Munificence contingent small business growth model (special emphasis to African SMEs’ context)

Abstract

Despite the growth in number and kind of research emphasizing small and medium-sized enterprises (SMEs), little is known about the relationship between drivers and modes of SMEs’ growth. To address this gap, the paper systematically analyzes the relationship between growth drivers and strategies based on the dynamic resource-based view and proposes munificence contingent growth model. The authors argue that the selection of growth strategy should base on firm's resource and environmental munificence settings. Firms can select either organic or inorganic growth strategies based on the abundance or scarcity of certain resources and the accommodative capacity of the economic environment. When the economic environment comes with attractive opportunities SMEs tend to cooperate with other firms either through collaborative framework or diversification strategies. Conversely, when they are faced with very competitive market conditions and the resource availability is limited bootstrapping strategies found to be helpful to maintain competitiveness and thrive. Subsequently, as the resource muscle of the firm develops through bootstrapping strategies SMEs are expected to employ expansion strategies.