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Stage models tend to focus on the internal dynamics of growing concerns, and typically pay insufficient attention to the impact of external factors in the social, economic and business environments. For example, stage models generally fail to take account of spatial dimensions of SME tied to advancement or decline of local, regional, national or international economies.

These points cover virtually all the substantial criticisms of stage models of SME found in preambles to empirical studies already identified, and in specific reviews/critiques such as those of Penrose (1952), Perry (1982), Gibb & Davies (1989, 1990, 1991), Hay & Kamshad (1994) and Merz et al. (1994).

Of the criticisms of stage-of-growth models identified in the previous paragraph, those grouped in the fourth point are most often voiced in the relevant literature. For example, in her seminal work The Theory of the Growth of the Firm, Penrose (1952, p. 806) expresses the following views:

The purpose a life cycle theory of the firm would serve are obvious, yet the theory as a base undeveloped hypothesis has existed for a long time and nothing has been done to construct from it a consistent theoretical system with sufficient content to enable it to be used for any purpose whatsoever. . . . Although we have a respectable collection of information about firms, it has not stimulated economists even to suggest the further hypotheses necessary to the development of a life cycle theory of the firm. This, I think, is primarily because the available evidence does not support the theory that firms have a life cycle characterized by a consistent transition through recognizable stages of development similar to those of living organisms. Indeed, just the opposite conclusion must be drawn: the development of firms does not proceed according to the same ‘grim’ laws as does that of living organisms.

Gibb & Dyson (1984) claim that much SME growth is topsy-turvy, and is reactive rather than pro-active. Fombrun & Wally (1989, p. 108) make the point that ‘Growth . . . may be neither orderly nor sequential; it may occur in surges’. According to Miller & Friesen (1984a):

. . . while the stages of the life cycle are internally coherent and very different from one another they are by no means connected to each other in any deterministic sequence.

Finally, when commenting on published research into stages of growth in SMEs, Merz et al. (1994, p. 49) proclaim that:

These studies, while interesting and thought provoking, possess limited usefulness for the study of growth management since they are built upon the deterministic assumption that all firms grow linearly through a predictable series of preordained stages.

5. Stages or Gestalts of SME Growth?

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