Entrepreneurial growth
Per Davidsson
Although entrepreneurship and growth are fre quently associated, the concept of entrepreneurial growth is not (yet) a firmly established term in theory, be it economic, organizational, or stra tegic. This work, however, focuses on entrepren eurial growth of the micro level units – firms or ventures. Therefore, while referring to the ag gregate level economic growth that results from entrepreneurial action on the micro level would be a legitimate use of the concept of entre preneurial growth, this is not our focus here. On the micro level, entrepreneurial growth has different meanings, depending on the concep tualization of entrepreneurship employed (see entrepreneurship). Three partly overlap ping perspectives on entrepreneurship are con sidered: (1) entrepreneurship is starting and running one’s own firm; (2) entrepreneurship is the creation of new organizations; and (3) entre preneurship is (economic development through) the creation of new to the market economic ac tivity. It can be argued that these three perspec tives collectively exhaust the possible meanings of entrepreneurial growth on the micro level.
The notion that entrepreneurship is about starting and running one’s own firm is explicit or implicit in much empirical research con ducted under the entrepreneurship label. Under this conceptualization, entrepreneurial growth means, simply, the growth of independ ently owned and managed firms (see entre preneurial growth). It is irrelevant whether the growth is achieved proactively or reactively and whether it is obtained though market penetration, market expansion, or the development and launch of new products and services. It is likewise irrelevant whether these forms of growth occur organically or through acquisition. What makes the growth entrepren eurial is that it occurs in a firm run by an entre preneur, understood as a founder manager of a business. This perspective, then, offers a straightforward interpretation of the concept of entrepreneurial growth. This view is closely linked to the configuration argument in stages of development models (e.g., Churchill and Lewis, 1983), which highlight among other things the changing demands on the founder manager as the firm grows and matures.
While seemingly straightforward, this notion of entrepreneurial growth is problematic. An enterprising individual may start and run several business operations. If independent ownership is the vantage point for defining entrepreneurial growth, it can be argued to be the growth of the total set of business operations that are asso ciated with an individual – and not that of one particular firm – that should be the basis for a discussion of entrepreneurial growth (Davidsson and Wiklund, 2000). Moreover, with the aging and maturing of entrepreneurship as an 80 entrepreneurial growth academic field of study, the association between entrepreneurship and small (owner managed) business has been weakened. This is arguably because we have learned that many small, inde pendent businesses do not excel at other charac teristics associated with entrepreneurship (e.g., proactiveness, innovativeness, risk taking), while many larger and/or non independent business organizations do. As a result, interpreting entre preneurial growth as the growth of owner man aged firms is losing popularity.
The notion that entrepreneurship is the cre ation (or emergence) of new organizations is strongly associated with the works of William Gartner (e.g., Gartner, 1988). This notion is also embraced by population ecologists and or ganizational sociologists. One of the main mis sions for entrepreneurship research under this paradigm is to explain how and why organiza tions come into being, thus covering a topic that has been largely neglected in economic and or ganizational theories. This perspective does not allow for the concept of entrepreneurial growth. Entrepreneurship is about organizational emer gence; the growth of established organizations is a different phenomenon, outside the entrepren eurial realm. However, most real world firms become operational at a much smaller size and with much less of a structure, systems, and func tional division than the firm as we know it from organization theory. Therefore, in order to fill the gap and fulfill its theoretical mission, re search conducted from this perspective may have to include not only pre launch processes but also the ‘‘early growth’’ phase of businesses.
The notion that entrepreneurship is (eco nomic development through) the creation of new to the market economic activity has been embraced in some form by economic theorists who have taken an interest in entrepreneurship. With slightly different wording this view has recently been propagated in an influential article by Shane and Venkataraman (2000). Under this conceptualization, entrepreneurial growth is firm or venture level growth that has been obtained through offering a market something new (Davidsson, 2003; Davidsson, Delmar, and Wiklund, 2002). This new offer (product or service innovation, new business model, or just a new, marginally dissimilar product or service) gives customers new choice alternatives; it pro vides incumbent firms with a reason to take counter action, and it may inspire other poten tial entrants to follow suit – possibly with a slightly improved offer. An established firm growing as a result of entering a new market is also an instance of entrepreneurial growth, even if the market offerings are the same as previously offered by the same firm in other markets. This is because the market effects (on customers, incumbents, and potential followers) are the same as if a new firm had entered the same market with a corresponding offer. By contrast, growth obtained through market penetration is not entrepreneurial growth, because there is no creation of new to the market economic activ ity. The same is true for a firm that grows by acquiring other firms. In itself, this transfer of ownership does not change anything in the mar ketplace, and therefore the acquiring firm’s ex pansion is not an example of entrepreneurial growth.
In summary, this article has suggested two micro level interpretations of the concept of entrepreneurial growth. The first equates this concept with the expansion of founder managed firms. This is consistent with defining entre preneurship as starting and owning one’s own firm. The second interpretation associates the term with organic growth through new product development or market expansion. This is consistent with defining entrepreneurship as (economic development through) the creation of new to the market economic activity. Ac cording to the third main perspective on entre preneurship – concerning the creation of new organizations – firm growth takes place after the entrepreneurial process of emergence is completed.
Bibliography
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