How Fast Can Firms Grow?
38 Pages Posted: 3 May 2013
Date Written: April 20, 2013
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: Suggested Citation