Growth Setbacks in New Firms

Posted: 9 Nov 2009

See all articles by Elizabeth W. Garnsey

Elizabeth W. Garnsey

University of Cambridge - Judge Business School

Paul Heffernan

University of Cambridge - Centre for Technology Management

Multiple version iconThere are 2 versions of this paper

Date Written: 2005

Abstract

This study investigates interruptions in the early growth of new firms.Although researchers have largely ignored this issue, a decade-long study of 237 high-tech firms founded in 1990 reveals the prevalence of growth interruptions among young firms. Indeed, even firms with the best survival records experienced growth setbacks. Case studies of four Cambridge high-tech firms with an early growth record are used to identify the underlying causes of interruptions.These case studies suggest that the depletion of early resource endowments and the failure to sustain an early growth record are two crises that commonly create setbacks.Taken together, the data indicate that substantial, continuous growth is quite rare and that growth interruptions are created by both internal and external dynamics. The timing of resource availability is critical for new firms, and the pace of growth may eclipse the synchronization of specialized resources, as well as managers' skills and knowledge.The unpredictability of emerging industries leaves new firms that lack the resources to weather short-term crises particularly vulnerable. Still, new and unexpected problems can be useful learning tools for growing firms. (SAA)

Keywords: Experimental/primary research, High technology firms, Barriers to growth, Resource management, Survival rates, Firm growth, Startups, Firm growth

Suggested Citation

Garnsey, Elizabeth W. and Heffernan, Paul, Growth Setbacks in New Firms (2005). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1502459

Elizabeth W. Garnsey (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 338183 (Phone)

HOME PAGE: http://www.jims.cam.ac.uk/people/faculty/garnseye.html

Paul Heffernan

University of Cambridge - Centre for Technology Management ( email )

Engineering Department
Trumpington Street
Cambridge, CB2 1PZ
United Kingdom
+44 (0)1223 338175 (Phone)
+44 (0)1223 766400 (Fax)

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