Processes of firm growth and diversification: Theory and evidence

Alex Coad, Christina Guenther

Research output: Contribution to journalArticle

14 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)857-871
Number of pages15
JournalSmall Business Economics
Volume43
Issue number4
DOIs
Publication statusPublished - 2014 Feb 27
Externally publishedYes

Keywords

  • Diversification
  • Firm growth
  • Growth process
  • Machine tools
  • Penrose

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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