Alternative Theories of Small-Firm Growth : A Critical Review

Reviews theories of growth and change concerning small manufacturing firms. Stochastic, stage, and strategic models of firm growth are considered, as well as the importance of the spatial dimension for the small firm, entrepreneurial personality, and an analysis of social perspectives based on Stanworth and Curran's (1976) identities of the artisan, entrepreneur, and manager. Previous theories of small firm growth have not sufficiently accounted for external factors, particularly the dependence of small firms on large organizations, and the exploitative relationships that often occur as a result. Further, small firms need to be analyzed independently, rather than being seen as microcosms of large enterprises. The research found, contrary to popular assumptions, that small firms struggle to optimize production (i.e., the price/quality relationship) according to consumer demand. Thus, a production-oriented theory of growth is suggested. Conclusions show that the stimuli for small-firm growth require further study, but it is clear that for a small firm to compete, it must take advantage of internal and external resources and implement the correct price/quality ratio for a specific market and region. (CJC)