New Firm Growth: Exploring Processes and Paths

TLDR

The Penrosean (1995) model underpins a developmental view of new firm growth. The study proposes a framework for new firm growth, outlining five propositions about measurable growth‑path features. The authors test these propositions using growth data from new firms in three countries, applying graphical and sequence analysis to compare growth paths. The analysis reveals that new firm growth is non‑linear, frequently interrupted, and subject to setbacks, a pattern underappreciated in prior research.

Abstract

This paper provides an approach to new firm growth that views this as an unfolding developmental process. This approach is based on a Penrosean (1995) model of the firm. We find that new firm growth is non‐linear and prone to interruptions and setbacks to an extent overlooked in the literature. From the model of development used, five propositions are drawn concerning measurable features of new firms' growth paths; these relate to patterns of survival, continuousness of growth, turning points, reversals and cumulative growth. These propositions are examined in the light of data on the growth paths of new firms in three countries, with aggregate comparisons of firms' growth paths effected by graphical representations and sequence analysis.