How can start-ups grow successfully?
How can organisations successfully grow? The best theories say the answer concerns access to resources. However, the answer still remains largely unclear. To find this out, the EU-funded ORGGROWTH (The growth of new entrepreneurial ventures and the internal dynamics of resources) project set out to study business growth by examining the use of material resources, which indicate organisational performance. It focused on the United Kingdom's airline industry during the period 1919-1975. ORGGROWTH's main finding is that entrepreneurs and small business owners have difficulty managing a diverse resource portfolio, such as human or knowledge-based resources. The reasons are that such a portfolio likely results in lower survival odds and growth rates, and managers more often look to sell resources to cope with the challenge of maintaining different resources. Small business owners are at an advantage when handling a more streamlined, similar set of resources. Researchers found that entrepreneurs who periodically diversify and change the resource portfolios of their business ventures minimise the risk of becoming outdated in a fluctuating environment. However, results also show that major diversity and change can be risky, leading to lower growth rates and a higher probability of venture failure. They conclude that resource portfolio renewal needs to be done in a prudent manner and over time. Another finding reveals that entrepreneurs lack the right resources and cannot maintain growth when starting a venture during highly competitive times. Lastly, industry concentration eases the acquisition of resources by specialised entrepreneurial ventures. This outcome contradicts popular belief that industry concentration holds back start-ups from achieving growth. ORGGROWTH contributed to organisation theory and entrepreneurship research. Entrepreneurs should now think twice about when to start a business, and how to gain access to and successfully manage necessary resources that are so key to sustainable growth.
