High-growth start-ups-demanding an entrepreneurial growth theory

Abstract

Summary form only given. The successful start-up firms use their strength of flexibility and creativity to enter over niches the mainstream markets and reshape so the existing paradigms. Common to all these firms is that they started as very small enterprises, but grew afterwards exceptionally fast compared to their former competitors. However, the exceptional organizational development during the first few years of such high-growth firms is not well understood yet. Although the number of studies about founding characteristics and success factors rose exponentially over the last few years, little insights have been gained into the organizational development and growth of such ventures. To date, no general framework exists, which models the complex reality of ventures to a sufficient degree. And the existing theory seems to fail completely when applied to high-growth ventures. This common complaint among entrepreneurial researchers has been the starting point for the present paper and encouraged us to summarize the different existing frameworks and to evaluate their applicability to high-growth ventures. In order to accomplish this goal we performed in a first step a comprehensive review of the pertinent literature on organizational growth and development, which revealed four major organizational theories, namely the stage or life cycle models, the population ecology approach, the evolutionary models of the industrial economists, and the alternative theories of growth. A comparison of the theoretically proposed growth patterns with the actual organizational development characteristics of five explorative case studies of high-growth ventures, which have been selected from a sample of 183 team-based start-ups in the IT and high-tech sector in Germany, largely supported the claimed deficiencies.