Over the history of entrepreneurship research there have been many attempts to categorize entrepreneurs according to a variety of dimensions. These categories have included industry, size, region, age, capital (labor) intensity, hi/low-tech, stage of life cycle, personality type, and numerous others. A particular stream of research has evolved that has attempted to categorize or differentiate small business owners from "pure" entrepreneurs, i.e. those that were satisfied with the status-quo vs. those that wanted to grow their business more rapidly. The focus of this research study is on the latter group?those that have exhibited a willingness to grow their business.
Carland, et al (1984) differentiated between "small business owners" and "entrepreneurs," in which the latter category focused on growth and innovation. Moderate growth firms were identified by Ginn and Sexton (1990) who contrasted them to the sample of Inc's 500 fastest growing firms of the year. A partial replication for Carland's conceptualization was established.
Birch (1987) also discovered two groups of small firms: "income substitutors" and "entrepreneurs." He found that entrepreneurs intended to grow their organizations significantly, and concluded that these organizations were responsible for a major proportion of job creation over several periods ranging from 1969 to 1985.
The theoretical model developed here follows a pattern of growth literature developed by Davidsson (1989, 1991), Greenberg, Baringer and Macy (1996), Krueger and Carsrud (1993), Ward (1993), Kolveried (1990), and Gibb and Davies (1990). The study reported here extends the decision models to start a business (as chosen by the founder) to the decision to grow the business by the same entrepreneur or her successors. To date most of the media research attention has focused on rapidly growing new ventures. However, surprisingly little theoretical, quantitative or rigorous literature has included the underlying factors supporting such expansion plans.
Attributes of High Growth Entrepreneurs and Organizations
To many entrepreneurs, the greatest satisfaction, owning a business, which often includes working closely with customers and employees, inevitably diminishes as the business grows and the owner's role changes. Jack Ferner, former dean at Wake Forest says "Many entrepreneurs would rather limit growth than give up those satisfactions. My experience has been that for every one who has dreams of grandeur and size and billions of dollars, there are probably five that prefer to remain small" (Barrier, 1996). The other perspective is pointed out by John Thorne from Carnegie Mellon who states: "I think there is an argument in many industries that if you don't grow, you can't hold good people, you're not going to stay in touch with the technology or the marketing trends, and you sort of die" (Barrier, 1996).
According to Davidsson (1989; 1991) firm growth is an indication of continued entrepreneurship. One study in particular (Davidsson, 1989) focused on the relationship between the expected outcomes and growth willingness. The study incorporated a multidimensional approach, yet Davidsson relied heavily on psychological theories of motivation. Specifically the study strove to identify factors which either enhanced or reduced the willingness to grow. He raised four questions: 1) Can differences in growth willingness be explained by differences in expected outcomes? 2) What expected outcomes are important growth motivators or deterrents?; 3) Do different levels of achievement motivation affect growth willingness?; 4) How does growth willingness, and its determinants differ among different classes of trade? With his sample of 400 randomly selected Swedish entrepreneurs, he found that:
1) Certain expected outcomes seem to affect growth willingness
in the predicted direction. Yet, money which often has been found
to be the central motivating force in most economic theories was
not found to have an important role.
2) Most firms favored growth, 62% favored moderate growth in the number of employees, and 87% favored growth in turnover.
3) Control and independence variables were found to have an asymmetric relationship. Each played a separate and distinct role in the relationship between growth and autonomy, their impact changed with firm size.
4) Growth was conditional on more than individual desire. External conditions and entrepreneurial ability were important, not just willingness. The perception of what growth will bring over time impacted growth.
5) The results suggest that need for achievement does affect growth. He suggested that individuals with high need for achievement perceive money as a measure of success.
If the decision to start a business is a choice made by the founder, it may also be assumed that the decision to grow the business is a choice made by the same entrepreneur (Kolvereid 1991). In his study of Norwegian entrepreneurs Kolvereid adopted a multilevel approach looking at the relationships between the entrepreneur's motives to start the business, education, experience, industry, localization, characteristics of the organization and its environment, the firm's history of growth, and the entrepreneur's growth aspirations.
Drawing from a sample of 250 Norwegian entrepreneurs from four different regions of the country, he identified the entrepreneurs motives to start their business. In addition, he uncovered:
1) Significant relationships between education and industry as
well as a number of organizational variables, including past growth in
both revenue and number of employees, in relation to an entrepreneur's
aspirations to grow their firm.
2) No significant relationships between growth aspirations of entrepreneurs and experience, sex, location, or size of business as measured by employee count.
3) Higher growth aspiration levels tended to be related to entrepreneurs who desired personal achievement.
4) Entrepreneurs with the strongest growth aspirations were in the manufacturing sector as opposed to services. Manufacturing firms were found to have smaller, and distant customer bases, often with more competitors.
5) When comparing like samples in Great Britain and New Zealand, a significantly larger percent of Norwegian entrepreneurs did not aspire to grow their firms.
As Kolvereid (1991) pointed out, significant relationships were found between growth willingness and expectations concerning employee well-being, control, independence, workload, and achievement motivation. This study provided valuable insights however, as Davidsson (1991) concluded, there are likely to be many situational influences unique to each firm that influence growth willingness and intention. The study reported here was designed to identify some of these situational influences so we may gain a clearer picture of the paths that high-growth firms follow.
The present study extends the literature on growth intention to include a large sample of women entrepreneurs across industrial sectors in firms with significant sales and in well-established businesses. Although the focus on women entrepreneurs has greatly increased in recent years, few studies have included larger women-owned firms, and those that have, including the present one, have undergone substantial effort and cost to locate and study them (Eggers & Leahy, 1993). The present study focuses on women entrepreneurs, twenty-one percent of whom, according to a recently published study by the National Foundation for Women Business Owners (1994), reported that maintaining the growth and competitiveness of their firms is a significant challenge.
This study attempts to extend the research on women entrepreneurs beyond the examination of the link between gender and entrepreneurial (personal) characteristics (such as propensity to take risks, degree of independence desired, locus of control, etc.). Such research, valuable though it is in describing women entrepreneurs, tells us little about the differences that exist among women entrepreneurs, whose businesses may be differentiated by size, industry, strategic intent, and performance. The present research examines critical elements in the entrepreneurial process, including strategies for growth and organizational design. In their comprehensive review of current research on women entrepreneurs, Starr & Yudkin (1996) suggest the need ".for more studies of women-owned-businesses with greater than $1 million in sales to help define preconditions and strategies for growth (1996: p. 49).
In summary, the present research examines the expansion strategies of a large sample of women entrepreneurs whose businesses are large in size, significant in sales, and diverse in industry representation. High growth firms were differentiated from low-growth firms by their growth intentions/willingness as measured by 19 specific expansion plans. This measure accurately portrays the growth aspirations of the entrepreneur herself.
The independent variables of interest were organizational structure, entrepreneurial intensity, willingness to incur opportunity costs, importance of factors contributing to growth, type of financing sources, and demographics. Specifically, questions of interest included:
1) What characterizes a high growth firm/entrepreneur with respect
to experience, equity in previous firms, sales revenue, number of
employees and type of organizational structure utilized?
2) Do high growth entrepreneurs exhibit higher levels of entrepreneurial intensity?
3) Are high growth entrepreneurs more willing to pay the price of the things they must give up (opportunity costs)?
4) Do high growth entrepreneurs place more weight on strategic success factors identified by various authors?
5) Are high growth entrepreneurs unique in how they finance their start-up and expansion expenses?
The following hypotheses are proposed:
Hypothesis 1: Entrepreneurs in high-growth firms can be differentiated from women entrepreneurs in low-growth firms on the dimension of entrepreneurial intensity.
Hypothesis 2: Entrepreneurs in high-growth firms can be differentiated from women entrepreneurs in low-growth firms on the dimension of opportunity costs.
Hypothesis 3: Entrepreneurs in high-growth firms are more likely to have a formal organizational design (structure) in place than women entrepreneurs in low-growth firms.
Hypothesis 4: Entrepreneurs in high-growth firms will attach greater importance to factors related to business growth than women entrepreneurs in low-growth firms.
Hypothesis 5: Entrepreneurs in high-growth firms are more likely
to use a unique pattern of financing sources with greater frequency than
women entrepreneurs in low-growth firms.