Innovation-economic and spatial aspects of firm growth - The contribution of firm-internal and firm-external factors
This thesis is explorative in nature. Based on empirical investigations of different research fields (i.e. Geography and Economics), it analyses firm growth in terms of factors and sources that come internal and external to firms. This book deals with the integration of different growth related dime...
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|This thesis is explorative in nature. Based on empirical investigations of different research fields (i.e. Geography and Economics), it analyses firm growth in terms of factors and sources that come internal and external to firms. This book deals with the integration of different growth related dimensions, in particular with factors and knowledge sources for investigating and analysing growth processes of firms. Firm growth is important for the economic competitiveness and technological progress as well as for the regional development. Therefore, it can be considered as a heterogeneous process with high complexity and idiosyncratic characteristics. This idiosyncrasy is partially caused by the high number of dimensions, growth factors and knowledge sources which are basically involved in the growth process. An important purpose of this doctoral thesis is to combine different key dimensions and determinants of the firm growth process. Within this multidimensional concept, various growth factors and knowledge sources appear which potentially contribute to the growth of firms. In order to analyse and improve the understanding of the growth process itself, it is distinguished between internal and external growth factors and knowledge sources that might influence firm growth. An example of the combination of these key dimensions and growth factors is the usage and consideration of knowledge sources that are internal or external to firms. It has been discussed that these determinants of the growth process can influence or even complement each other. Nevertheless, these determinates have often been analysed separately and literature concerning how to combine them is (still) limited. The domain of firm growth and its growth determinants is considered complex since the growth process is characterised by many factors and sources influencing each other. It aims at particularly highlighting the issue of agile relationships between space, time and economic interactions. The space centred geography developed specific models of space, but has been largely neglected the spatial and temporal features of economic interactions. Economic interactions were understood as a ‘Black-box-concept’ without any further information (e.g. Werlen 2000). Then, the ‘Black-box’ comprises deterministic assumption understanding space as homogenous entity (see Petersen 1944). Contrarily to the deterministic belief, this work understands economic features and relationships as realistic and relational operations, using space and time as agile issues of economic interactions. A multidimensional investigation and evaluation for exploring growth factors, knowledge sources and the activities involved in the growth process of firms is therefore developed, and problems and obstacles are studied.
Moreover, firm growth can be considered as a process depending on interrelated growth factors and knowledge sources that influence and complement each other. Thus, firms operate in environments over which they might have full, or at least, partial influence. These environments are usually probabilistic with the effect that firm “growth results from adaptive search over a probabilistic fitness landscape with stochastic attractors” (Lee and Harrison 2001: p. 115). Hence, firms cannot expect the same output each time they process the same inputs. An important result of this property of the probabilistic approach is that firms operate in a multidimensional setting and environment where various growth-related factors and knowledge sources are embedded. An important result of this property of the probabilistic approach is that firms operate in a multidimensional setting and environment where various growth-related factors and knowledge sources are embedded. The following more suitable definition was provided by Alex Coad (2009 p: 110): “Firm growth is indeed a multifaceted phenomenon, it has a strong idiosyncratic character, and as a result it is difficult to generalise across firms and circumstances.” None of these theories and empirical studies can provide a comprehensive explanation of the different key dimensions of firm growth. Moreover, different key dimensions of firms’ growth processes can be revealed, reflecting the fact that firm growth is driven by heterogeneity and complexity. A multidimensional concept of firm growth might be defined as a complex system containing a set of different dimensions and growth related factors which interact with or complement each other in order to reach their respective goal (e.g. employment growth, innovativeness). This thesis contributes to the existing knowledge by determining three different key dimensions of firms’ growth processes: temporal, spatial and organisational dimensions. Additionally, literature mostly distinguishes between the firms’ growth characteristics in terms of firm-internal growth (i.e. innovation effort, export orientation) and in terms of firm-external growth factors (e.g. Acar 1993). Generally speaking, the author argues that internal resources are neither sufficient nor adequate to achieve efficiency and firm growth. By contrast, for most firms a wide range of external factors is also relevant. Consequently, region-specific characteristics and their spatial relatedness engender differences in the way firms grow, and may be seen as substantial drivers for firm growth (e.g. universities, other firms, population, knowledge intensive business services).
More precise, firm growth has many growth stimulation factors and sources. Some of them are analysed in this book. A multidimensional approach of the firms’ growth process is introduced. It is shown that a multidimensional consideration of the firms’ growth process is of high importance because a multiplicity of interrelated factors and sources influence firm growth. This thesis captures aspects of time, space and organisations, and deals with the mixing of these dimensions. The detailed insight into ‘unknown’ factors, interrelationships and linkages is a great benefit in the explanation of the structure and procedure of firm growth processes. Generally speaking, this work allows for a detailed insight into the distinction between firm-internal and firm-external factors and knowledge sources to growth and controls for ‘stylized facts’ such as firm size, firm age and industry affiliation grounded in the previous empirical literature. More precisely, this book contributes to the literature by favouring the linkages and interrelationships between them: First, it analyses the interrelationships between firm-internal growth factors (i.e. innovation effort and export orientation) and time. It investigates whether firm characteristics, which – in literature - are related to firm growth, are also related to the development path of firms. A major conclusion is that the determinants of growth paths are not the same as the determinants of firm growth at one point of time. Obviously, the temporal structure of the impact of growth related factors on firm growth matters. Furthermore strong interrelationships and linkages between them exist. It is analysed whether the factors, which are found to be related to firm growth in literature, are also related to the continuous growth of firms in the medium term. In literature, it is usually examined whether certain characteristics are related to a higher average growth rate. In this work it is studied whether these characteristics are also related to the probability of various development paths, such as permanent growth. Hence, in this paper, the perspective is moved from average growth to the structure of development paths. Changing the perspective does not change the results fundamentally but provides many additional insights. Furthermore, the thesis examines the time structure of the effects of R&D activities (i.e. firm-internal) on firm growth. Also, the discussion about whether R&D investments are connected to firm growth in the subsequent periods and how this relationship depends on other firm characteristics (for example size and industry) is stressed. One main result is that, on average, R&D has a positive effect on turnover growth, but the effect and its temporal structure strongly depends on firm size and industry affiliation. To put it differently, firm-internal factors do affect firm growth and the temporal structure matters hereby. The occurrence of growth in the short run is to be distinguished from growth development paths (long-run). They each serve as own pattern of explanation and have to be interpreted separately. Second, the analysis accomplished improves the understanding of the emerging complementarities between the involved factors and knowledge sources. Therefore, it deals with the existence and the emergence of complementarities and the spatial embeddedness into cooperation networks (i.e. cooperative and non-cooperative) over time. This work particularly contributes to the existing literature by differentiating between cooperative and non-cooperative R&D subsidies, which are shown to have distinct effects. Moreover, the firms’ spatial embeddedness into subsidized cooperation networks is evaluated with respect to its importance for employment growth. The findings however provide some evidence for efficient complementarities, i.e. subsidies for cooperation that support interactions between firms and research organizations can yield positive effects. As such, growth factors can complement each other over time and therefore stimulate the spatial embeddedness into cooperation networks. Thus, the respective design of the implementation of growth factors matters. Third, this book highlights the importance of firm-external factors and their internalisation into firm activities. The analysis places growth relevant knowledge spillover processes (i.e. firms and universities) in a concrete space. Instead of imposing artificial and arbitrary regional delimitations and constructing imprecise measures of the available regional knowledge, the author looks at the exact geographical point locations of firms and their economic distance to different external sources of potential knowledge dissemination. As a main conclusion of the analysis it can be stated that both, other related firms and universities, are associated with firm growth. Furthermore, this section examines the contribution of specialisation and industrial variety to employment growth and therefore highlights the controversial discussion about Marshallian (technical) externalities (i.e. specialisation) and Jacobian externalities (i.e. diversification). The findings show that the level of industry aggregation has a direct impact on firm growth. In the case of Jacobian variety, firm size plays a major role. Finally, the thesis analyses the contribution of local knowledge endowment to employment growth in nanotechnology firms. Nanotechnology firm growth is influenced by the locations hosting the firms. The main conclusion of this study is that local knowledge endowment indeed influences firm growth in nanotechnology positively, while local knowledge specialisation is surely not always positively affecting the growth of individual firms. To sum up, firm-external factors can be incorporated into the activities of firms the consideration of exact geographical locations, regional specialisation or industrial variety as well as local knowledge endowment bridges the gap between external factors and their internalisation into firms’ growth process.
The work indicates high potential for creating the opportunity of implementing further research directions and issues such as an entrepreneurial dimension. One direction of future work could hence be the identification of additional dimensions of firms’ growth processes that might be useful to integrate, or even complement with each other. Furthermore, more information about the complementarities and their effects are necessary in order to enhance detailed results and to obtain more insights into the indirect effects of growth related factors and knowledge sources. In particular, the question arises whether the impact of a firms’ position within a network implies any knowledge complementarities and whether it matters with which types of organisations they cooperate with. The gained knowledge would be an additional, valuable achievement for understanding the complexity, heterogeneity and idiosyncrasy of firm growth. For future work, changing the perspective from the micro-level to the meso-level of spatial aggregation might also be decisive, because firms’ growth properties are substantial features of the dynamics of regional growth. Finally, interested in how the particular features of the firms influence the firm growth processes, the empirical examinations are accomplished in the context of firm growth as showcase examples. Relevant and appropriate policy implications can only be derived for particular firm cohorts, while policy implications for the support of firms in general might fail to have a growth-sustaining impact. Hence, the implementation of policy instruments comes along seeking to regulate specific activities across different firm cohorts. With respect to the comprehensive analyses in this book, different firm groups can be determined requiring specific policy instruments.