Capabilities for growth

07 november 2003

EIM has analysed the relationship between entrepreneurial capabilities and the growth of firms. The central question of our investigation was: What is the relationship between firm-specific capabilities and the growth of medium-sized Dutch firms in ICT services and life science?

Lado and Wilson identify four categories of capabilities aimed at the managerial, input-based, transformational and output-based processes of the firm. In each category different variables can be distinguished. We distinguish thirteen variables, such as strategy formulation, ambition, human recruitment, innovativeness, restructuring, quality and network usage.

We tested the importance of these variables in ten cases. The ten companies are active in ICT services or life sciences. Six companies showed a strong growth, the other four grew relatively slow or even declined.

The four fields of capabilities are all well presented in the fast growth of firms in ICT services and life sciences. The total influence indicates that the managerial capabilities of the firms are valued highest in the light of the organisational growth during the past three years. The most important variable in this category is strategy formulation. Secondly come the firm's output-based capabilities, of which reputation building is the most important variable. The relatively lowest influence is found for input-based capabilities.

The analysis of the six fast-growing firms brings forward three interesting fields of outcomes: (1) Growth is realised according to a clear strategic vision of the entrepreneurs; (2) the firms' top management were able to combine both technical and commercial skills and (3) the firms were able to find a balance between organisational innovativeness and managerial control.

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Capabilities for growth

07 november 2003

This study explores firm growth and its relation with firm-specific capabilities. Organisations can benefit from growth in many ways, including greater efficiencies through economies of scale, increased power, the ability to withstand environmental change, increased profits and increased prestige for organizational members. The second element of research in this study, firm-specific capabilities, refers to the ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments. The fields of growth and capabilities seem to be complementary. However, the exact relationship currently seems to be underdeveloped. In this study, an attempt is made to incorporate the development of capabilities in the process of organisational growth. The following issues are addressed: The way organisations strive to grow, the manner in which firm-specific capabilities are incorporated and translated into the corporate strategy and whether these companies have succeeded.
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Auteur(s): dr. R.G.M. Kemp, R.L.C. Philipsen


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