: higher geared firms experience lower growth and lower profits than lower geared firms. this effect can be explained by costs of debt servicing and exposure to risk.
|Date of creation:||Oct 1994|
|Date of revision:|
|Contact details of provider:|| Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL|
Phone: 01334 462420
Fax: 01334 462438
Web page: http://crieff.wordpress.com/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, David S, 1987.
"Tests of Alternative Theories of Firm Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 95(4), pages 657-74, August.
- Slater, Martin, 1980. "The Managerial Limitation to the Growth of Firms," Economic Journal, Royal Economic Society, vol. 90(3593), pages 520-28, September.
- N. H. Leyland, 1964. "Growth And Competition," Oxford Economic Papers, Oxford University Press, vol. 16(1), pages 3-8.
- Richard N. Langlois, 1995. "Capabilities and the Theory of the Firm," Industrial Organization 9503002, EconWPA.
- Gavin C Reid & Lowell R Jacobsen., . "The Small Entrepreneurial Firm," Hume Papers 8, David Hume Institute.
- Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-96, September.
- Gavin C Reid, 1994. "Early Life-Cycle Behaviour of Micro-Firms in Scotland," CRIEFF Discussion Papers 9410, Centre for Research into Industry, Enterprise, Finance and the Firm.
- Dobson, Stephen M & Gerrard, Bill J, 1989. "Growth and Profitability in the Leeds Engineering Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(4), pages 334-52, November.
- G. B. Richardson, 1964. "The Limits To A Firm'S Rate Of Growth," Oxford Economic Papers, Oxford University Press, vol. 16(1), pages 9-23.
- G. B. Richardson & N. H. Leyland, 1964. "The Growth Of Firms," Oxford Economic Papers, Oxford University Press, vol. 16(1), pages 1-2.
When requesting a correction, please mention this item's handle: RePEc:san:crieff:9426. 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: (the School of Economics)
If references are entirely missing, you can add them using this form.