Analyzing non-linear dynamics of organic growth: Evidence from small German new ventures
Abstract
This paper links theories of growth models with the literature on serial autocorrelation of growth. We study the serial autocorrelation of tendencies of growth trajectories of employment and sales for German new ventures over a nine-year period using mosaic plots as a conceptual framework. The autocorrelation of growth tendencies provides important information on firms growth processes. We find that growing new ventures are subject to negative autocorrelation of tendencies of growth trajectories making sustained growth a very rare occurrence. This indicates that the growth of new ventures is non-linear, prone to interruptions, amplifying forces, and setbacks. Therefore, we interpret the commonly used term ‘stages of growth model’ in a different manner. A stage cannot be defined as a time span but rather as a sort of conditions of circumstances that are all present at a point in time and that are conditionally linked to a preceding sort of circumstances.
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