Entrepreneurship, Sustainable Growth and Performance
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Entrepreneurship, Sustainable Growth and Performance

Frontiers in European Entrepreneurship Research

Edited by Hans Landström, Hans Crijns, Eddy Laveren and David Smallbone

This book provides an invaluable, state-of-the-art overview of current European research in the field of entrepreneurship. It focuses on four themes, each of which illustrates a key dimension in the overall theme: • entrepreneurs and their role in entrepreneurship • entrepreneurship in family businesses • performance of new ventures and • entrepreneurial processes.
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Chapter 15: Employment Growth of New Firms

Erik Stam, Petra Gibcus, Jennifer Telussa and Elizabeth Garnsey

Extract

15. Employment growth of new firms Erik Stam, Petra Gibcus, Jennifer Telussa and Elizabeth Garnsey INTRODUCTION A key outcome of the entrepreneurial process is new business creation. Most new businesses employ only one or very few persons. The creation of new growing firms – a key element of Schumpeter’s (1934) theory of economic development – is a relatively rare event. The few new firms that grow substantially face completely different issues during their life course than the many start-ups that remain small. These growing new firms are under pressure to act strategically, especially with respect to the expansion and renewal of their resource base (for example, via organizational learning), innovation, alliances and possibly internationalization). Strategic entrepreneurship (Hitt et al., 2001) is said to be a core issue here, especially the use of dynamic capabilities (Eisenhardt and Martin, 2000). Most studies on dynamic capabilities have focused on large, established firms, despite the flexible, dynamic nature of many small, new firms (cf. Piore and Sabel, 1984; Yu, 2001). Thus far there have been no studies tracing how dynamic capabilities relate to the growth of new firms. This chapter will analyse the association between dynamic capabilities and new firm growth, controlling for measures of firm resources, characteristics of the entrepreneur and aspects of the environment. The central research question is: How strong is the relationship between dynamic capabilities and the growth of new firms? The chapter opens with a review of empirical studies on employment growth in new firms and then moves on to...

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