of SME growth – an approach to the issue with a long but somewhat contentious pedigree in the relevant literature. One stages-of-growth model in particular is described in some detail, and is then carefully evaluated in the light of contemporary scholarship to discern whether it appears to overcome key failings of its forebears. The model is also compared and contrasted with an alternate gestalts of SME growth perspective which has recently received some support in the literature. The paper closes with a summary and conclusions arising from the review.
2. Explaining SME Growth
Wider scholarly thought on business growth in the literature of economics may be found in works by Marris & Ward (1971), Lindgren & Aislabie (1976), Casson (1982), Brock & Evans (1986), Johns et al. (1989), Acs & Audretsch (1990), Keasey & Watson (1993), McMahon et al. (1993), Reid (1993) and Acs (1995). The most useful recent review articles found on the growth process of SMEs are those of Chell & Haworth (1988), O’Farrell & Hitchens (1988), Gibb & Davies (1989, 1990, 1991), Hanks & Chandler (1992) and Holmes & Zimmer (1994). These are all substantial and critical published reviews of prior research which has attempted to explain the dynamics of growth in SMEs. In addition, Birley & Westhead (1990) provide a general review of the relevant literature as a precursor to reporting empirical findings on growth and performance contrasts in SMEs. Importantly, these reviews are broad in scope and comprehensive; and, by and large, they are not confined to the perspective of a particular academic discipline or to a single explanatory paradigm for growth. The most significant conclusions of the general reviews are summarised below.
In their review of alternative conceptual frameworks for explaining SME growth, O’Farrell & Hitchens (1988) classify available business growth theories into four main groups:
Mostly static equilibrium theories derived from the field of industrial economics that are insufficiently concerned with the dynamics of growth, and which tend to be preoccupied with attainment of economies of scale and minimisation of long-run unit costs. Many are considered to overemphasise the large firm as the ultimate stable outcome of growth, there being no perceived limit to the size that a business might achieve (Perry, 1982; O’Farrell & Hitchens, 1988). In this context, Penrose’s (1959) views on the availability of managerial time and expertise, and its impact on the achievable growth rate for a business, are most significant.