Enterprise and Small Business Principles
Growth and development in the small business
David Smallbone and Peter Wyer
There has probably been more written about small business growth in recent years than any other aspect of the development or management of small firms. One of the reasons for this is the contribution of growing firms to economic development and employment generation, which has attracted the attention of policy makers in many countries. In this regard, there is a growing body of research evidence that demonstrates a positive relationship between entrepreneurship and economic growth (e. g. Audretsch et al., 2002; Carree et al., 2002; Reynolds et al., 2003; Wennekers and Thurik, 1999). At the same time, there is little understanding of how this occurs and what the nature of the causal relationships is. Nevertheless, the issue is very topical in the early years of the twenty - first century, which is evidenced by the widespread interest and support by policy makers for the Global Entrepreneurship Monitor (GEM) study.
For private sector business service providers such as banks, growing businesses are potentially attractive customers because business growth is likely to be associated with a demand for finance and other services. For some individual business owners, the high casualty rates among new firms, in particular, focuses attention on the elusive ‘success factors’, the identification of which has been the subject of a large number of studies (e. g. Smallbone et al., 1995; Davidsson and Delmar, 1997; Warren and Hutchison,
2000) . Whilst growth may be judged by some as an indicator of business success, it can also present managers with problems which often focus on the need to relate expansion to the resources available or those that can be realistically mobilised.
In this context, this chapter considers some of the main issues relating to growth that confront small business owners/managers, as well as those individuals and organisations concerned with assisting or doing business with them. After a brief discussion of what is meant by ‘growth’ in small firms, the question of how growth can be explained is considered, drawing on a number of major research studies. The second half of the chapter focuses on some of the management issues associated with growth in small firms, including the main barriers to growth and how these can be managed.
