Complexity as a constraint on firm expansion within and across industries

Thomas Hutzschenreuter and Fabian Guenther
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Thomas Hutzschenreuter: Department of Strategy, WHU Otto Beisheim School of Management, Vallendar, Germany, Postal: Department of Strategy, WHU Otto Beisheim School of Management, Vallendar, Germany
Fabian Guenther: Department of Strategy, WHU Otto Beisheim School of Management, Vallendar, Germany, Postal: Department of Strategy, WHU Otto Beisheim School of Management, Vallendar, Germany

Managerial and Decision Economics, 2009, vol. 30, issue 6, pages 373-392

Abstract: With this paper, we want to shed light on factors influencing a firm's rate of expansion. We argue that expansion is a complex task and complexity associated with expansion projects in one period can negatively impact rate of expansion in the following period. Moreover, we argue that firm portfolio complexity also slows down further expansion. Using longitudinal data on the expansion path of 91 German companies, we show that added product scope of expansion and degree of internationalization characterizing expansion in one period as well as level of product and international diversity have a significant impact on slowing down rate of expansion in the subsequent period. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:wly:mgtdec:v:30:y:2009:i:6:p:373-392

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