A quantitative content analysis of the characteristics of rapid-growth firms and their founders

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Abstract

A group of firms that is attracting attention are rapid-growth firms. These firms are of particular interest because rapid growth is an indication of market acceptance and firm success. By studying rapid-growth firms, researchers can help all firms better understand the attributes associated with firm growth. Despite these positive outcomes, however, rapid firm growth is difficult to achieve and maintain.

This study adds to the literature through a quantitative content analysis of the narrative descriptions of 50 rapid-growth firms and a comparison group of 50 slow-growth companies. The purpose of the study was to draw from the narratives a list of empirically grounded growth-related attributes that are associated with rapid-growth firms. The findings of the study resulted in the advancement of a conceptual model of the attributes of rapid-growth firms in four areas: founder characteristics, firm attributes, business practices, and human resource management (HRM) practices.

Section snippets

Executive summary

A subset of firms that are of particular interest to researchers and practitioners are rapid-growth firms. Rapid-growth firms, which are defined in this study as firms with a 3-year compound annual sales growth rate of 80% or above, provide an important stimulus to the national economy. In addition, rapid growth is frequently an indication of market acceptance and firm success. Young rapid-growth firms, such as Apple Computer, Cisco Systems, and Oracle, have spawned new industries and

Literature review

The literature on rapid-growth firms has focused on whether there are systematic differences between rapid-growth firms and their slow-growth counterparts, and what these differences are. In a review of 55 research articles on firm growth published between 1989 and 1996, Delmar (1997) concluded that there is little agreement on what factors affect growth. In a more recent article, Delmar and Davidsson (1998, p. 399) remarked that despite increased research efforts, our knowledge about

Sample

The data used in this study came from a randomly selected set of narrative case studies provided by the Ewing Marion Kauffman Foundation. The cases represent a subset of a larger database of narratives from entrepreneurs that were regional or national winners of the Ernst & Young LLP Entrepreneur of the Year award sponsored by the National Center for Entrepreneurship Research at the Kauffman Foundation. The Entrepreneur of the Year program recognizes the achievements of U.S. entrepreneurs in 11

Discussion of the results of the content analysis

Table 4 presents the categories and variables that emerged from the study. Throughout the analysis, we were interested in the extent to which the firms in the sample “emphasized” these variables. The frequency of emphasis for each variable, broken down by rapid-growth versus slow-growth firms, is shown in the table. We chose this method of frequency analysis to ensure that “vivid, but false impressions” (Eisenhardt and Schoonhoven, 1990) were not regarded as more meaningful and pervasive than

Summary

Most of the findings reported above affirm the existing literature on rapid-growth firms. The characteristics of the founder of a firm, along with a firm's attributes, business practices, and HRM practices, are important in helping a firm achieve rapid growth. The results of the study are important because they confirm the results obtained through conventional deductive research, which is represented by the majority of the studies cited in Table 1.

Several new concepts emerged from our content

Implications, observations, and conclusion

The results of the paper provide several important implications for entrepreneurs. First, growth is not a random event. A firm's growth-related attributes, its business practices, and its HRM practices make a difference in terms of its ability to achieve and sustain rapid growth. The growth-facilitating variables identified in this study are shown in Table 4. Entrepreneurs who lead growth-minded firms may benefit by studying this table and considering the extent to which their firms embrace the

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