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Processes of firm growth and diversification: theory and evidence

Alex Coad and Christina Guenther ()
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Christina Guenther: WHU - Otto Beisheim school of Management, Germany

No 2013-11, SPRU Working Paper Series from SPRU - Science Policy Research Unit, University of Sussex Business School

Abstract: In this short research note we investigate the role of diversification in the firm growth process. We build on Penrose’s (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 which 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.

Keywords: Diversification; firm growth; Penrose; Machine tools; Growth process (search for similar items in EconPapers)
JEL-codes: L11 L20 L25 L6 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent, nep-fdg, nep-hme, nep-sbm and nep-tid
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Processes of firm growth and diversification: theory and evidence (2014) Downloads
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