Processes of firm growth and diversification: theory and evidence

Alex Coad () and Christina Guenther ()

Small Business Economics, 2014, vol. 43, issue 4, 857-871

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. Copyright Springer Science+Business Media New York 2014

Keywords: Diversification; Firm growth; Penrose; Machine tools; Growth process; L6; L11; L20; L25; L26 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:43:y:2014:i:4:p:857-871

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DOI: 10.1007/s11187-014-9566-4

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