How Fast Can Firms Grow?

38 Pages Posted: 3 May 2013

See all articles by Johann Peter Murmann

Johann Peter Murmann

University of St. Gallen; UNSW Australia Business School - AGSM

Jenny Korn

University of Illinois at Chicago; Harvard University

Hagen Worch

Swiss Distance University of Applied Sciences

Date Written: April 20, 2013

Abstract

Building on recent research on dynamic, high-growth firms — so called “gazelles” — this paper explores a simple question that is important both in theoretical and practical terms: what is the fastest rate at which firms can grow. Based on a sample of seven high-growth firms (Cisco, G. M., I. B. M., Microsoft, Sears, Starbucks, and U. S. Steel), we find that 162% is the maximum sales growth rate in any one year that an established company (i.e. companies that are at least a few years old) can grow without merger and acquisitions, while the rate of employee growth is approximately 115%. All of the companies in our sample attained a maximum sales growth rate of above 50%, with most hovering around 75%. Furthermore, the firms’ growth rates show similar patterns. No company experienced its maximum sales growth rate toward the latter part of its history. Every company experienced its slowest employee growth rate after attaining its maximum employee growth rate, usually within a decade of one another. Most importantly, all firms show an average sales growth that exceeded the average employment growth. This finding is an indication that successful growing firms have a superior capability to continuously improve employment efficiency and adjust organizational structure to suit an increasing workforce.

Keywords: organizational growth, organizational size, evolution

JEL Classification: M10, D90

Suggested Citation

Murmann, Johann Peter and Korn, Jenny Ungbha and Worch, Hagen, How Fast Can Firms Grow? (April 20, 2013). UNSW Australian School of Business Research Paper No. 2013 STRE 01, Available at SSRN: https://ssrn.com/abstract=2259411 or http://dx.doi.org/10.2139/ssrn.2259411

Johann Peter Murmann (Contact Author)

University of St. Gallen ( email )

Dufourstrasse 40a
Institute of Management and Strategy
St.Gallen, 9000
Switzerland
+41 71 224 23 64 (Phone)

HOME PAGE: http://professor-murmann.net

UNSW Australia Business School - AGSM ( email )

UNSW Sydney, NSW 2052
Australia
+61-2-9385-9733 (Phone)

HOME PAGE: http://professor-murmann.net

Jenny Ungbha Korn

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

Hagen Worch

Swiss Distance University of Applied Sciences ( email )

Althardstr. 60
Regensdorf, 8105
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
128
Abstract Views
1,140
rank
261,802
PlumX Metrics