What do we know so far?

  • Small business growth is one of the dominant themes in the entrepreneurship literature. Decades of research have delivered much insight in the factors that influence and predict venture growth, such as the entrepreneur’s network, the resource base, individual-level motivations and hostility and dynamism of the environment (Davidsson, et al. 2010; Wiklund et al., 2009). However, this search for growth factors seems to have hit a dead end, as we lack sufficient understanding of the growth process. Small business growth intrinsically includes change of the venture and the operations along multiple aspects and dimensions, which are difficult to capture in set of uniform growth factors that aim to explain the change in amount of employees and/or financial measures.

  • Despite profound critiques, the understanding of entrepreneurial growth processes is still largely based on stage models, such as the models of (Greiner, 1972; Chandler & Hanks, 1994; Clarysse & Moray, 2004). These models are attractive for practitioners and also frequently used by researchers to depict different phases of venture growth, although they are simplistic and lack sufficient empirical validation. The main problems of these stage models are that they assume that ventures progress along a fixed number of stages through a generic, immanent growth path, that they deal with management problems rather than activities, and that they poorly cover external influences. In this study, we respond to the call for inclusive, dynamic state-models (Davidsson, 2010; Leitch et al., 2010; Levie & Lichtenstein, 2010) to align modeling with empirical data while retaining practical utility of those models. We use the complex, non-linear dynamics modeling tool of System Dynamics (SD), to build an exploratory model of the growth process of ventures, including stagnation and decline. SD can model situations that involve multiple and interacting processes, delays, accumulations, and other nonlinear effects, such as feedback loops and thresholds (e.g., Daviss et al., 2007; Sterman, 2000), but only recently researchers have started to apply SD-methods to entrepreneurship.