Influencing factors on growth modes change : systematic literature review and future research agenda

Abstract

Objectives. Inevitable condition of entrepreneurship, firm growth (Gundry & Welsch, 2001), can be understood better if more attention is paid to how companies grow instead of how much they grow (McKelvie & Wiklund, 2010). Research about small firm growth is fragmented. One reason is that the phenomenon has been treated over-simplistically by lacking separation among growth modes (Davidsson & Wiklund, 2000; Gilbert et al., 2006a; Wiklund et al., 2009) and subsequently missing understanding why firms growth and how (Benning & Flatten, 2020; Geuvers, 2016). This led to a predisposition of SMEs growing mainly organically, when in fact empirical studies have shown contradictions (Alemayehu & Van Vuuren, 2017; Reynolds & Teerikangas, 2016; Weitzel & McCarthy, 2011). The objective of this study is to fill in this research gap by identifying motives behind different growth modes selection in SMEs. Prior Literature. Earlier studies focused on the relationship between modes and firm performance (McKelvie & Wiklund, 2010; Moatti et al., 2015). Knowledge about firm growth determinants is limited, especially when it comes to growth modes (Carpenter & Petersen, 2002; Davidsson et al., 2010; Delmar et al., 2003). Some empirical findings were performed with low accuracy (Wright & Stigliani, 2013) and certain research questions about firm growth modes have been depreciated (Clarysse et al., 2011; Iacobucci & Rosa, 2010). Similarly, there is limited insight into understanding how different contextual components affect growth modes selection (Moatti et al., 2015; Wright & Stigliani, 2013). Approach. This article presents findings from ta systematic literature review of earlier studies on the motives behind growth modes in SMEs. It conducts a 2-stage data search and thematic analysis of 119 studies to identify major motives for selecting organic, hybrid or M&A mode. Results. The review suggests 2 groups and 4 sub-groups of major motives influencing SMEs’ choice of modes and switch between them. Organic growth is triggered mainly firm structure and strategy, hybrid by strategy and M&A by firm structure and external motives. Value and Implications. SME’s ability to change aims, motives and intentions is frequently the only way to adjust to a changing environment (Carsrud & Brännback, 2011). Because perceptible growth outcomes are at least partly influenced by the mechanisms an entrepreneur chooses to apply (Gilbert et al., 2006b), it is important to understand what influences on a decision to change between modes so that one may predict growth outcomes. Our study offers several potential contributions. It structures knowledge about SMEs ways of growing, summarizes motivations behind organic, hybrid and acquisitive growth based on their importance in the literature and proposes directions for future research. In a societal sense, once companies reconsider their growth paths and investment schemes, they can use employees’ work force in a more meaningful way depending on a growth mode to be pursued.