Processes of firm growth and diversification: theory and evidence

Processes of firm growth and diversification: theory and evidence Investigating the role of diversification in the firm growth process, we build on Penrose’s (The theory of the growth of the firm. Oxford University Press, Oxford, 1959) Theory of the Growth of the Firm to formulate hypotheses about growth of employment, assets and sales in the years before, during and after a new product introduction. We exploit a new database from the German machine tool industry that boasts a detailed and meaningful definition of diversification. Our exploratory analyses indicate that diversification, in terms of product introductions, is preceded by employment growth. Moreover, we find support that diversification is positively associated with subsequent asset growth, but negatively associated with subsequent employment growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Processes of firm growth and diversification: theory and evidence

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Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Management/Business for Professionals; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-014-9566-4
Publisher site
See Article on Publisher Site

Abstract

Investigating the role of diversification in the firm growth process, we build on Penrose’s (The theory of the growth of the firm. Oxford University Press, Oxford, 1959) Theory of the Growth of the Firm to formulate hypotheses about growth of employment, assets and sales in the years before, during and after a new product introduction. We exploit a new database from the German machine tool industry that boasts a detailed and meaningful definition of diversification. Our exploratory analyses indicate that diversification, in terms of product introductions, is preceded by employment growth. Moreover, we find support that diversification is positively associated with subsequent asset growth, but negatively associated with subsequent employment growth.

Journal

Small Business EconomicsSpringer Journals

Published: Feb 27, 2014

References

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