Frontiers in European Entrepreneurship Research
Edited by Hans Landström, Hans Crijns, Eddy Laveren and David Smallbone
Chapter 15: Employment Growth of New Firms
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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