Accumulation, Boundaries, Capabilities and Dynamics - Explaining Firm Growth

Doctoral thesis, 2007

The aim of this thesis is to further develop the theoretical understanding of the growth of knowledge intensive business organizations. The overall aim is to understand the growth challenges of emerging firms in the knowledge-based economy. In particular this thesis addresses several aspects of the growth of small bioscience based firms. In a world characterized by global markets and rapid information transfer, the existence of firms can no longer be justified by established products and defence of old positions. The traditional logic of economic activities and industrial organization has instead increasingly been replaced by dynamic Schumpeterian competition in which firms compete based upon knowledge and innovations. This thesis depart in the emergent theories of evolutionary economics which focus on economic action and firm behaviour in a restless disequilibrium and endogenous technological change (Nelson and Winter 1982). Within such a restless capitalistic society, new firms play a central role in economic development. As a consequence, economic as well as management researchers has increased their interest in entrepreneurship and industrial dynamics. The emergence and growth new firms have been found to relate to both the introduction and diffusion of new knowledge, innovations, as well as generators of new employment. The growth of new firms is hence vital to understand from the perspective of industrial dynamic throughout the process of Schumpeterian competition and technological evolution and in the longer perspective, economic growth. The thesis is structured around the general, puzzling phenomenon of the relative absence of growing firms within this specific technological and industrial context. In order to investigate the research problem a theoretical framework is put together along two main dimensions. The first consists of a review of the research field of firm growth including such as entrepreneurial and organizational aspects. The second dimension provides a theoretical outline regarding the specific industrial and institutional environment and thus presents a context in which these new firms evolve. The focus within this thesis is primarily on the growth of the individual business organizations. The initial research problem centres around the empirically evident relative low growth rates of bioscience based firms. As a consequence of this low growth rate of firms, the industrial dynamics is instead shaped by entries of new actors, creating a highly turbulent industry. According to the dominant theories of the firm, the reasons for performing activities within the institutional form of a business organization, resulting in economic advantages of being inside the boundaries. Such knowledge and innovation based competition should be seen in the context of the firm’s unique trajectory and as a process of accumulation of associated specific capabilities and distinctive competences. Innovation is thus a process of knowledge accumulation of both internal and external learning, influenced by the specific context in which the firm resides. The lack of growth of new knowledge intensive firms within this specific industry is thus found in the complexities of knowledge accumulation as generating firm capabilities for further actions. The pressure on innovativeness and the ability for firms both to foster and take advantages of knowledge raises several issues regarding growth of knowledge intensive business organizations. Altogether understanding firm growth within this context might potentially be seen as role models for increasingly knowledge intensive firms within other industries. Even with more modest implications such findings might have profound effect when limited to the studied industrial context.