Financial Determinants of High-Growth Companies: A Conceptual Model 9783030593490, 9783030593506

This book explores the factors that contribute to high corporate growth, presenting a new conceptual model for research

228 96 2MB

English Pages 160 [163] Year 2020

Report DMCA / Copyright

DOWNLOAD FILE

Polecaj historie

Financial Determinants of High-Growth Companies: A Conceptual Model
 9783030593490, 9783030593506

Table of contents :
Acknowledgements
Contents
List of Tables
Chapter 1: Introduction
Bibliography
Chapter 2: High-Growth Companies: Origins, Characteristics, Growth Determinants and Performance
2.1 High-Growth Companies
2.1.1 Demographic and Factual Characteristics of High-Growth Companies
2.2 Financing of High-Growth Companies
2.3 Entrepreneurial Orientation of High-Growth Companies
2.4 Intangible Capital of High-Growth Companies
2.5 Financial Performance of High-Growth Companies
Bibliography
Chapter 3: Multidimensional Model of High-Growth Companies’ Performance
3.1 Definition of Key Theories for the Development of Research Models
3.1.1 Theory of the Growth of the Firm and Resource-Based Theory
3.1.2 Effectuation Theory
3.1.3 Capital Structure Theories
3.1.4 Starting Points and Developed Models of Entrepreneurial Process and Growth
3.2 Research Model
3.2.1 Entrepreneurial Orientation and Perceived Financial Resources Availability
3.2.2 Entrepreneurial Orientation and Measures Implemented to Overcome Financial Constraints
3.2.3 High-Growth Companies’ Intangible Capital and Perceived Financial Resources Availability
3.2.4 High-Growth Companies’ Intangible Capital and Measures Implemented to Overcome Financial Constraints
3.2.5 Measures Implemented to Overcome Financial Constraints and Perceived Financial Resources Availability
3.2.6 Perceived Financial Resources Availability and  High-Growth Companies’ Perceived Financial Performance
3.2.7 Measures Implemented to Overcome Financial Constraints and High-Growth Companies’ Perceived Financial Performance
Bibliography
Chapter 4: Empirical Research: Case of Slovenia
4.1 Introduction into Empirical Research
4.1.1 Data Sources and Sample
4.1.2 Methodology
4.1.3 Questionnaire Description
4.2 Results
4.2.1 Exploratory Factor Analysis
4.2.2 The SEM Model—First Order Factors
4.2.3 The SEM Model—Second Order Factors
4.2.4 Hypotheses (Second Order Factors) and Sub-hypotheses (First Order Factors) Testing
Bibliography
Chapter 5: Policy Implications for the Real World
Bibliography
Chapter 6: Where We Go from Here
Bibliography
Bibliography
Index

Citation preview

Financial Determinants of High-Growth Companies A Conceptual Model

Blaž Frešer Karin Širec Polona Tominc

Financial Determinants of High-Growth Companies

Blaž Frešer • Karin Širec • Polona Tominc

Financial Determinants of High-Growth Companies A Conceptual Model

Blaž Frešer Slovenska Bistrica, Slovenia Polona Tominc Faculty of Economics and Business University of Maribor Maribor, Slovenia

Karin Širec Faculty of Economics and Business University of Maribor Maribor, Slovenia

ISBN 978-3-030-59349-0    ISBN 978-3-030-59350-6 (eBook) https://doi.org/10.1007/978-3-030-59350-6 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover pattern © Melisa Hasan This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Acknowledgements

The authors acknowledge the financial support from the Slovenian Research Agency (research core funding No. P5–0023).

v

Contents

1 Introduction  1 2 High-Growth Companies: Origins, Characteristics, Growth Determinants and Performance  7 3 Multidimensional Model of High-Growth Companies’ Performance 45 4 Empirical Research: Case of Slovenia 73 5 Policy Implications for the Real World127 6 Where We Go from Here135 Bibliography139 Index159

vii

List of Tables

Table 2.1 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table 4.15 Table 4.16 Table 4.17 Table 4.18 Table 4.19 Table 4.20 Table 4.21 Table 4.22 Table 4.23

Overview of research on high-growth enterprises 11 EFA results for entrepreneurial orientation 83 EFA results for intangible capital 84 EFA results for measures taken to overcome financial constraints86 Indicator loading in CFA 92 Reliability and validity of the factors and observed variables of the first order 95 Quality of the model as a whole—first order factors 97 Quality of the model as a whole 99 Validity and quality of established constructs 100 Correlation matrix between constructs 101 Verifying hypothesis 1 102 Verifying H1.1 103 Verifying H1.2 103 Verifying H1.3 104 Verifying hypothesis 2 106 Verifying H2.1–H2.6 107 Verifying hypothesis 3 109 Verifying H3.1 and H3.2 110 Verifying H3.3 111 Verifying hypothesis 4 112 Verifying H4.1–H4.6 113 Verifying hypothesis 5 115 Verifying H5.1 and H5.2 116 Verifying hypothesis 6 117

ix

x 

List of Tables

Table 4.24 Table 4.25 Table 4.26 Table 5.1

Verifying H6.1–H6.7 119 Verifying hypothesis 7 120 Verifying H7.1–H7.2 120 Growth factors that form access to an individual financial resource131

CHAPTER 1

Introduction

Abstract  High-growth company (HGC) research is diverse and heterogeneous in nature, as HGCs seeking to create growth must deal with a number of factors that affect their performance from both a financial and a growth perspective. The growth of companies is thus an effect of appropriate motivation, growth opportunities and a harmonious organization of tangible and intangible means of production and financial resources. This book is therefore intended to contribute to the understanding of the specificity of the financing of HGCs, since the accessibility of financial resources is one of the key factors in the process of development and growth of the company. Keywords  Growth • Financial performance • Production resources • Conceptual model The study of corporate growth is a phenomenon in entrepreneurial theory, the beginnings of which date back to the 1950s, more precisely 1959, when author Edith Penrose (1959) published her theory on the growth of the firm. Nevertheless, researchers only placed more importance on high-­ growth companies (HGCs) in the late 1970s, when David Birch presented his then-controversial findings on the economic significance of small HGCs (Landström 2010, p.  159 and 164). Lately, HGC research has been diverse and focused mainly on the interpretation of the importance © The Author(s) 2020 B. Frešer et al., Financial Determinants of High-Growth Companies, https://doi.org/10.1007/978-3-030-59350-6_1

1

2 

B. FREŠER ET AL.

of entrepreneurship, the characteristics of companies (demographic factors) and the impact on the creation of employment and economic growth (Henrekson and Johansson 2010, p. 127). HGCs seeking to create jobs and economic growth must manage a number of factors that affect their performance, both from a financial perspective and from a growth perspective. With the conceptual model design, we wish to contribute to understanding the specificity of the financing of HGCs, as the accessibility of financial resources is one of the key factors in the development and growth of small and medium-sized enterprises (SMEs) (IFC 2011), which include a large proportion of HGCs. Insufficient or inadequate sources of financing may lead to the inability to operate properly and to realize business opportunities or to reduce the growth and development of companies (Beck and Demirguc-­Kunt 2006; Kim-Soon et al. 2017). On a sample of HGCs, Brüderl and Preisendörfer (2000, p. 62) found that the amount of financial capital invested in companies had a significant impact on the likelihood of rapid growth, which is also in agreement with Hambrick and Crozier (1985). This leads us to the realization that financing is especially important for HGCs, since these enterprises certainly require substantial financial resources in order to achieve high growth rates, while at the same time they may be subjected to more financing restrictions (Moreno and Casillas 2007; Hambrick and Crozier 1985). Access to relevant financial resources is also important for future access to financial resources, as the possession of a sufficient amount of financial resources is perceived as a measure of stability, reliability and reputation of the company/entrepreneur in the eyes of the investor (Neville et al. 2005; Baum 1996). This aspect is particularly important for HGCs, which can be slightly smaller in comparison to other companies, since an extensive part of theory and empirical research suggests that growth rate decreases with the size of the company, or that smaller companies grow faster (Calvo 2006; Yasuda 2005; Audretsch 1995; Reid 1995; Evans 1987a, b). Additionally, HGCs are, on average, also younger than non-growing companies, since the age of a company is negatively linked to the achieved growth rate (Delmar et al. 2003, p. 196; Henrekson and Johansson 2010, p.  237), and they are also more prone to risk (Davidsson and Delmar 2006) but to greater innovation as well (Shane 2009). As a result, there are differences between the financing of HGCs and the financing of non-growing (static) companies, relating mainly to the extent of the necessary financial resources (Brüderl and Preisendörfer 2000) and the use of different sources of financing, since HGCs,

1 INTRODUCTION 

3

compared to other companies, are more likely to use a “cocktail” of various financial resources (Brown and Lee 2014, p. 1). Financial resources and their accessibility represent a key aspect/challenge of the modern entrepreneurial process (Grichnik et al. 2014), especially among HGCs. According to the theory on the growth of the firm (Penrose 1959), the growth of companies is not inherently present (Močnik and Širec 2016, p. 300) but is rather an effect of appropriate motivation, growth opportunities (promoted by the entrepreneurial orientation) and harmonious organization of production resources, including human and social capital (Gilbert et al. 2006). As past research suggests, entrepreneurial orientation, human capital and social capital (particularly networking and organizational networking capacity) also have an important role in the selection and formulation of access to financial resources (Lukkarinen et al. 2016; Carter et al. 2007; Freel 2007). On the basis of the past theoretical knowledge, we have created our own conceptual model that links multidimensional variables—growth factors (entrepreneurial orientation, human capital, organizational networking capability—as a key aspect of the structural dimension of social capital) that affect perceived accessibility to the various forms of financing and the measures that the HGCs implement in regard to perceived financing constraints or in order to ensure optimal access to financial resources, and consequently also the financial performance of the company. Financial performance is crucial for HGCs; Penrose (1959) pointed out that excessive growth can compromise financial performance. Financial performance is also highlighted in connection with the possibility of maintaining jobs by Davidsson and Delmar (2006), who consider that a significant proportion of jobs are lost in HGCs as a result of extremely high and sometimes significantly risky growth and the difficulties that such growth brings about. We use the designed conceptual model that we have empirically verified on a random sample of HGCs in the Republic of Slovenia to supplement a deficit and heterogeneous field of research, thus creating an important scientific publication. The importance of the original scientific contribution is also reflected in the implications of the results for the needs of economic (entrepreneurial) policies, both at company level and at the national economy level. The book is based on a doctoral dissertation (Frešer 2020) and consists of several parts. The introductory part is followed by the theoretical planning and design of the theoretical conceptual model by formulating relevant research hypotheses. Next, there is a demonstration of the empirical verification of the conceptual model on a sample of HGCs from the

4 

B. FREŠER ET AL.

Republic of Slovenia. We conclude the publication with a discussion and the implications of the results for the needs of economic (entrepreneurial) policies as well as our concluding thoughts.

Bibliography Audretsch, D. B. (1995). Innovation, growth and survival. International Journal of Industrial Organization, 13(4), 441–457. Baum, C. A. J. (1996). Organizational ecology. In S. Clegg, C. Hardy, & W. Nord (Eds.), Handbook of organizational studies (pp. 77–114). London: Sage. Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance, 30(11), 2931–2943. Brown, R., & Lee, N. (2014). Funding issues confronting high growth SMEs in the UK. Edinburg, UK: ICAS. Retrieved May 30, 2019, from http://eprints.lse. ac.uk/57264/1/Brown_Lee_Funding-issues-confronting-high-growthSMEs-in-the-UK_2014.pdf. Brüderl, J., & Preisendörfer, P. (2000). Fast-growing businesses: Empirical evidence from a German study. International Journal of Sociology, 30(3), 45–70. Calvo, J. L. (2006). Testing Gibrat’s law for small, young and innovating firms. Small Business Economics, 26(2), 117–123. Carter, S., Shaw, E., Lam, W., & Wilson, F. (2007). Gender, entrepreneurship, and bank leading: The criteria and processes used by bank loan officers in assessing applications. Entrepreneurship Theory and Practice, 31(3), 427–444. Davidsson, P., & Delmar, F. (2006). High-growth firms and their contribution to employment: The case of Sweden 1987–96. In P.  Davidsson, F.  Delmar, & J.  Wiklun (Eds.), Entrepreneurship and the growth of firms (pp.  156–178). Cheltenham, UK: Edward Elgar. Delmar, F., Davidsson, P., & Gartner, B. W. (2003). Arriving at the high-growth firm. Journal of Business Venturing, 18(2), 189–216. Evans, D.  S. (1987a). Tests of alternative theories of firm growth. Journal of Political Economy, 95(4), 657–674. Evans, D.  S. (1987b). The relationship between firm growth, size, and age: Estimates for 100 manufacturing industries. The Journal of Industrial Economics, 35(4), 567–581. Freel, S. M. (2007). Are small innovators credit rationed? Small Business Economics, 28(1), 23–35. Frešer, B. (2020). The model for determining the impact of the perceived availability of selected growth determinants on high-growth enterprises’ performance. Maribor: University of Maribor, Faculty of Economics and Business.

1 INTRODUCTION 

5

Gilbert, A. B., McDougall, P. P., & Audretsch, B. D. (2006). New venture growth: A review and extension global. Journal of Management, 32(6), 926–950. Grichnik, D., Brinckmann, J., Singh, L., & Manigart, S. (2014). Beyond environmental scarcity: Human and social capital as driving forces of bootstrapping activities. Journal of Business Venturing, 29(2), 310–326. Hambrick, C. D., & Crozier, M. L. (1985). Stumblers and stars in the management of rapid growth. Journal of Business Venturing, 1(1), 31–45. Henrekson, M., & Johansson, D. (2010). Gazelles as job creators: A survey and interpretation of the evidence. Small Business Economics, 35(2), 227–244. IFC. (2011). SME finance policy guide. Washington: International Finance Corporation. Retrieved July 12, 2017, from https://www.ifc.org/wps/wcm/ connect/f3ef82804a02db409b88fbd1a5d13d27/G20_Policy_Report. pdf?MOD=AJPERES. Kim-Soon, N., Ahmad, R. A., & Poh, C. Y. (2017). Improving small and medium enterprises financing for stronger financial and non-financial performance. Advanced Science Letters, 23(4), 3025–3028. Landström, H. (2010). David Birch. In H. Landström (Ed.), Pioneers in entrepreneurship and small business research (pp. 159–172). USA: Springer. Lukkarinen, A., Teich, E. J., Wallenius, H., & Wallenius, J. (2016). Success drivers of online equity crowdfunding campaigns. Decision Support Systems, 87, 26–38. Močnik, D., & Širec, K. (2016). Growth aspirations of early-stage entrepreneurs: Empirical investigation of South-Eastern and Western European countries. Journal of East European Management Studies, 21(3), 298–317. Moreno, M. A., & Casillas, C. J. (2007). High-growth SMEs versus non-high-­ growth SMEs: A discriminant analysis. Entrepreneurship & Regional Development, 19(1), 69–88. Neville, A. B., Bell., J. S., & Mengüc, B. (2005). Corporate reputation, stakeholders and the social performance-financial performance relationship. European Journal of Marketing, 39(9/10), 1184–1198. Penrose, E. (1959). The theory of the growth of the firm. Oxford: Oxford University Press. Reid, C. G. (1995). Early life-cycle behaviour of micro-firms in Scotland. Small Business Economics, 7(2), 89–95. Shane, S. (2009). Why encouraging more people to become entrepreneurs is bad public policy. Small Business Economics, 33(2), 141–149. Yasuda, T. (2005). Firm growth, size, age and behavior in Japanese manufacturing. Small Business Economics, 24(1), 1–15.

CHAPTER 2

High-Growth Companies: Origins, Characteristics, Growth Determinants and Performance

Abstract  High-growth companies (HGCs) are different from non-­ growing (static) companies. The main differences may be due to their demographic characteristics, the financial resources required, the intensity of entrepreneurial orientation or their intangible capital. Although much is known about the origins, characteristics, growth determinants and performance of HGCs, there is no generally accepted definition of these firms, as corporate growth is a very complex phenomenon, which leads to greater heterogeneity and diversity in the definition of HGCs. In this chapter, an attempt will be made to illustrate the heterogeneity of the field in a systematic analysis of the results to date. Keywords  High-growth company • Growth determinants • Heterogeneity • Entrepreneurial orientation • Intangible capital • Financial performance

2.1   High-Growth Companies The definition of high-growth companies (HGCs) dates back to the 1970s, more specifically 1979, when David Birch triggered a fairly controversial discussion of the importance of HGCs with his publication The Job Generation Process (Landström 2010). Birch defined a very small proportion of companies as HGCs—up to 4% of all companies that consistently

© The Author(s) 2020 B. Frešer et al., Financial Determinants of High-Growth Companies, https://doi.org/10.1007/978-3-030-59350-6_2

7

8 

B. FREŠER ET AL.

achieved high growth rates in the time period researched (Brnjas et  al. 2015, p. 45). Despite numerous findings on the importance of HGCs, a generally accepted definition of these companies does not exist (Henrekson and Johansson 2010), and researchers have used a wide range of definitions of growth and various methods to determine HGCs. This leads to the existence of a pronounced heterogeneity among the existing research relating to HGCs. According to Širec (2011, p. 21), as a result of heterogeneity in previous HGC research, the issue of establishing a consistent theoretical basis is that empirical research is very difficult to compare directly because of the inconsistencies and diversity of growth criteria used. Growth of the company is a very complex phenomenon that has a wide range of definitions due to its nature. Growth can thus be absolute or relative, where absolute growth is linked to the variation of the selected category in the selected time period, and relative growth is linked to the variation expressed on the basis of the comparative category or expressed as a percentage (Davidsson and Wiklund 2000, p. 54). Both absolute and relative growth can be measured in different ways, from very simple to slightly more demanding mathematical models (ibid., pp.  54–56). The decision between absolute and relative growth is particularly important in terms of taking into account the (initial) size of the company. Absolute growth measurement enables better outcomes for large companies (growth measured in cash units, number of employees, etc.), while relative measurement of growth allows for a better position of small enterprises (growth measured in percentage, growth recalculation to the selected unit) (Delmar et al. 2003). The next important element of heterogeneity is reflected in the selection of the growth indicator. The most commonly used growth indicators are employee growth and sales growth (Delmar et  al. 2003, p.  193; Delmar 1997). Other growth indicators have also been used in past research, including performance indicators, market share indicators, company resource growth and other indicators, which have proved to be more subjective and more subject to the impact of the activity—thus, for example, the growth of resources is not an appropriate indicator for service companies that only have a small share of long-term (fixed) resources (Delmar 1997, pp. 65–67). On the basis of the above, Brnjas et  al. (2015, p.  46) anticipated that the following options were available for measuring the growth of a company:

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

9

• absolute growth of the indicator, which measures the absolute change in the value of the indicator (employee or sales growth) in the selected periods. • relative growth of the indicator, which measures the relative change in the value of the indicator (employee or sales growth) in the selected periods. • the Birch index, also called the DaBeg index. It measures the change of the indicator (primarily employee growth) as a combination (product) of absolute and relative growth between the selected periods. HGCs are defined on the basis of the calculated index for all companies and the subsequent definitions of the top 10% or 5% of the population of the companies in relation to the calculated index. An important aspect of heterogeneity also stems from the study of the different time periods used in defining growth. Growth is most commonly defined as the difference in the selected category between two time periods (Delmar 1997), which has a number of weaknesses, since this way ignores changes within the period (Delmar et al. 2003, p. 195). Delmar (1997, p. 70) examined 55 surveys of research in the field of growth study, and the selected period of time in these studies encompassed from one to eight years, or the time period was not stated at all. The heterogeneity of existing research is also affected by the selection of the studied unit. Thus, growth can be examined from the perspective of individuals (i.e. entrepreneurs), activities, organization and management of companies (Davidsson and Wiklund 2000, p. 51), and in recent research, growth was also studied in terms of entrepreneurial orientation (Wiklund et al. 2009), resources (Wiklund and Shepherd 2003), and the tendency and motivation for growth (Delmar and Wiklund 2008). In the above paragraphs, we presented a number of factors affecting the heterogeneity of research in the field of HGC. As mentioned above, this strongly complicates the comparison of findings and the creation of general theories relating to HGCs. Despite numerous inequalities (differences), McKelvie and Wiklund (2010, pp. 262–273) managed, at least to a certain extent, to standardize the three main branches of the study of growth: • Growth as a result. This is the most extensive branch of research in the field of company growth. The common point of this aspect of growth study is that growth is defined as a dependent variable, and

10 

B. FREŠER ET AL.

researchers attempt to identify factors with the most important impact on growth by integrating a wide range of said factors. The objective of this branch of research is to clarify as much as possible the proportion of growth variance, thus finding the most important factors that shape and influence the growth of the company. • The outcome of growth. This branch of growth study focuses on the study of growth outcomes. In contrast to the previous aspect, growth in this case is considered an independent variable in explaining other factors. Growth is considered as an existing circumstance, so in this aspect there is no tendency to look for factors that could affect growth itself. The aim of this branch of study is to explain, in particular, how growth affects the various aspects of the functioning of entrepreneurs and businesses. • Growth as a process. Unlike previous aspects where growth was treated either as an independent or as a dependent variable, this aspect of the study of growth is primarily considered a process. If, in the previous aspects, the main objective of finding an answer to the question is why growth arises or why growth affects a particular category, this aspect presents mainly the question of how companies grow, what is happening within companies when they grow and the like. The presented heterogeneity of the definition of growth results in ambiguity in the formulation of the definition of HGC. The first direction in the design of a definition of HGC is oriented towards the design of key criteria in advance (anaerobic conditions). For example, Birch et al. (1995) and Birch and Medoff (1994) used an annual sales growth rate of at least 20% as a benchmark for the definition of fast growth, while Autio et al. (2000) opted for a criterion of 50% of sales growth in a three-year period. The researchers also considered employee growth—Brüderl and Preisendörfer (2000, p. 54) used 100% employee growth as a benchmark for classifying a company as an HGC, while Halabisky et al. (2006) decided on a criterion of 50% employee growth within the selected period. The second direction of the design of the definition of HGC started to evolve with Kirchhoff (1994), who included in the definition of HGCs those companies that were ranked in the upper decile (10%) of the fastest-­ growing companies in the population based on each criterion. For example, the above reasoning was also followed by Schreyer (2000) and Davidsson and Delmar (2003, 2006). The HGC measurement overview is shown in Table 2.1.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

11

Table 2.1  Overview of research on high-growth enterprises Research/ author

Period

Definition of HGC State

Objective of study

Birch and Absolute Medoff growth (1994), Birch et al. (1995)

1988–1992

United States

Employment

Kirchhoff (1994)

Relative growth

1977–1978 to 1984

United States

Employment

Storey (1994)

Absolute and relative growth Absolute growth

A company with an annual growth level of over 20% and annual revenues exceeding 100,000 USD The upper decile (10%) of the fastest-growing companies in the population Definition based on employee growth The growth of sales in three consecutive years is greater than or equal to 50% and, at the end of the period, at least 1 million monetary units in sales Companies whose employee growth is greater than 100% (or more than 5 employees) Doubling sales during the period; While sales also exceed 500,000 monetary units

Great Britain

Employment

Finland

Employment

Germany

Employment

Finland

Employment

Autio et al. (2000)

Indicator

1994–1997

Brüderl and Absolute Preisendörfer and relative (2000) growth

1985–1986 to 1990

Littunen and Tohmo (2003)

1990–1997

Absolute and relative growth

(continued)

12 

B. FREŠER ET AL.

Table 2.1 (continued) Research/ author

Indicator

Period

Definition of HGC State

Objective of study

Schreyer (2000)

Composite index

1985–1994

The upper decile (10%) of the fastest-growing companies in the population of companies employing at least 20 employees The top 5% of the fastest-growing companies in the population of companies employing at least 20 employees The upper decile (10%) of the fastest-growing companies in the population of companies employing at least 10 employees The upper decile (10%) of the fastest-growing companies The upper decile (10%) of the fastest-growing companies in the population of companies employing at least 20 employees in 1996

Employment

1989–1996

1990–1994

Logarithmic 2000 function

Davidsson and Delmar (2003, 2006), Delmar et al. (2003)

Absolute growth

1987–1996

France

Canada, Employment Italy, The Netherlands

Spain

Employment

Germany

Employment

Sweden

Employment

(continued)

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

13

Table 2.1 (continued) Research/ author

Indicator

Period

Definition of HGC State

Objective of study

Halabisky et al. (2006)

Relative growth

1985–1999

Employee growth by more than 50% in the selected period The top proportion in the population in terms of employment (the population are start-up companies employing between 1 and 20 employees) Definition based on sales growth— growth greater than 100% over a given time period (3–4 years) Companies that doubled sales during the four-year period and employed at least 2 employees New HGCs employing between 20 and 499 employees Defining HGCs on the basis of the OECD definition

Canada

Employment, wages

Germany

Employment

Spain

Sales

United States

Employment, sales revenue

United States

Employment

Finland

Employment

Fritsch and Absolute Weyh (2006) growth

1984–2002

Moreno and Casillas (2007)

Relative growth

1998–2001

Acs et al. (2008)

Absolute and relative growth

1994–2006

Acs and Mueller (2008)

Relative growth

1990–2003

Deschryvere (2008)

Absolute and relative growth

2003–2006

(continued)

14 

B. FREŠER ET AL.

Table 2.1 (continued) Research/ author

Indicator

Period

Definition of HGC State

Objective of study

Anyadike-­ Danes et al. (2009) Bravo-Biosca (2010)

Composite index

2002–2008

Overview of past research

Great Britain

Employment

Relative growth

2002–2005

Definition of HGC based on annual growth of employees during the three-year period— determination of HGC based on the top part of the population The definition of HGC based on the top part (5 and 10%) of the population Definition of HGC in terms of employee growth Compliance with the OECD definition and the Birch index

Europe compared to the United States

Employment, productivity

16 countries of the European Union

Employment (addressing only organic growth)

United States

Employment

Sweden

Employment

Hölzl and Composite Friesenbichler index (2010)

1998–2000

Stangler (2010)

Relative growth

2007

Bjuggren et al. (2013)

Absolute and relative growth

1993–2006

Source: (adapted from Daunfeldt et al. 2014, pp. 343–344; Henrekson and Johansson 2010, pp. 231–234)

According to Širec and Crnogaj (2010, pp. 46–47), we can conclude on the basis of the determined definitions for the definition of HGCs that these are dynamic companies that grow and evolve rapidly, employ intensively and are always a step ahead of the competition, because their goal is not to survive but to succeed. As such, the term dynamic company can be used as a common term to all related terms relating to HGCs. High-­ growth (dynamic) companies will therefore be companies that will have to properly organize their internal environment and entrepreneurial team. They will have to focus on innovation and the implementation of changes, growth and harvesting strategies, business and management systems, human resources and also financing strategies (Pšeničny 2009,

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

15

pp. 278–279, Pšeničny et al. 2012). HGCs differ from static (non-growing) companies, in particular, by the way in which the company itself is managed and organized, oriented towards a branched organizational structure that provides support in the management of all growth factors. Likewise, extensive analytical support enables the adoption of the most appropriate measures that are reflected in the conditions for achieving a high growth rate (Ray and Hutchinson 1983). The important conclusion is that, in principle, HGCs are not only production-oriented but are defined by their ability and desire of organizing the production process in such a way that it can be exploited and that it may achieve the developed growth strategies (Tajnikar et al. 2016). Such companies must develop an appropriate internal structure of the organization that will enable the delegation of operational tasks to employees, while key persons can devote themselves to strategic-level planning (Smallbone et al. 1995). If the company wishes to achieve high growth rates, many factors should be successfully managed. HGCs thus differ significantly from static, non-growing companies, since by creating conditions for successful growth they have a significant impact on the strategic orientation of the company, its organizational structure and its functioning. 2.1.1  Demographic and Factual Characteristics of High-Growth Companies Size of High-Growth Companies When defining growth in relation to the size of the company, we reach back to 1931 and the so-called Gibrat’s law, which presupposes the existence of proportional growth and thus assumes that the likelihood of proportional growth will be the same regardless of the initial size of the company (Calvo 2006; Sutton 1997). The law was confirmed by various surveys but also rejected by some. Past research shows results in favour of the law, rejecting the law and those somewhere in between: • Part of past theory and empirical research does not reject the law, since no link has been identified between the size of the company and its growth—there is no evidence that smaller companies grow faster than larger ones or vice versa that larger companies grow faster than smaller ones (Lensink et al. 2005; Wagner 1992). • A considerable part of past theory and empirical research rejects the law, as it supports the thinking that the growth rate decreases with

16 

B. FREŠER ET AL.

the size of the company, or that smaller companies grow faster (Calvo 2006; Yasuda 2005; Audretsch 1995; Reid 1995; Dunne and Hughes 1994; Evans 1987a, b). • However, the remaining part of past theory and empirical research is not decided in terms of this law; it does not reject or support it, or it rejects/supports it only in certain cases of addressing of specific companies (Park and Sydnor 2011). As initially noted, the results of some HGC research show that HGCs, in contrast with other averagely growing companies, may be slightly smaller (Moreno and Casillas 2007, p. 69; Jovanovic 1982), since, according to the authors presented in the second indent of the above paragraph, the growth rate may be reduced with the size of the company. On this basis, smaller companies would grow more rapidly, which is contrary to Gibrat’s law. The tendency for a small company to grow rapidly can come from achieving greater efficiency and competitiveness as well as from the desire to exploit the benefits of the economy of scale. Moreno and Casillas (2007, p. 73) state that according to the theory of Edith Penrose on the growth of the firm, smaller companies will simply have to grow if they wish to take full advantage of all the benefits of the superior production resources they possess in the business process. Rodriguez et al. (2003) note that if a company wants to grow successfully, it must first reach a certain size that ensures an acceptable degree of efficiency. Širec and Crnogaj (2010) agree with this as well. Age of High-Growth Companies Past research suggests that HGCs are somewhat younger, as the age of companies can be negatively linked to the growth rate achieved (Henrekson and Johansson 2010, p. 237; Delmar et al. 2003). Delmar et al. (2003, p.  196) thus consider that there is a clearer connection to be found between the age of a company and its growth than between the size of the company and its growth. Tajnikar et al. (2016, p. 31) also agree that the low age of companies is more strongly linked to achieving a high growth rate than to the size of a company. Due to their allegedly lower average age, HGCs are more prone to risk (Davidsson and Delmar 2006) but also to greater innovation (Shane 2009). This leads to the realization that age, as well as the size of the company, can affect the growth rate achieved. Zimmermann (2017, p.  2), for

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

17

example, presented the realization that a young company (compared to a company that has been operating in the market for many decades) is more than twice as likely to achieve high growth. Younger companies are more likely to achieve high growth rates, regardless of their baseline definition (Daunfeldt et al. 2014). Activity of High-Growth Companies The company’s activity can have a significant impact on its growth and its financial performance (Mason and Brown 2013; McPherson 1996; Lumpkin and Dess 1995). Among HGC support policy makers, there is a belief that high-tech “new” sectors are responsible for the emergence and generating of a large number of HGCs (Mason and Brown 2013, p. 214). However, the findings indicate that this is not so and that HGCs can be present in any activity (sector) (Mason et al. 2009; Acs et al. 2008). The high technological development and the overall deviation from existing sectors can be very risky for companies. Thus, HGCs can also employ slightly smaller innovative technological changes within existing sectors, enabling them to gain wider access to customers by retaining existing and potentially acquiring new customers (Mason and Brown 2013). The above leads to the realization that HGCs can originate from all sectors, that is even where high-tech innovations are not possible. The fact is that HGCs are not only predominant in the most modern activities (sectors) such as biotechnology and nanotechnology but can also be found in traditional, capital and labour-intensive sectors, including in the field of construction (Gundry and Welsch 2001) and metal industries (Littunen and Tohmo 2003). Thus, HGCs can be found in all activities (but significantly less so in some than in others).

2.2   Financing of High-Growth Companies The importance of financial resources as one of the production resources has already been stressed by Shane (2003) in his model of the entrepreneurial process. Among all production sources, Shane (ibid., p.  161) is particularly focused on financial resources and the process of their acquisition, which is closely linked to the exploitation of entrepreneurial opportunities. Accessibility to sources of financing represents one of the most important factors of growth and development of each company (IFC 2011), as insufficient or inadequate financial resources can lead to

18 

B. FREŠER ET AL.

difficulties in the operational business of the company relating to the lack of financial resources for investing in research and development and the ongoing settlement of all financial obligations towards stakeholders. At the same time, it can significantly reduce the capacity of the company to achieve growth (Beck and Demirguc-Kunt 2006). Shane (2003, p. 162) and others (e.g., Grichnik et al. 2014) consider that financial resources are indisputably one of the key issues of the entrepreneurial process that both high-growth and other companies are faced with in their process of managing and organizing production resources and ultimately in the process of management itself. In line with the resource-based theory, sufficient financial resources allow a company to purchase adequate long-term and short-term assets as well as allow for the retention of key personnel in the company by creating a good working environment and the conditions for appropriate remuneration, which enables the creation of competitive advantages and the preservation of the company over a longer period of time (Eisenhardt and Martin 2000). Adequate and relevant financial resources thus have a significant impact on the performance of companies and their existence (Fatoki 2011; Gimeno et al. 1997; Bates 1995; Cooper et al. 1994). It should be noted that empirical research relating to financial resources and the existence of companies is largely related to SMEs and companies in the early entrepreneurial phases (start-up companies), as their operations are considered to be the most risky. Nevertheless, the study of the importance of financial resources is also key to addressing HGCs. For example, Brüderl and Preisendörfer (2000, p. 62) found that the amount of financial capital invested in companies had a significant impact on the likelihood of fast growth, while Lee et al. (2001, p. 615) found that the network connections of companies with financial institutions and thus financial resources have an important role in terms of fast growth—according to the sales indicator, which, in the case of that survey, was considered a fundamental benchmark. Other surveys also highlight financial resources as one key determinant to enable companies to achieve growth (Gupta et al. 2013; Barbero et al. 2011). Access to relevant financial resources is also important for further access to financial resources, as the possession of a sufficient amount of financial resources is perceived as a measure of stability, reliability and reputation of the company/entrepreneur in the eyes of the investor (Neville et al. 2005; Baum 1996), which also makes it possible to further improve the position of the company in accessing financial resources.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

19

There are a number of differences between high-growth (dynamic) and non-growing (static) companies, which will also be reflected in the financing of companies. Dynamic (high-growth) entrepreneurs will require extensive financial resources to realize the business opportunities that will enable the achievement of high growth rates. In fact, Brüderl and Preisendörfer (2000, p.  62) found that the amount of financial capital invested in companies had a significant impact on the likelihood of fast growth, which is also in agreement with Hambrick and Crozier (1985). However, HGCs are more often regarded as companies that face financing constraints (Moreno and Casillas 2007; Hambrick and Crozier 1985). Some studies show that, contrary to other, average-growth companies, HGCs may be slightly smaller (Moreno and Casillas 2007, p. 69; Jovanovic 1982) and younger, since the age of the company negatively affects the growth rate (Henrekson and Johansson 2010, p. 237; Delmar et al. 2003, p. 196), as well as more prone to risk (Davidsson and Delmar 2006) but also to greater innovation (Shane 2009). This, in conjunction with the increased need for financial resources in HGCs, may lead to financing constraints. This leads us to the first of the specificities of financing HGCs, that is more pronounced requirements for financial resources (Brüderl and Preisendörfer 2000) parallel to potential increases in the limitations (constraints) of financing (Moreno and Casillas 2007; Hambrick and Crozier 1985). HGCs have to implement different financing strategies than other non-growing companies. The next key feature of HGC financing, which concerns the use of external sources of financing, is also derived from the discussions presented above. If, in particular, start-up companies are considered to more often use the entrepreneur’s own savings and non-formal financial resources, it is characteristic that these sources become slightly less important with the growth of the company (Abdulsaleh and Worthington 2013). Loans from family, friends and co-workers, along with own savings, are some of the most common sources of financing for start-ups, but with growth, the central role is assumed by other sources of financing—mainly retained profits and bank loans as the most common sources of financing for the high growth rate of companies (Pšeničny et al. 2012). Although retained profits are an important source of financing for HGCs, HGCs also need to pay more attention to external sources of financing, as their financial needs are more pronounced. In terms of the financial lifecycle of the company, Damodaran (2015, p. 296) points out that HGCs are most likely not able to cover their financial requirements using only their own sources of financing (retained profits). On the basis

20 

B. FREŠER ET AL.

of the foregoing, Brown and Lee (2014, p. 1) believe that HGCs, in comparison with other companies, are more likely to use a “cocktail” of financial resources from various providers, as they use both their own and external sources of financing, whereby they tend to use debt financing, as this also lets them obtain a tax benefit (Luigi and Sorin 2009, p  316; Green and Hollifield 2003). According to the research by Pšeničny et  al. (2012), HGCs in the Republic of Slovenia most often want to use retained profits (30.6%) in their operations, followed by debt financing (28.4%) and grants and subsidies from the state (7.3%). There are also a smaller proportion of business angels, risk capital and financial resources of suppliers and buyers. We should note that as much as 8.6% of the HGCs from the survey sample did not plan additional financial investments. The survey on the access to finance of enterprises (SAFE) indicates that, unlike in the case of HGCs, the financing for all SMEs is dominated by bank limit overdrafts, leasing and bank loans. According to this study, financing from retained profits in SMEs is only in the fifth place among the financial resources examined (ECB 2018, p.  14). This represents an important distinction between HGCs and SMEs in regard to financing from retained profits, which is consistent with Damodaran’s (2015) understanding of the financial life cycle of the company, since a rapid growth period brings about more favourable circumstances for partial financing from internal resources (retained profits). The financing of HGCs is also in line with the pecking-­ order theory. According to the latter, the companies follow a specific sequence for financing, where they first seek to exploit internal (own) financing opportunities (retained profits), then focus on financing in the form of debt (external resources) and only ultimately financing in the form of capital (Abeywardhana 2017, p.  136). This theory applies to both growing and non-growing companies; however, high-growth (dynamic) companies, due to their increased requirements for financial resources, will likely have to look for more (quantitative or qualitative) financial resources among external sources of financing. This is in line with the findings of Brown and Lee (2014), who state that HGCs are the companies that will more likely ask for external sources of financing. In defining the differences in the financing of a growing (dynamic) and non-growing (static) company, we can start from the definition of passive and active financing strategies, where the passive strategy is more specific to non-growing companies and the active strategy is specific to growing companies. The passive and active financing strategies are related to the theories of strategic

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

21

management and corporate governance. Thus, companies following a passive strategy build on the exploitation of existing production resources and (financial) capacities (Kim and Mauborgne 1997, p. 106), while those following an active strategy are not limited by their holdings but instead attempt to realize projects regardless of their starting baseline. The active strategy can thus be seen as an entrepreneurial growth-oriented strategy that focuses more closely on business opportunities and not so much on the effective use of existing financial resources (Brown et al. 2001). Thus, instead of first determining how much financial resources it has at its disposal and deciding on which business opportunity to use (passive strategy), the company will first perceive the business opportunity and then start looking for and collecting financial resources for its exploitation (active strategy). The company’s business strategy is thus important in developing the motivation and desire to acquire external sources of financing, and it also co-creates the circumstances for retaining financial resources within the enterprise (Xiang and Worthington 2015, p. 516).

2.3   Entrepreneurial Orientation of High-Growth Companies The phenomenon of entrepreneurial orientation as the driving force of organizational tendencies for the achievement of entrepreneurial activities has become one of the fundamental aspects of the study of entrepreneurship (Covin and Wales 2012) in recent decades. There are several definitions of entrepreneurial orientation (ibid., p. 678), which are more or less related to Miller’s (1983) definition of entrepreneurial orientation (Hughes and Morgan 2007, p. 652). Miller has defined companies with an entrepreneurial orientation as companies “which are involved in product-­marketing innovations, take up high risks in their ventures, and which overcome competition through proactive innovations and action” (Miller 1983, p. 771). The core of understanding entrepreneurial orientation thus lies in the assumption that entrepreneurial orientation originates from the factor (variable or group of variables) on the basis of which companies are distinguished for being more or less successful according to their entrepreneurial capability (Covin and Wales 2012, p.  677). Thus, past theory suggests that companies can demonstrate different levels of entrepreneurial orientation, whereby they can assume the position of a defender—that is, companies that resist risk, experimentation, innovation,

22 

B. FREŠER ET AL.

so conservative companies—or they can take a more aggressive approach to entrepreneurial orientation and thus be proactive pioneers in the creation of business opportunities (Avlonitis and Salavou 2007). In order for the company to achieve this, entrepreneurial orientation is important from the company’s perspective as an organization, involving at least innovation, risk-taking and proactivity (Miller 1983). Upon further development of this way of thinking, the concept of entrepreneurial orientation also included competitive aggressiveness and autonomy (Lumpkin and Dess 1996). Innovation and entrepreneurship are closely related concepts, which is why innovation is often seen as an important influential growth factor of the company (McGrath et  al. 1996). Innovation, as the most common benchmark of novelty (Garcia and Calantone 2002, p.  112), can cause radical changes, that is changes that strongly sway and alter the status quo on the market, thus creating market imbalance, and it can also be directed at lesser changes (Dyer et  al. 2011) related to changes in business processes, productivity, minor improvements in existing products and the like. Innovation is thus often seen as one of the key characteristics having an impact on entrepreneurial behaviour and success (Teece 2007). The delimitation of innovation for the needs of entrepreneurial orientation is illustrated in the case of a measuring instrument developed by Hughes and Morgan (2007), where innovation is measured on the basis of three statements relating to the active deployment of novelties and innovations in business, creativity in the business model and the search for new ways of conducting business. The baseline measurement scale by Miller (1983) also addresses innovation in conjunction with other dimensions of entrepreneurial orientation. Despite the fact that it was measured in conjunction with other dimensions, innovation, in terms of it being a dimension of entrepreneurial orientation, was identified by Miller (1983) as being “demonstrative of experimentation, exploitation and creative behaviour; a reflection of new products or services, new technologies and processes, new work methods and new business strategies” (Covin and Wales 2012, p.  694). In terms of entrepreneurial orientation, Rauch et  al. (2009, p.  763) consider innovation a “predisposition for integration, creativity and experimentation through the introduction of new products or services as well as technological leadership through research, development and new processes”. It should be noted that innovation, in combination with other dimensions of entrepreneurial orientation, is considered to represent the strategic entrepreneurial orientation of a company, where the

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

23

dimensions of the entrepreneurial orientation are interconnected (Covin and Wales 2012; Miller 1983), but past theory (Kreiser et  al. 2013; Lumpkin and Dess 1996) also provides possibility for the individual study of the dimensions of the entrepreneurial orientation and therefore also the exploration of the specific context of innovation as one of the dimensions of the entrepreneurial orientation. Innovation as a dimension of entrepreneurial orientation is often addressed in relation to the growth of the company. For example, North and Smallbone (2000) found that the most innovative SMEs are those companies that have historically achieved the fastest growth rates. Innovation is thus one of the key dimensions for the emergence and existence of HGCs (Coad and Rao 2008; Freel 2000), regardless of the size of the company, as Scherer (1965) also found, when studying a sample of large companies, that innovation (measured in the survey by the number of patents) has a positive impact on the growth of sales achieved and thus on the profitability of the company. Additionally, Georski and Machin (1992) found that innovative companies are the ones that grow faster than non-innovative. Although past research suggests that innovative companies will outgrow non-innovative companies, it is nevertheless necessary to note that the effects of innovation on the company’s growth can be seen only over a long period of time (Bourke and Roper 2017). This can lead to difficulties in studying the relationship between the innovation and growth of a company in the long term due to less visible causal links. The next important element of entrepreneurial orientation is risk-­ taking. Risk-taking represents the willingness of individuals or key employees in the company to engage in risky activities (Shane 2003, p. 103). This dimension of entrepreneurial orientation (risk-taking) was defined by Rauch et al. (2009, p. 763) as “making bold moves, delving into the unknown, when acquiring (borrowing) large amounts of financial assets and/or providing significant amounts of resources for the realisation of undertakings in uncertain environments”. Developing new products or services, technologies and processes (innovation), proactively exploiting opportunities, the tendency to give incentives for market change and lastly also adapting to competition require company to commit certain (often extensive) financial and other production resources whose profitability cannot be fully predicted due to uncertain circumstances (Stambaugh et al. 2017, p. 720). This means that companies face higher or lower levels of risk in their operations. Although historically risk has generally been studied at the level of individual decision-making—in

24 

B. FREŠER ET AL.

terms of entrepreneurship, in particular the decisions between self-­ employment and employment in an organization—with entrepreneurial orientation, risk is largely implemented at the level of the company or the decisions taken by the company (or upper management on behalf of the company) in the distribution of production resources to various uncertain undertakings (Schillo 2011, p. 21). This definition of risk-taking is also in agreement with Miller (1983), who defines risk-taking as “willingness to devote production resources to projects, ideas or processes whose outcomes are uncertain and for which the cost of failure could be high” (Covin and Wales 2012, p. 694). Kreiser et al. (2013) believe that there are positive links between risk, business orientation and success of the company and thus support the findings of Schumpeter (1926, in Taatila 2010, p. 49), who identified risk-taking as one of the key factors of successful entrepreneurs (alongside innovation and creativity). Kreiser et al. (2013) nevertheless point out that, in examining risk-taking, particular attention should be paid to the costs that may arise if the expectations are not realized. In their view, the company must carefully consider the cost-­ benefit balance of the risk and decide on the optimal risk on the basis of that (ibid., p. 279). Risk-prone companies combine the search for opportunities with taking risks by creating strategic conditions for their exploitation. Although this may cause additional costs to the company, taking risks as an element of entrepreneurial orientation on markets where buyers expect changes has proven to be one of the key areas where the company can ensure its success (Hughes and Morgan 2007, p. 653), either in terms of the financial situation or in terms of growth (Cassia and Colombelli 2010). Ward (1997, p.  326) pointed out that without taking risks, the opportunity for a company to grow can be denied. Although risk-taking is important for the creation and preservation of growth (Rabelo and Speller 2005), the importance of taking risks as a standalone dimension of entrepreneurial orientation is slightly less prominent in past literature. Risk-­ taking is also often seen as a dimension that promotes the development of other dimensions of entrepreneurial orientation (especially innovation and proactivity), to which past research (in relation to growth) attributes a more pronounced importance (Naldi et al. 2007). Proactivity, as a dimension of entrepreneurial orientation, refers to the company’s view of the future in which the company wants to actively search for opportunities that will enable it the benefit of making the first move and changing the competitive environment (Hughes and Morgan 2007, p.  652). Proactive companies thus try to anticipate future

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

25

opportunities, both in relation to their existing/potential production range and in relation to technology, market and demand (needs) of customer—such proactive companies are companies that prefer to be a leader in testing and implementing changes rather than merely following and adapting to competing companies (Schillo 2011, p.  21). In accordance with the definition of proactivity, Rauch et al. (2009, p. 763) define proactivity as an “aspect of searching for opportunities and looking into the future by introducing new products or services before the competition and action based on future demand expectations”. Thus, from a shortterm point of view, the fundamental objective of a company’s proactive activity is to exploit the advantages enabled by having the first move and, from a long-term perspective, to shape and influence the direction of the development of the industry (Hughes and Morgan 2007, p.  653; Venkatraman 1989). However, despite the undisputed benefits of proactive action for companies, Kreiser et al. (2013, p. 277) point out that, as is the case for innovation, proactive action also requires extensive investment in production resources. Companies must first invest in the development of capabilities that will enable the development of perceived opportunities in the future. The positive effects of proactivity will only be perceptible in the company when the benefits derived from proactive operation exceed the initial/advance costs. Kreiser et al. (ibid.) thus point out that when changing (reinforcing) the proactive operation of a company from a lower level to a medium level, weaker effects are expected in terms of the performance of the company. In changing (reinforcing) proactive operation from the middle to the high level, however, it is expected that there will be positive effects of proactive performance on the company’s performance— and because of this, proactive companies will be addressed more often, along with companies with potential for growth. Research (Cassia and Colombelli 2010, pp. 453–454; Du et al. 2010; Davidsson and Delmar 2006, p.  173) shows a positive link between proactive operation and growth of the company, while at the same time pointing to a number of pitfalls that companies may encounter when acting too proactively or taking too much risk by trying to create a new market—the first move. Subsequent competitors are not subjected to such a risk in their subsequent inclusion in the market and thus in their exploitation of the already somewhat verified business opportunity (Min et al. 2006). Competitive aggressiveness is defined as an aggressive way for a company to face its competitors in the pursuit of business opportunities (Schillo 2011, p. 21). Stambaugh et al. (2017, p. 720) define competitive

26 

B. FREŠER ET AL.

aggressiveness as a “willingness to challenge and overcome competing companies”, which fundamentally separates it from proactivity, which is more focused on market opportunities. Similarly, Rauch et  al. (2009, pp. 763–764) define competitive aggressiveness as the “intensity of a company’s effort to overcome competition with a strong offensive stance against competing companies and with aggressive responses to the risks posed by competing companies”. Hughes and Morgan (2007, p.  652) define competitive aggressiveness as an “expressed intensity by which the company will decide to compete with and strive to overcome the competition, which will be reflected in the desire to out-manoeuvre it”. Competitive aggressiveness is thus regarded as an important dimension for the survival and growth of companies in a changing competitive environment (Oliveira 2015, p. 156; Antončič and Hisrich 2001; Covin and Covin 1990). The next dimension of entrepreneurial orientation, which was not included in the basic definition of entrepreneurial orientation by Miller (1983), is the dimension of autonomy. The concept of autonomy was presented in conjunction with competitive aggressiveness by Lumpkin and Dess (1996), who define autonomy as the independence of an individual or a group in designing and pursuing an idea. Thus, autonomy refers to the ability and desire to be autonomous in the pursuit of opportunities, which could be applied to the situation of the company as an organization—taking measures without stifling organizational constraints (ibid., p. 140). Lumpkin and Dess (1996, p. 140) point out that the degree of autonomy may vary between companies according to their size, management and managerial style as well as their ownership structure. In this respect, it is necessary to realize that autonomy does not develop by itself and that maintaining autonomy in the company will require effort (Gelderen 2016) in terms of committing a sufficient amount of resources and therefore additional costs. It should be emphasized that autonomy creates a solid foundation for internal entrepreneurship (Kuratko et  al. 2014; Simon et al. 1999) and is therefore important to the entrepreneurial orientation of the organization. We also wish to note that autonomy in entrepreneurial orientation, unlike other dimensions of entrepreneurial orientation that can be adjusted to the level of the company (organization), is slightly more focused on the autonomy of individual employees and their independence in the performance of work tasks (e.g. the scale by Hughes and Morgan 2007). It is necessary to distinguish between the autonomy of the individual at his workplace and the autonomy of the company as an organization, which is particularly exposed in the early

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

27

start-up periods of establishment and operation of the company (Gelderen and Jansen 2006). Antončič and Hisrich (2001, p.  499) addressed and attempted to overcome this obstacle by incorporating autonomy at the level of the organization in the entrepreneurial orientation. Despite the fact that autonomy, either from the perspective of employees (Hosie et al. 2013) or as organizations (Groves et al. 1994), is important for the development of the company, the excessive desire for the company’s autonomy can reduce accessibility to financial resources. In so far as the company wishes to operate autonomously, it must rely on external sources of financing as little as possible, which could negatively reflect on the potential for growth. Likewise, companies (entrepreneurs) can knowingly give up growth if they believe that they will lose their independence or autonomy (Davidsson 1989). Because of this, we do not discuss autonomy in more detail in the developed conceptual model.

2.4   Intangible Capital of High-Growth Companies HGCs’ intangible capital includes human capital in the form of “knowledge, ability, competences and attributes embodied in individuals, to promote and create personal, social and economic welfare” (OECD 2007, p. 29) and social capital, which is defined by Nahapiet and Ghoshal (1998) as structural, relational and cognitive social capital. A particular focus in terms of the organizational networking capability of HGCs is aimed at structural social capital, that is social (network) bonds and interactions. In the opinion of Vidotto Frasson et al. (2017, pp. 316–317), human capital is a key production resource that can be even more important than natural resources (land) and financial capital, as it plays an important role in the innovative and strategic orientation of the company. Bozbura et al. (2007) define human capital as a key dimension of intellectual capital, which, as such, covers not only formal education but also experiences and learning arising as a result of life as well as informal education acquired through additional training (Davidsson and Honig 2003, p.  306). Although human capital is often addressed at the level of an individual, it is permissible to adapt the use of the term human capital to companies, that is the human capital held by employees in a particular company. OECD (2007, p.  30) also defines human capital as the “quality of the workforce”. As a result, Schultz (1961, p. 4) defined human capital as the level of knowledge, skills and education, based upon which he built the

28 

B. FREŠER ET AL.

discussion on the impact of human capital on the separation between qualified and unqualified employees in companies. In addition to human capital, social capital is considered to be one of the fundamental driving concepts of the development of a modern society that is subject to continuous market, technological and innovation changes that enable economic progress and development. Social capital is of utmost importance in entrepreneurship research and for the perception and exploitation of business opportunities (Shane 2003), as it can be seen as one of the key elements that enable individuals to perceive, implement and exploit business opportunities. By exploiting social capital, individuals can access useful information (Doh and Zolnik 2011, p. 4962), and the quality of an individual’s social capital also dictates the quality, quantity and speed of obtaining useful information to use as the basis for making appropriate decisions (Shane 2003, p.  49). The area of social capital is very broad and diverse, which was also presented by Nahapiet and Ghoshal (1998, p.  251), who defined social capital in the framework of three dimensions: • The structural dimension of social capital, which comprises network connections and their arrangement (configuration) and appropriate organization. A key understanding of the structural dimension of social capital stems from network connections, which must be properly managed and organized in order to ensure access to resources (ibid., pp.  252–253). The structural social capital is thus built on network connections, which, due to their nature, provide the individual with certain advantages. Individuals (including entrepreneurs) can take advantage of their connections as well as the connections within the system (organizations) in a way that allows them to obtain information or access to production resources (Tsai and Ghoshal 1998, p. 465). • The cognitive dimension of social capital comprises a shared system of values that enable a general understanding of social objectives and promote appropriate practices in the social system (Tsai and Ghoshal 1998, p. 465). Nahapiet and Ghoshal (1998, p. 254) highlight the importance of a common language and culture in the cognitive/ social capital dimension, which can have an important effect on the way of understanding individual pieces of information and knowledge arising from potential network connections, reflecting the cultural dimension and the conditionality of social capital. Social capital

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

29

and social ties therefore should be addressed in the social context, since this is the only way to obtain a comprehensive insight into understanding them. • The relational dimension of social capital, which comprises trust based on past relationships, norms and values, mutual expected commitments and rights and affiliation (identification) with the social group (Nahapiet and Ghoshal 1998, pp. 254–256). We focus primarily on the structural dimension of social capital, which we address in the conceptual model in conjunction with organizational networking capability. Mu and Di Benedetto (2012, p. 5) define organizational networking capability as the “capability of the company/organization to exploit its existing network connections (weak and strong) and explore new network connections (weak and strong) with external entities, in order to achieve a (re)configuration of resources and strategic competitive advantages in the periods of establishment, transformation, development and termination of markets”. On the basis of the above, Parida et al. (2017, pp. 96–97) subsequently identified organizational networking capability as “the central capability of the company to develop and use a network of actual and potential interorganizational relations, through which it acquires access to the production resources held by other actors; and the capacity of the company to develop the aforementioned capabilities by incorporating (integrating) these resources into the organization or into units and employees with the help of which the network connections will be coordinated and which will create value from the knowledge of network partners”. Organizational networking capability thus has a decisive impact on the performance of the company, both in terms of innovation (Parida et al. 2017; Mu et al. 2017) and in terms of export orientation (Mort and Weerawardena 2006). Organizational networking capability also represents a key dimension of structural social capital—exploiting network connections to achieve the set objectives and benefits. Shane (2003, p.  49) points out that the network connections that a company (or key employee) can possess play a key role in the access, quality and quantity of information on potential markets, opportunities, employees, ways of organization and opportunities for financing. Past research addresses intangible capital as an important determinant that shapes the conditions for achieving growth in companies. Human capital, as a dimension of intangible capital, is treated as an important determinant for forecasting the company’s growth (Rauch et al. 2005), as

30 

B. FREŠER ET AL.

the company can improve productivity and achieve shifts in strategic and technological innovation by investing in human capital. Cooper et  al. (1994) and Kangasharju and Pekkala (2002) linked human capital to higher growth rates on a model of small and emerging companies, while Coleman (2007), in examining human capital (in the case of research on work experience) and growth, perceived negative impacts. For a company, investing in human capital constitutes a loss of certain production sources, from financial resources to opportunity costs (loss of time) intended for human resources. Lee and Tsang (2001, p.  583) believe that the link between the investments in human capital and the growth of the company can be negative for smaller companies but will be positive for larger companies that already have a more developed human resource management system. Similarly, in the case of human capital, the social capital and organizational networking capability are important to achieve the desired level of growth. Thus, Lee and Tsang (2001) confirmed that networking activities were positively linked to the growth rate achieved by the company. Social capital in conjunction with networking will also positively shape an individual’s (entrepreneur, manager) desire for growth (Liao and Welsch 2003). On the basis of the above, management skills with human capital (Barbero et  al. 2011), in addition to the ability to network and exploit network connections (Chaston 2000) as well as the entrepreneurial orientation and financial resources, will be one of the key dimensions of the creation of fast growth for the company. Although the importance of intangible capital in achieving a high growth rate of the company remains undisputed, it should be noted that there is a possibility of a situation where investing in non-tangible capital will not result in the expected growth/profitability rate, which is more specific to younger companies (Tajnikar et al. 2016, p. 44).

2.5   Financial Performance of High-Growth Companies Financial performance, as the fundamental objective of the economically oriented company, is particularly important for HGCs, which, in comparison with other non-growing companies, have usually been shown to be younger (Delmar et al. 2003), more innovative (Shane 2009) and more prone to risk (Davidsson and Delmar 2006). This may negatively affect the financial performance of such company, which Penrose considers a key

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

31

prerequisite for further growth and expansion, since financial and investment decisions are largely linked to the desire to influence the long-­term financial performance of the company (Penrose 1959). On the basis of the above, financial performance represents an important dimension that all HGCs should strive towards. The financial performance of the company could be defined as the profitability of a company, which will enable the company to survive, succeed and develop (Kaplan and Norton 1992). Thus, financial performance relates to a successful strategy of a company that allows it to survive and succeed at a given moment as well as in the future (ibid., p. 77). It should be noted that the measurement of financial performance in the company is a very diverse field, which partly stems from the fact that performance is not necessarily merely linked to the accounting aspect but also to the economic, psychological, sociological, marketing and managerial aspects (Neely 2007, p.  7). Orlitzky et  al. (2003, pp. 407–408) also point out that the financial performance of a company can be measured by three aspects, that is (i) the market aspect (the aspect of the return of investors—e.g. yield per share), (ii) the accounting aspect, which focuses mainly on the internal financial performance of the company, that is the effectiveness of adapting to various management decisions, and (iii) the aspect of perception (assessment of the financial position of the company, financial objectives and financial success through a survey questionnaire). In this chapter, we focus mainly on accounting criteria as Cochran and Wood (1984, p. 47) believe that these are the best criteria to measure financial performance and on the perception of these accounting criteria. Measuring financial performance, in terms of “accounting”, can be carried out on the basis of a large number of indicators, including the profit of the company in a wide variety of forms, the returns from capital and debts (Return on Investment or ROI) and the Economic Value Added (EVA) indicator, which can also be addressed in relation to profitability (Otley 2007), as it represents the benchmark for the value generated by the company from the amounts invested into it. Other commonly used indicators are the indicators of Return on Assets (ROA) and Return on Equity (ROE) (Maditinos et al. 2011; Makni et al. 2009). In addition to the ROE and ROA indicators, Chen et al. (2005, pp. 164–165) also proposed using the increase in revenue and the measure of employee productivity in measuring the financial performance of the company, by which they measured the value added per employee. The financial performance of the company is often discussed together with the business performance, but in this case, the criteria are

32 

B. FREŠER ET AL.

slightly more demanding. Thus, financial performance can also be measured in the framework of the balanced scorecard (Kaplan and Norton 1992). This confirms the belief that there is a wide range of indicators and criteria available for measuring financial performance, depending on the point of view from which the financial performance of the company is being studied (Cochran and Wood 1984, pp.  44–45). In the past, the financial performance of a company was usually studied in relation to its growth. Thus, according to Capon et al. (1990, p. 1143), the growth of a company is positively linked to its financial performance in most past surveys. The aforementioned is supported by the previously presented realization that, for example, HGCs in the Republic of Slovenia in 2017 despite their small number (4.4%), generated a significant share of the net profit of all companies (29.2%) (AJPES 2018). However, some surveys note that financial performance and growth can be mutually exclusive. For example, Jang and Park (2011, p. 1027) found that the company’s profitability in the previous year was positively linked to its growth in the current year, while past and ongoing growth were negatively linked to the ongoing profitability of the company. Penrose (1959) had already addressed the risk of excessive and too rapid growth for companies, regarding which Davidsson and Delmar (2006) also agree. A possible reason for the mutual exclusivity of objectives (financial performance and growth) can be seen in the fact that HGCs are more often faced with constraints and obstacles in financing (Moreno and Casillas 2007) and potential problems with solvency (Tajnikar et al. 2016). The research also linked other financial performance criteria with the growth of the companies. Thus, the ROI indicator can facilitate and boost the achievement of a company’s objectives (Rico 2006) and therefore also the objectives associated with its growth. Heikal et al. (2014, p. 101) also found that the ROE and ROA indicators, together with other financial performance indicators (or separately, each on its own), shape the growth rate achieved by the company. Soininen et  al. (2012) also found a link between financial performance (measured by ROA) and growth, particularly when entrepreneurial orientation is being addressed in parallel. Blažkova (2016, p. 59) points out that the value of the ROA indicator can coincide with the size of the company, which would mean higher indicator values for larger companies. The economic value added indicator also proved to be important in enabling company growth (Mouritsen 1998).

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

33

Bibliography Abdulsaleh, M. A., & Worthington, C. A. (2013). Small and medium-sized enterprises financing: A review of literature. International Journal of Business and Management, 8(14), 36–54. Abeywardhana, D. K. Y. (2017). Capital structure theory: An overview. Accounting and Finance Research, 6(1), 133–138. Acs, Z. J., & Mueller, P. (2008). Employment effects of business dynamics: Mice, gazelles and elephants. Small Business Economics, 30(1), 85–100. Acs, Z., Parsons, W., & Tracy, S. (2008). High impact firms: Gazelles revisited, office of advocacy. Washington, DC: US Small Business Administration. AJPES. (2018, 2017, 2016, 2015, 2014, 2013, 2012). Data for HGC, years 2011, 2012, 2013, 2014, 2015, 2016 and 2017. Retrieved January 15, 2019, from AJPES: https://www.ajpes.si/Letna_porocila/Informacije/Podatki_ po_regijah#b239. Antončič, B., & Hisrich, D. R. (2001). Intrapreneurship: Construct refinement and cross-cultural validation. Journal of Business Venturing, 16(5), 495–527. Anyadike-Danes, M., Bonner, K., Hart, M., & Mason, C. (2009). Measuring business growth—High-growth firms and their contribution to employment in the UK. Belfast: ERINI, Economic Research Institute of Northern Ireland, Monograph 44. Audretsch, D. B. (1995). Innovation, growth and survival. International Journal of Industrial Organization, 13(4), 441–457. Autio, E., Arenius, P., & Wallenius, H. (2000). Economic impact of gazelle firms in Finland. Working Papers Series 2000:3. Helsinki: Helsinki University of Technology, Institute of Strategy and International Business. Avlonitis, J. G., & Salavou, E. H. (2007). Entrepreneurial orientation of SMEs, product innovativeness, and performance. Journal of Business Research, 60(5), 566–575. Barbero, L. J., Casillas, C. J., & Feldman, D. H. (2011). Managerial capabilities and paths to growth as determinants of high-growth small and medium-sized enterprises. International Small Business Journal, 29(6), 671–694. Bates, T. (1995). A comparison of franchise and independent small business survival rates. Small Business Economics, 7(5), 377–388. Baum, C. A. J. (1996). Organizational ecology. In S. Clegg, C. Hardy, & W. Nord (Eds.), Handbook of organizational studies (pp. 77–114). London: Sage. Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance, 30(11), 2931–2943. Birch, L. D., & Medoff, J. (1994). Gazelles. In L. C. Solmon & A. R. Levenson (Eds.), Labor markets, employment policy and job creation (pp.  159–167). Boulder, CO: Westview.

34 

B. FREŠER ET AL.

Birch, L. D., Haggerty, A., & Parsons, W. (1995). Who’s creating jobs? Boston: Cognetics. Bjuggren, C. M., Daunfeldt, S. O., & Johansson, D. (2013). High-growth firms and family ownership. Journal of Small Business & Entrepreneurship, 26(4), 365–385. Blažkova, I. (2016). Profitability of Czech food enterprises in relation to their size. Acta Universitatis Bohemiae Meridionalis, 19(2), 59–66. Bourke, J., & Roper, S. (2017). Innovation, quality management and learning: Short-term and longer-term effects. Research Policy, 46(8), 1505–1518. Bozbura, T. F., Beskese, A., & Kahraman, C. (2007). Prioritization of human capital measurement indicators using fuzzy AHP. Expert Systems with Applications, 32(4), 1100–1112. Bravo-Biosca, A. (2010). Growth dynamics: Exploring business growth and contraction in Europe and the US. London, UK: NESTA. Brnjas, Z., Vulićević, V., & Č anaićević, D. (2015). Importance and role of fast growing companies. Gazelles in Modern Economies, 48(3–4), 44–61. Brown, R., & Lee, N. (2014). Funding issues confronting high growth SMEs in the UK. Edinburg, UK: ICAS. Retrieved May 30, 2019, from http://eprints.lse. ac.uk/57264/1/Brown_Lee_Funding-issues-confronting-high-growthSMEs-in-the-UK_2014.pdf. Brown, E.  T., Davisson, P., & Wiklund, J. (2001). An operationalization of Stevenson’s conceptualization of entrepreneurship as opportunity-based firm behavior. Strategic Management Journal, 22(10), 953–968. Brüderl, J., & Preisendörfer, P. (2000). Fast-growing businesses: Empirical evidence from a German study. International Journal of Sociology, 30(3), 45–70. Calvo, J. L. (2006). Testing Gibrat’s law for small, young and innovating firms. Small Business Economics, 26(2), 117–123. Capon, N., Farley, U. J., & Hoenig, S. (1990). Determinants of financial performance: A meta-analysis. Management Science, 36(10), 1143–1159. Cassia, L., & Colombelli, A. (2010). Growth factors in medium-sized enterprises: The case of an Italian region. International Entrepreneurship and Management Journal, 6(4), 437–458. Chaston, I. (2000). Organisational competence: Does networking confer advantage for high growth entrepreneurial firms? Journal of Research in Marketing and Entrepreneurship, 2(1), 36–56. Chen, M.-C., Cheng, S.-J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), 159–176. Coad, A., & Rao, R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37(4), 633–648.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

35

Cochran, L. P., & Wood, A. R. (1984). Corporate social responsibility and financial performance. Academy of Management Journal, 27(1), 42–56. Coleman, S. (2007). The role of human and financial capital in the profitability and growth of women-owned small firms. Journal of Small Business Management, 45(3), 303–319. Cooper, C. A., Gimeno-Gascon, F. J., & Woo, Y. C. (1994). Initial human and financial capital as predictors of new venture performance. Journal of Business Venturing, 9(5), 371–395. Covin, G. J., & Covin, J. T. (1990). Competitive aggressiveness, environmental context, and small firm performance. Entrepreneurship Theory and Practice, 14(4), 35–50. Covin, G. J., & Wales, J. W. (2012). The measurement of entrepreneurial orientation. Entrepreneurship Theory and Practice, 36(4), 677–702. Damodaran, A. (2015). Applied corporate finance (4 izd.). USA: John Wiley & Sons. Daunfeldt, O. S., Elert, N., & Johansson, D. (2014). The economic contribution of high-growth firms: Do policy implications depend on the choice of growth indicator? Journal of Industry, Competition and Trade, 14(3), 337–365. Davidsson, P. (1989). Entrepreneurship—And after? A study of growth willingness in small firms. Journal of Business Venturing, 4(3), 211–226. Davidsson, P., & Delmar, F. (2003). Hunting for new employment: The role of high growth firms. In D. A. Kirby & A. Watson (Eds.), Small firms and economic development in developed and transition economies: A reader (pp. 7–19). Hampshire, UK: Ashgate. Davidsson, P., & Delmar, F. (2006). High-growth firms and their contribution to employment: The case of Sweden 1987–96. In P.  Davidsson, F.  Delmar, & J.  Wiklun (Eds.), Entrepreneurship and the growth of firms (pp.  156–178). Cheltenham, UK: Edward Elgar. Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of Business Venturing, 18(3), 301–331. Davidsson, P., & Wiklund, J. (2000). Conceptual and empirical challenges in the study of firm growth. In P.  Davidsson, F.  Delmar, & J.  Wilund (Eds.), Entrepreneurship and the growth of firms, 2006 (pp.  39–61). Cheltenham: Edward Elgar. Delmar, F. (1997). Measuring growth: Methodological considerations and empirical results. In P. Davidsson, F. Delmar, & J. Wiklund (Eds.), Entrepreneurship and the growth of firms, 2006. Cheltenham: Edward Elgar. Delmar, F., & Wiklund, J. (2008). The effect of small business managers’ growth motivation on firm growth: A longitudinal study. Entrepreneurship Theory and Practice, 32(3), 437–457. Delmar, F., Davidsson, P., & Gartner, B. W. (2003). Arriving at the high-growth firm. Journal of Business Venturing, 18(2), 189–216.

36 

B. FREŠER ET AL.

Deschryvere, M. (2008). High-growth firms and job creation in Finland. Discussion Paper No. 1144, Helsinki: Research Institute of the Finnish Economy (ETLA). Doh, S., & Zolnik, J. E. (2011). Social capital and entrepreneurship: An exploratory analysis. African Journal of Business Management, 5(12), 4961–4975. Du, Y., Ren, B., Chen, Z., & Zhang, Y. (2010). Proactiveness, legitimation via ISO certification and the growth of SMEs in China. Frontiers of Business Research in China, 4(2), 283–305. Dunne, P., & Hughes, A. (1994). Age, size, growth and survival: UK companies in the 1980s. The Journal of Industrial Economics, XLII(2), 115–140. Dyer, J., Gregersen, H., & Christensen, M.  C. (2011). The innovator’s DNA: Mastering the five skills of disruptive innovators. Boston, MA: Harvard Business Review Press. ECB. (2018). Survey on the access to finance of enterprises in the Euro area—October 2017 to March 2018. Frankfurt: European Central Bank. Retrieved December 5, 2019, from https://www.ecb.europa.eu/pub/pdf/other/ecb.accesstofinancesmallmediumsizedenterprises201806.en.pdf. Eisenhardt, M. K., & Martin, A. J. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21(1), 1105–1121. Evans, D.  S. (1987a). Tests of alternative theories of firm growth. Journal of Political Economy, 95(4), 657–674. Evans, D.  S. (1987b). The relationship between firm growth, size, and age: Estimates for 100 manufacturing industries. The Journal of Industrial Economics, 35(4), 567–581. Fatoki, O. O. (2011). The impact of human, social and financial capital on the performance of small and medium-sized enterprises (SMEs) in South Africa. Journal of Social Sciences, 29(3), 193–204. Freel, S. M. (2000). Do small innovating firms outperform non-innovators? Small Business Economics, 14(3), 195–210. Fritsch, M., & Weyh, A. (2006). How large are the direct employment effects of new businesses? An empirical investigation for West Germany. Small Business Economics, 26(2–3), 245–260. Garcia, R., & Calantone, R. (2002). A critical look at technological innovation typology and innovativeness terminology: A literature review. The Journal of Product Innovation Management, 19(2), 110–132. Gelderen, van M. (2016). Entrepreneurial autonomy and its dynamics. Applied Psychology: An International Review, 65(3), 541–567. Gelderen, van M, & Jansen, P. (2006). Autonomy as a start-up motive. Journal of Small Business and Enterprise Development, 13(1), 23–32. Georski, P.  A., & Machin, S. (1992). Do innovating firms outperform non-­ innovators? Business Strategy Review, 3(2), 79–90.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

37

Gimeno, J., Folta, B. T., Cooper, C. A., & Woo, Y. C. (1997). Survival of the fittest? Entrepreneurial human capital on the persistence of underperforming firms. Administrative Science Quarterly, 42(4), 750–783. Green, C.  R., & Hollifield, B. (2003). The personal-tax advantages of equity. Journal of Financial Economics, 67(2), 175–216. Grichnik, D., Brinckmann, J., Singh, L., & Manigart, S. (2014). Beyond environmental scarcity: Human and social capital as driving forces of bootstrapping activities. Journal of Business Venturing, 29(2), 310–326. Groves, T., Hong, Y., McMillan, J., & Naughton, B. (1994). Autonomy and incentives in Chinese state enterprises. The Quarterly Journal of Economics, 109(1), 183–209. Gundry, K. L., & Welsch, P. H. (2001). The ambitious entrepreneur: High growth strategies of women-owned enterprises. Journal of Business Venturing, 16(5), 453–470. Gupta, D. P., Guha, S., & Krishnaswami, S. S. (2013). Firm growth and its determinants. Journal of Innovation and Entrepreneurship, 2(15), 1–14. Halabisky, D., Dreessen, E., & Parsley, C. (2006). Growth in firms in Canada, 1985–1999. Journal of Small Business and Entrepreneurship, 19(3), 255–268. Hambrick, C. D., & Crozier, M. L. (1985). Stumblers and stars in the management of rapid growth. Journal of Business Venturing, 1(1), 31–45. Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia stock exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101–114. Henrekson, M., & Johansson, D. (2010). Gazelles as job creators: A survey and interpretation of the evidence. Small Business Economics, 35(2), 227–244. Hölzl, W., & Friesenbichler, K. (2010). High-growth firms, innovation and the distance to the frontier. Economics Bulletin, 30(2), 1016–1024. Hosie, P., Jayashree, P., Tchantchane, A., & Lee, S. B. (2013). The effect of autonomy, training opportunities, age and salaries on job satisfaction in the South East Asian retail petroleum industry. The International Journal of Human Resource Management, 24(21), 3980–4007. Hughes, M., & Morgan, E. R. (2007). Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Industrial Marketing Management, 36(5), 651–661. IFC. (2011). SME finance policy guide. Washington: International Finance Corporation. Retrieved July 12, 2017, from https://www.ifc.org/wps/wcm/ connect/f3ef82804a02db409b88fbd1a5d13d27/G20_Policy_Report. pdf?MOD=AJPERES.

38 

B. FREŠER ET AL.

Jang, S., & Park, K. (2011). Inter-relationship between firm growth and profitability. International Journal of Hospitality Management, 30(4), 1027–1035. Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica, 50(3), 649–670. Kangasharju, A., & Pekkala, S. (2002). The role of education and self-employment success in Finland. Growth and Change, 33(2), 216–237. Kaplan, S. R., & Norton, P. D. (1992). The balanced scorecard—Measures that drive performance. Harvard Business Review, January–February, 71–79. Kim, C. W., & Mauborgne, R. (1997). Value innovation: The strategic logic of high growth. Harvard Business Review, 75(1), 102–112. Kirchhoff, B.  A. (1994). Entrepreneurship and dynamic capitalism. Westport, CT: Praeger. Kreiser, M.  P., Marino, D.  L., Kuratko, F.  D., & Weaver, K.  M. (2013). Disaggregating entrepreneurial orientation: The non-linear impact of innovativeness, proactiveness and risk-taking on SME performance. Small Business Economics, 40(2), 273–291. Kuratko, F. D., Hornsby, S. J., & Covin, G. J. (2014). Diagnosing a firm’s internal environment for corporate entrepreneurship. Business Horizons, 57(1), 37–47. Landström, H. (2010). David Birch. In H. Landström (Ed.), Pioneers in entrepreneurship and small business research (pp. 159–172). USA: Springer. Lee, Y. D., & Tsang, W. K. E. (2001). The effects of entrepreneurial personality, background and network activities on venture growth. Journal of Management Studies, 38(4), 583–602. Lee, C., Lee, K., & Pennings, M.  J. (2001). Internal capabilities, external networks, and performance: A study on technology-based ventures. Strategic Management Journal, 22(6–7), 615–640. Lensink, R., Van Steen, P., & Sterken, E. (2005). Uncertainty and growth of the firm. Small Business Economics, 24(4), 381–391. Liao, J., & Welsch, H. (2003). Social capital and entrepreneurial growth aspiration: A comparison of technology- and non-technology-based nascent entrepreneurs. The Journal of High Technology Management Research, 14(1), 149–170. Littunen, H., & Tohmo, T. (2003). The high growth in new metal-based manufacturing and business service firms in Finland. Small Business Economics, 21(2), 187–200. Luigi, P., & Sorin, V. (2009). A review of the capital structure theories. Annals of Faculty of Economics, 3(1), 315–320. Lumpkin, G. T., & Dess, G. G. (1995). Simplicity as a strategy-making process: The effects of stage of organizational development and environment on performance. Academy of Management Journal, 38(5), 1386–1407.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

39

Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135–172. Maditinos, D., Chatzoudes, D., Tsairidis, C., & Theriou, G. (2011). The impact of intellectual capital on firms’ market value and financial performance. Journal of Intellectual Capital, 12(1), 132–151. Makni, R., Francoeur, C., & Bellavance, F. (2009). Causality between corporate social performance and financial performance: Evidence from Canadian firms. Journal of Business Ethics, 89, 409–422. Mason, C., & Brown, R. (2013). Creating good public policy to support high-­ growth firms. Small Business Economics, 40(2), 211–225. Mason, G., Bishop, K., & Robinson, C. (2009). Business growth and innovation: The wider impact of rapidly growing firms in UK city-regions. London: NESTA. McGrath, G.  R., Tsai, H.-M., Venkataraman, S., & MacMillan, C.  I. (1996). Innovation, competitive advantage and rent: A model and test. Management Science, 42(3), 389–403. McKelvie, A., & Wiklund, J. (2010). Advancing firm growth research: A focus on growth mode instead of growth rate. Entrepreneurship Theory and Practice, 34(2), 261–288. McPherson, A.  M. (1996). Growth of micro and small enterprises in southern Africa. Journal of Development Economics, 48(2), 253–277. Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770–791. Min, S., Kalwani, M. U., & Robinson, W. T. (2006). Market pioneer and early follower survival risks: A contingency analysis of really new versus incrementally new product-markets. Journal of Marketing, 70(1), 15–33. Moreno, M. A., & Casillas, C. J. (2007). High-growth SMEs versus non-high-­ growth SMEs: A discriminant analysis. Entrepreneurship & Regional Development, 19(1), 69–88. Mort, S. G., & Weerawardena, J. (2006). Networking capability and international entrepreneurship: How networks function in Australian born global firms. International Marketing Review, 23(5), 549–572. Mouritsen, J. (1998). Driving growth: Economic value added versus intellectual capital. Management Accounting Research, 9(4), 461–482. Mu, J., & Di Benedetto, A. (2012). Networking capability and new product development. IEEE Transactions on Engineering Management, 59(1), 4–19. Mu, J., Thomas, E., Peng, G., & Di Benedetto, A. (2017). Strategic orientation and new product development performance: The role of networking capability and networking ability. Industrial Marketing Management, 64, 187–201. Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. The Academy of Management Review, 23(2), 242–266.

40 

B. FREŠER ET AL.

Naldi, L., Nordqvist, M., Sjöberg, K., & Wiklund, J. (2007). Entrepreneurial orientation, risk taking, and performance in family firms. Family Business Review, 20(1), 33–47. Neely, A. (Ed.). (2007). Business performance measurement: Unifying theory and integrating practice (2. izd.). Cambridge: Cambridge University Press. Neville, A. B., Bell, J. S., & Mengüc, B. (2005). Corporate reputation, stakeholders and the social performance-financial performance relationship. European Journal of Marketing, 39(9/10), 1184–1198. North, D., & Smallbone, D. (2000). The innovativeness and growth of rural SMEs during the 1990s. Regional Studies, 34(2), 145–157. OECD. (2007). Human capital: How what you know shapes your life. Paris: Corporate Affairs Division of the Directorate for Financial and Enterprise Affairs. Retrieved July 13, 2018, from https://www.oecd.org/insights/ humancapitalhowwhatyouknowshapesyourlife.htm. Oliveira, B. A., Jr. (2015). The aggressive competitiveness influence on the retailer company performance. Future Studies Research Journal, 7(1), 156–183. Orlitzky, M., Schmidt, L. F., & Rynes, L. S. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441. Otley, D. (2007). Accounting performance measurement: A review of its purposes and practices. In A. Neely (Ed.), Business performance measurement: Unifying theory and integrating practice (2. izd.) (pp. 11–35). Cambridge: Cambridge University Press. Parida, V., Pesämaa, O., Wincent, J., & Westerberg, M. (2017). Network capability, innovativeness, and performance: A multidimensional extension for entrepreneurship. Entrepreneurship & Regional Development, 29(1–2), 94–115. Park, K., & Sydnor, S. (2011). International and domestic growth rate patterns across firm size. International Journal of Tourism Sciences, 11(3), 91–107. Penrose, E. (1959). The theory of the growth of the firm. Oxford: Oxford University Press. Pšeničny, V. (2009). A longitudinal comparison of the growth factors of Slovenian fast growing enterprises. Economic and Business Review, 11(4), 265–283. Pšeničny, V., Maček, A., & Vidovič, D. (2012). Less than 5% potential high growth enterprises kept the national economy growth during the crisis. Mednarodno inovativno poslovanje: strokovno-znanstvena revija za področje poslovanja in poslovnega izobraževanja, 4(2), 1–15. Rabelo, L., & Speller, T. H., Jr. (2005). Sustaining growth in the modern enterprise: A case study. Journal of Engineering and Technology Management, 22(4), 274–290. Rauch, A., Frese, M., & Utsch, A. (2005). Effects of human capital and long–term human resources development and utilization on employment growth of small–scale businesses: A causal analysis. Entrepreneurship Theory and Practice, 29(6), 681–698.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

41

Rauch, A., Wiklund, J., Lumpkin, G.  T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice, 33(3), 761–787. Ray, G.  H., & Hutchinson, P.  J. (1983). The financing and financial control of small enterprise development. Nichols Publishing. Reid, C. G. (1995). Early life-cycle behaviour of micro-firms in Scotland. Small Business Economics, 7(2), 89–95. Rico, F. D. (2006). A framework for measuring ROI of enterprise architecture. Journal of Organizational and End User Computing, 18(2), 1–12. Rodriguez, C. A., Molina, A. M., Gonzalez Perez, L. A., & Medina Hernandez, U. (2003). Size, age, activity sector on the growth of the small and medium firm size. Small Business Economics, 21(3), 289–307. Scherer, F. M. (1965). Corporate inventive output, profits, and growth. Journal of Political Economy, 73(3), 290–297. Schillo, S. (2011). Entrepreneurial orientation and company performance: Can the academic literature guide managers? Technology Innovation Management Review, 1(2), 20–25. Schreyer, P. (2000). High-growth firms and employment (p. 2000/3). Paris: OECD Science, Technology and Industry Working Papers. Schultz, W. T. (1961). Investment in human capital. American Economic Review, 51(1), 1–17. Schumpeter, J.  A. (1926). Theorie der wirtschaftlichen Entwicklung. Leipzig: Duncker & Humblot. Shane, S. (2003). A general theory of entrepreneurship. The individual-opportunity nexus. Cheltenham, UK: Edward Elgar. Shane, S. (2009). Why encouraging more people to become entrepreneurs is bad public policy. Small Business Economics, 33(2), 141–149. Shane, S., Locke, A.  E., & Collins, J.  C. (2003). Entrepreneurial motivation. Human Resource Management Review, 13(2), 257–279. Simon, M., Houghton, M. S., & Gurney, J. (1999). Succeeding at internal corporate venturing: Roles needed to balance autonomy and control. Journal of Applied Management Studies, 8(2), 145–159. Širec, K. (2011). Izzivi in predlog multidimenzionalnega modela proučevanja rasti malih in srednje velikih podjetij (Challenges and suggestions of multidimensional model in studying SMEs’ growth). Naše gospodarstvo/Our Economy, 57(5–6), 20–29. Širec, K., & Crnogaj, K. (2010). Slovenske gazele in njihov družbeno-ekonomski pomen (=Slovenian gazelles and their socio-economic impact). In K. Širec & M. Rebernik (Eds.), Vrzeli slovenskega podjetniškega okolja. Slovenski podjetniški observatorij 2009/2010 (=Slovenian Entrepreneurship Observatory). Maribor: Faculty of Economics and Business.

42 

B. FREŠER ET AL.

Smallbone, D., Leig, R., & North, D. (1995). The characteristics and strategies of high growth SMEs. International Journal of Entrepreneurial Behaviour & Research, 1(3), 44–62. Soininen, J., Martikainen, M., Puumalainen, K., & Kyläheiko, K. (2012). Entrepreneurial orientation: Growth and profitability of Finnish small- and medium-sized enterprises. International Journal of Production Economics, 140(2), 614–621. Stambaugh, E. J., Martinez, J., Lumpkin, T. G., & Kataria, N. (2017). How well do EO measures and entrepreneurial behaviour match. International Entrepreneurship and Management Journal, 13(3), 717–737. Stangler, D. (2010). High-growth firms and the future of the American economy. Kauffman Foundation Research Series: Firm Formation and Economic Growth, March. Kansas City, Missouri: Ewing Marion Kauffman Foundation. Storey, D. J. (1994). Understanding the small business sector. London: Routledge. Sutton, J. (1997). Gibrat’s legacy. Journal of Economic Literature, 35(1), 40–59. Taatila, P. V. (2010). Learning entrepreneurship in higher education. Education + Training, 52(1), 48–61. Tajnikar, M., Ponikvar, N., & Bonča, D. P. (2016). Characteristics of firms with different types of growth: The case of Slovenia. Economic Annals, 61(208), 27–47. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350. Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41(4), 464–476. Venkatraman, N. (1989). Strategic orientation of business enterprises: The construct dimensionality, and measurement. Management Science, 35(8), 942–962. Vidotto Frasson, D. J., Ferenhof, A. H., Selig, M. P., & Bastos, C. R. (2017). A human capital measurement scale. Journal of Intellectual Capital, 18(2), 316–329. Wagner, J. (1992). Firm size, firm growth, and persistence of chance: Testing GIBRAT’s law with establishment data from Lower Saxony, 1978–1989. Small Business Economics, 4(2), 125–131. Ward, L. J. (1997). Growing the family business: Special challenges and best practices. Family Business Review, 10(4), 323–337. Wiklund, J., & Shepherd, A. D. (2003). Aspiring for and achieving growth: The moderating role of resources and opportunities. Journal of Management Studies, 40(8), 1919–1941. Wiklund, J., Patzel, H., & Shepherd, A. D. (2009). Building an integrative model of small business growth. Small Business Economics, 32, 351–374.

2  HIGH-GROWTH COMPANIES: ORIGINS, CHARACTERISTICS, GROWTH… 

43

Xiang, D., & Worthington, A. (2015). Finance-seeking behaviour and outcomes for small- and medium-sized enterprises. International Journal of Managerial Finance, 11(4), 513–530. Yasuda, T. (2005). Firm growth, size, age and behavior in Japanese manufacturing. Small Business Economics, 24(1), 1–15. Zimmermann, V. (2017). Success factors of high-growth enterprises. KFW Research: Focus on Economics, 177, 1–5.

CHAPTER 3

Multidimensional Model of High-Growth Companies’ Performance

Abstract  The growth of companies is not inherent, but rather the effect of adequate motivation, growth opportunities (fostered by entrepreneurial orientation) and a harmonious organization of production resources, including human and social capital. The core of the chapter focuses on the detailed theoretical development of the conceptual research model, which combines multidimensional variables—(1) growth factors with the perceived accessibility of different forms of financing, (2) the measures implemented by high-growth companies in relation to perceived financing constraints and (3) indicators of the financial performance of the company. Keywords  Theory of the growth of the firm • Resource-based theory • Effectuation theory • Entrepreneurial process • Research model

3.1   Definition of Key Theories Models

for the Development of Research

The justification for the developed conceptual model can be found in the findings of the theory of the growth of the firm (Penrose 1959), the resource-based theory, the effectuation theory (Sarasvathy 2008) and capital structure theories and in the starting points related to the model of the entrepreneurial process (Shane 2003) and the multidimensional model in studying SMEs’ growth (Širec 2007, 2011). © The Author(s) 2020 B. Frešer et al., Financial Determinants of High-Growth Companies, https://doi.org/10.1007/978-3-030-59350-6_3

45

46 

B. FREŠER ET AL.

3.1.1  Theory of the Growth of the Firm and Resource-Based Theory In the Theory of the Growth of the Firm, Penrose (1959) considers companies to be clusters of rounded groups of production resources that have a decisive impact on the success of companies as well as their achieved growth rate (Buckley and Casson 2007). The possession of production resources enables companies to distinguish themselves by their efficient and innovative applications resulting from the ability to allocate, organize, combine and exploit these resources (Kor et al. 2016). She considers companies to be sets of natural and human resources and enables further study of motivational, behavioural and personality factors that influence and support the growth of companies (Širec 2011, p. 20). Thus, the growth theory of Edith Penrose represents one of the key aspects of company growth. Penrose understands growth as a result of a knowledge-based management/entrepreneurial team that must learn how to identify and manage opportunities for growth. The entrepreneurial/management team must obtain the relevant information in order to be able to choose the most appropriate opportunity and to design a plan for achieving the expected growth (Coad and Guenther 2014, p. 859). Penrose highlights the importance of a dynamic growth process, which also connects key people in the company with unique company resources. Contrary to neoclassical beliefs, such links may also be based on the creation of imbalances—an imbalance in the company allows for the existence of unused production resources, and these in turn come up as options and opportunities for further growth (Kor et al. 2016). The growth of the company, therefore, will not be a mere coincidence but a set of carefully planned and organized steps taken by the management/entrepreneurial team (Coad and Guenther 2014, p. 858) that will primarily aim to achieve financial performance. Penrose addresses financial performance as a key prerequisite for further growth and expansion, since financial and investment decisions are largely linked to the desire to influence the long-term financial performance of the company (Penrose 1959). At the same time, Penrose is aware that excessive growth can compromise the company’s financial performance. Finding an answer to the question of what is the optimum growth rate of a company that would ensure the achievement of financial performance has enabled the process of growth to be addressed by including the study of production resources, management and entrepreneurial skills (Kor et al. 2016, p. 1733) and therefore the capabilities relating to

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

47

entrepreneurial orientation, human capital and organizational networking capacity. The central part of the theory thus includes the adjustment cost for the company’s growth—the time and effort required for the integration of new activities to achieve growth (Lockett et al. 2011), based on the production resources considered. Due to the aforementioned, the theory of the growth of the firm has strongly marked the creation of a later theory, the resource-based theory (RBT) (Lockett and Thompson 2004). The latter considers the company to be a set of available production resources (Das and Teng 2000), with a focus on organizing them in such a way as to enable the design of superior products (products/services). RBT thus focuses on creating a competitive advantage for the company (Alvarez and Busenitz 2001). According to RBT, the company must pay more attention to the production resources it possesses and not to the external competitive environment, since competitive advantage is formed within the company itself through using company-specific production resources (Das and Teng 2000). Resources requiring special investments are addressed in particular—these include resources that may include a social component and tacit knowledge (Barney 1995), that is resources that are heterogeneous, valuable, rare, immobile (non-mobile) and such that the competition is not capable of completely emulating (Barney 1991). As these resources will be specific and unique to the company and not fully mobile, businesses will be heterogeneous from the perspective of the production resources used, which will represent opportunities of creating and achieving competitive advantages that will lead to above-average yields (Das and Teng 2000, p. 32). The company will thus have a competitive advantage when creating value over every other competing company, that is by using (company-)specific production resources (Barney 1991, p. 102). Barney (1991, pp. 105–112) notes that production resources, in addition to being heterogeneous, are also valuable, rare, immobile (or non-mobile) and such that the competition is not capable of fully emulating them. Moreover, production resources must not be completely replaceable. Production resources are valuable when they allow companies to introduce strategies that will reflect a higher level of efficiency, and they are rare when they are not present in several companies or where not all companies have the same potential to exploit them. The next assumption is the incomplete mobility (immobility) of production resources. The immobility of production resources will allow resource-generating companies to increase the level of innovation and implement strategies that other companies will not be able to implement because of the lack and

48 

B. FREŠER ET AL.

non-possession of the relevant production resources (ibid., p.  107). An important element, which is strongly linked to entry barriers, is the inability to emulate production sources. Das and Teng (2000, p. 42) identify patents, contracts and copyright protection (in connection with tangible production resources) as well as technological and managerial processes (in connection with intangible production resources) as key factors that cause the imitation of production resources. The last condition to be met by production resources in order to enable companies to achieve a competitive advantage is their (non-)substitutability, which means that there must be no equivalent of a production source that is mobile or unrestricted in nature and could be exploited by companies as a substitute for a particular production resource (Barney 1991, p. 111). Such production resources are regarded as tangible and intangible assets of the company, including managerial skills, organizational processes and the information and knowledge in possession of the company (Širec 2009, p. 86). RBT can be linked to the theory of entrepreneurship. The central concept of heterogeneity is the common determinant of both, entrepreneurial theories and RBT, except that the former theories are derived from slightly different starting points, and therefore they study heterogeneity from different points of view. Where RBT considers that heterogeneity in companies, in terms of production resources they possess, represents an opportunity to achieve a competitive advantage leading to above-average yields (Das and Teng 2000; Peteraf 1993), the major focus of the entrepreneurial theory is on the entrepreneurial opportunities that exist due to heterogeneity among individuals (people) that have different views on the value of the production resources used in the business process of transforming inputs into outputs (Shane and Venkataraman 2000). The link between the theories is primarily in the ability to perceive entrepreneurial opportunities, which is regarded as a rare resource in entrepreneurship that can be heterogeneous in regard to other persons or competing “non-­ entrepreneurial” companies, thus allowing for the specific organization of other production resources in the company and achieving competitive advantages (Alvarez and Busenitz 2001, p. 759). The entrepreneur’s ability to structure a given situation in an opportunistic manner will be a heterogeneous production resource that can be used to organize the remaining necessary production resources (Širec 2009, p.  88). Entrepreneurial opportunities are therefore generated when some individuals have a different view of the value of the resources than others. From this point of view, we therefore understand attention to

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

49

entrepreneurial opportunities and entrepreneurial knowledge, and the ability to organize resources/production resources, as an independent and rare production resource (Barney et al. 2001, p. 628). RBT can also be linked to the entrepreneurial theory in connection with restricting competition. If, according to the entrepreneurial theory, we assume that the individual characteristics and decision-making of entrepreneurs are rare production resources that cannot be transferred (at least entirely) to other individuals wishing to take the entrepreneurial route, we can conclude that these resources will represent a lasting competitive advantage (Širec 2009, pp. 89–90). The entrepreneurial theory thus faces a virtual restriction of competition, as some of the features relevant to entrepreneurship are not fully learnable—this stems from the discussion about whether entrepreneurs are born or if entrepreneurship can be learned by anyone (Halilović et al. 2014; Henry et al. 2005a, 2005b). RBT is directly linked to the developed conceptual model. The provision of relevant production resources, regardless of whether we are talking about human resources, resources arising from organizational networking capability or about financial resources, allows for the creation of a lasting competitive advantage, which can be shown in achieving high growth rates of the company. Production sources addressed from the perspective of RBT—especially tangible and (partly) non-mobile resources, as well as production resources discussed through the aspects of the entrepreneurial theory—entrepreneurial skills, perception of opportunities, organizational skills and the entrepreneur’s view of the value of resources, represent important determinants of growth (Barbero et  al. 2011; Shane 2003). The possession of relevant production encourages the innovative (development of new products), production (efficient production, quality and manageable costs) and market (efficient sales) capacities of a company (Rangone 1999), which can form the accessibility of the company to financial resources as well as its financial performance and growth potential. 3.1.2  Effectuation Theory The most prominent representative and leading author of effectuation theory is Saras D. Sarasvathy (2008). Effectuation theory highlights that, in situations of uncertainty faced by entrepreneurs, the latter will assume a way of thinking/working that will be slightly different from the traditional, more rational way of thinking (Fisher 2012, p. 1024). Sarasvathy (2008, p. 17) interprets traditional operation as being causal and logical,

50 

B. FREŠER ET AL.

which leads to the concept of “To the extent we can predict the future, we can control it”. Conversely, effectuation theory aims to formulate an understanding that “To the extent we can control the future, we do not need to predict it”. The theory thus presupposes that the entrepreneur is not too focused on the future, which he cannot control and predict but rather focuses on the factors that can be affected. At the level of the individual, such factors are primarily personal education, experience and a developed social network; at the level of the company, they are the physical, human and organizational resources (Fisher 2012, p.  1024, taken from Barney 1991). The first step of the dynamic model of the effectuation theory requires the identification of factors at the level of the individual. This includes finding answers to questions about who I am, what I know and who I know, so, according to Sarasvathy et al. (2014, p. 73), defining the entrepreneur’s identity (who I am), knowledge (what I know) and network connections (who I know). In doing so, the entrepreneur will focus on the role of a creator of the future, as they will be able to design potential opportunities and will not merely act as a person rationally deciding on future predictions. The theory thus presents thinking about what we have and what we can do with it (Sarasvathy uses the term “Bird-in-Hand”). The second step (Sarasvathy uses the term “Affordable Loss”) focuses on shaping the decision-making along with defining how much the decision-­ maker is willing to lose in doing so. The decision about the acceptable risk must specify the scope of the resources that the decision-maker must be aware that they may lose (Fisher 2012), and the scope must be such that the entrepreneur/company can still endure it in the event of loss. Traditional theories address the decision between one’s own company and employment in an existing company and thus the associated decision between the expected amounts of earnings or benefits. In contrast, effectuation theory focuses on the permissible loss of resources that a person can still manage—the focus is therefore on the present rather than on anticipating future benefits (Sarasvathy et al. 2014, p. 74). This stance in the formulation of existing objectives and strategies reduces the need for future planning, which is also reflected in savings of the entrepreneur’s time. The third step (Sarasvathy uses the term “Crazy Quilt”) defines the network position in connection with other persons/companies. The theory highlights network connections as the baseline and most important method in finding new or in expanding existing production resources (Sarasvathy et al. 2014, p. 74). This is followed by an obligation to stakeholders which, in the interrelationships built on the basis of networking,

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

51

brings certain obligations but also supports decisions and enables the expansion of existing production resources and appropriate addressing of innovations. For this, Sarasvathy uses the term “Pilot-in-the-Plane” (ibid., pp. 74–75), by which she seeks to emphasize the central role of the entrepreneur as a person who, in situations of high uncertainty, should constantly adapt and learn, thus creating entrepreneurial opportunities that will not only follow the expected trends in the future but also create them. The theory thus supports experimentation in conditions of acceptable losses and continuous learning (Sarasvathy 2001)—this will help entrepreneurs see the uncertainty and potentially unforeseen situations as opportunities that can be exploited through their adaptation (abandoning inadequate current strategies). On the basis of this, effectuation theory can be linked to several aspects of the developed conceptual model. Just as the theory of effectuation requires the entrepreneur to assess their knowledge and network connections and use this basis to start implementing strategies to achieve set goals that not only follow the competition but also create changes in the future (Sarasvathy 2008), we can say that high-growth companies (HGCs) should, in particular, assess the knowledge of key employees and network connections with stakeholders in order to successfully obtain the necessary production resources (including financial resources) and respond in situations of uncertainty in a way that does not jeopardize the long-term implementation of growing strategies. 3.1.3  Capital Structure Theories Among capital structure theories, we primarily focus on trade-off theory and the pecking-order theory. The term “trade-off” is commonly used in theories that presuppose that the decision-maker (owner/manager of the company) constantly ponders and assesses the individual costs and benefits of their decisions regarding the capital structure (Dahlström and Persson 2010). The theory can explain the possible preferential financing of companies with debt (external financial resources). Taking into account the tax perspective in the company is expressed as an increase in yields—the interest that debt causes in principle decreases the tax base; this situation is also called a tax shield. From this point of view, the financing of a company with debt would be the most rational solution (Luigi and Sorin 2009, p. 316). However, it should also be emphasized that debt increases the likelihood of financial difficulties—and it is up to the individual company

52 

B. FREŠER ET AL.

to properly balance and weigh the benefits and disadvantages that each external source of financing (especially debt) brings (Roshaiza and Nur Azura 2014). In accordance with the pecking-order theory, the company will strive towards internal (own) financing. In financing, the company will follow a specific sequence, where it will first seek to exploit internal (own) financing opportunities (e.g. retained profits), then focus on financing in the form of debt (external resources) and only ultimately financing in the form of capital (Abeywardhana 2017, p.  136). Companies will choose among external financial resources in such a way as to take account of the minimum cost of information asymmetry1 (Luigi and Sorin 2009, p. 318). This theory can thus be linked to preferences regarding financial decisions (Paul et al. 2007), as they can significantly shape the desire for each financial resource and thus the financial performance of the company. 3.1.4  Starting Points and Developed Models of Entrepreneurial Process and Growth Shane (2003, p.  11) presented a model of the entrepreneurial process, placing special emphasis on the perception, exploitation and implementation of entrepreneurial opportunities. In the model of the entrepreneurial process, he combined individual characteristics (psychological factors and demographic factors) and environmental characteristics (activity and macro-environment) by discovering entrepreneurial opportunities and exploiting/implementing them, that is by the acquisition of appropriate resources, organizational design and implementation strategy. This provides an important focus, in terms of the entrepreneurial exploitation of business opportunities, on the motivation of the individual, by defining the entrepreneurial process as a process by which opportunities for creating new products or services are detected, assessed and appropriately exploited (Shane and Venkataraman 2000). A similar basis was used for the model of entrepreneurial motivation built by Shane et  al. (2003), 1  The definition of information asymmetry is built on the knowledge that information in the environment is generally incomplete and costly, which will lead to different stakeholders possessing different levels and quality of information. The possession of different information, different knowledge of information and tacit intentions will cause information asymmetry among stakeholders (Stiglitz 2000). We believe that there will also be different levels of information asymmetry between the various financial resource providers and the HGCs, as a result of the different availability of information and potential longer-term cooperation with certain financial resource providers.

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

53

which divides entrepreneurial motivational factors into three groups, namely general motivation factors (desire for achievement, inner desire to control the environment, desire for independence as well as vision, passion and key motivation with associated ambitions), task-specific factors and cognitive factors (knowledge, abilities, skills). The aforementioned models of the entrepreneurial process (Shane 2003) and entrepreneurial motivation (Model of entrepreneurial motivation) (Shane et al. 2003) are the basis for the multidimensional model in studying SMEs’ Growth (Širec 2007, 2011). In the modified multidimensional growth model, the attributes of the entrepreneur relate to the attributes of baseline models and are described as psychological motivational factors and non-psychological motivational factors (Širec 2007). Among the psychological motivational factors, she includes the need for achievements, risk-taking, the desire for independence, self-esteem/self-efficacy and the area of management and vision; among the non-psychological motivational factors, she includes human capital (with explicit knowledge, experience and age), social capital, opportunity costs and entrepreneurial intensity (ibid., p. 99). The model also includes the company’s attributes (age of the company, competitive orientation, strategic orientation, technological orientation, networking) and environmental attributes (institutional and financial resources). Despite the fact that in the past attribute factors have been considered as psychological and non-psychological motivational factors, we believe that it is reasonable to avoid the division in defining psychological and non-psychological factors, namely because of their nature and potential interconnectedness. Thus, we have devised a conceptual model which, at the level of key employees of the company, combines the important element of psychological motivational factors with the construct of entrepreneurial orientation. An important part of non-psychological motivational factors is covered by the construct of the intangible capital of HGCs, where we limited ourselves to human and social capital (within which we further limit ourselves to organizational networking capability as an important dimension of structural social capital) as two of the key non-­ psychological motivational factors (Širec 2007). The other components of the conceptual model are divided in such a way as to enable insight into the various aspects of financing HGCs and thus relate to the field that Shane (2003) called resource assembly, in our case financial resources. The development of the conceptual model is rounded off with the construct of the financial performance of HGCs. As a result of the extremely high

54 

B. FREŠER ET AL.

growth rates, HGCs are faced with a number of threats that can be linked to liquidity problems (Tajnikar et al. 2016; Moreno and Casillas 2007), which are reflected in higher costs of financial resources for the company (Brealey et al. 2011, p. 66; Ross et al. 2002, p. 325). On the basis of the above, it is important for HGCs to build fast growth on healthy foundations that will not undermine the financial performance and existence of the company itself, allowing the company to survive and succeed at any given moment as well as in the future (Kaplan and Norton 1992, p. 77).

3.2   Research Model On the basis of past theory, we have devised a conceptual research model that can provide an answer to the question: Can adjustment of the influential factors presented in the model of the entrepreneurial process according to Shane (2003) and in the model of SMEs growth according to Širec (2007) be used to explain the perception of accessibility to various forms of financing, the measures employed to overcome financing restrictions or the measures implemented by HGCs in order to ensure optimal access to various financial resources and the resulting financial performance of companies? The conceptual model is presented in more detail in Fig. 3.1. 3.2.1  Entrepreneurial Orientation and Perceived Financial Resources Availability Past theory suggests that companies can demonstrate different levels of entrepreneurial orientation, whereby they can assume the position of a defender—that is companies that resist risk, experimentation and innovation, so conservative companies—or they can take a more aggressive approach to entrepreneurial orientation and thus be proactive pioneers in the creation of business opportunities (Avlonitis and Salavou 2007). Entrepreneurship orientation is thus one of the key indicators of the company’s ability to operate in an entrepreneurial way (Schillo 2011). On this basis, entrepreneurial orientation can be directly linked to the accessibility to financial resources. It is also necessary to address the existence of a branch of research that examines the reverse correlation—the study of the impact of financial resources on the entrepreneurial orientation (Wiklund et al. 2009, p. 365)—however, the aspect that we address in the publication, that is linking individual dimensions of entrepreneurial orientation with accessibility to financial resources, is subject to significantly greater

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

H1; i, h ENTREPRENEURIAL ORIENTATION OF HGC

H2; i, k

55

H6; h, m

PERCEIVED AVAILABILITY TO DIFFERENT FORMS OF FINANCING FINANCIAL PERFORMANCE OF HGC

INTANGIBLE CAPITAL HGC

H3; j, h

H4; j, k

H5; k, h MEASURES FOR OVERCOMING FINANCING RESTRICTIONS

H7; k, m

Fig. 3.1  Developed conceptual model. (Source: Own production)

attention. Depending on the definition, entrepreneurial orientation covers at least risk-taking, innovation and proactivity, and it can further cover competitive aggressiveness and autonomy. Risk-taking, as a dimension of entrepreneurial orientation, represents the willingness of an individual to engage in risky activities (Shane 2003, p. 103). It is also important to note that different financial resources are subject to different levels of risk. The risk-taking of the owner/manager, therefore, plays an important role when deciding on the use of an individual financial resource (Lewellen 2006). An excessive risk-taking can also indirectly prevent access to certain forms of financial resources, in particular resources from banks—during the financial crisis, banks became uninterested in giving loans to risky individuals and businesses (Cowling et al. 2012)—or it can increase the possibility of accessing other resources, for example, resources of venture capital investors. The latter provide financing to companies that have potential and provide higher returns in

56 

B. FREŠER ET AL.

the event of successful realization but are also much more risky (Sahlman 1990). Innovation, as a dimension of entrepreneurial orientation, can drastically increase the needs of the company for financial resources, which will be required for the support of large-scale investment projects (OECD 2018, p. 6). Thus, it has been shown that innovative SMEs have, on average, a greater need for external sources of financing, which, in general, increased in the last financial crisis (Lee et al. 2015, p. 379). According to the Global Entrepreneurship Monitor (GEM) report, for example, the need for financial resources to establish a company in innovative countries is significantly higher (six to ten times) than the need for financial resources to establish a company in efficiency and factor economies (Daniels et al. 2016, p. 7). However, past research suggests that highly innovative companies often have more difficulties in retaining existing sources of financing and are also less successful on debt markets, since, for example, innovation is linked to lower success in the acquisition of financial resources from banks (Freel 2007, p. 29). Innovative companies are also more often subject to the consequences of financial constraints (Schneider and Veugelers 2010). Nevertheless, it should be stressed that, on the other hand, innovation can provide better access to certain forms of financing, including venture capital investor assets (Engel and Keilbach 2007) and business angel investments (Bilau and Sarkar 2016), because through innovation these companies create strategies to increase growth and achieve potentially above-average profitability (Cho and Pucik 2005). Innovation can thus significantly shape the perceived accessibility to financial resources, and both positive and negative impacts on the accessibility to financial resources can be found in past literature. Proactivity, as a dimension of the entrepreneurial orientation, relates to the strategies carried out by the company in order to take market initiatives (Lumpkin and Dess 2001, p. 429). Proactive action, among other things, is a search for opportunities that would cause the company to overtake its competitors (ibid., p. 431), which could be indirectly linked to the perceived accessibility to financial resources—if the company wishes to be a step ahead of competition and take the market initiative, it is likely to be exposed to greater financial needs and higher risk at least at the initial stages, which could complicate access to certain resources. At the same time, however, this fact could also allow for better access to certain other sources of financing, for example venture capital sources, as it has been shown that these investors favour “pioneers” (i.e. companies operating

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

57

proactively, taking the market initiative) over “followers” (Shepherd 1999, p. 628). A company that operates proactively is more likely to demonstrate better operational and financial performance (Davis et  al. 2010), which could also shape better access to other financial resources. The company’s performance is one of the key criteria by which investors make decisions. Such reasoning is consistent with the realization that greater financial performance of a company is associated with smaller financial constraints (Feerrando and Mulier 2015). Newer dimensions of entrepreneurial orientation also include competitive aggressiveness and autonomy. Competitive aggressiveness includes measures by which a company seeks to outperform its competition—these measures may also include measures to drastically reduce prices in order to make it easier to enter the market and gain a greater market share (Rahman et al. 2016, p. 637). For such and other measures of competitive aggression, the company needs sufficient resources, including financial resources, as otherwise the implementation of these measures would not be possible (ibid.). Competitive aggressiveness has also proved to be one of the key dimensions that significantly shape strategic decisions about the company (Papadakis and Barwise 2002). We know that strategic decisions are also largely linked to decisions on the financial structure. As can be seen from the presented material, we can search various dimensions of the entrepreneurial orientation to look for both positive and negative links to the accessibility to financial resources. On the basis of the above, we have devised the following hypothesis for empirical verification: H1  : The entrepreneurial orientation of the company affects the perceived accessibility to various sources of financing, and the following sub-hypothesis: H1; i,h  : the i-th element of entrepreneurial orientation affects the perception of the accessibility to the h-th source of financing. (i = 1, 2,…n); (h = 1, 2,…m).

58 

B. FREŠER ET AL.

3.2.2  Entrepreneurial Orientation and Measures Implemented to Overcome Financial Constraints In recent literature, we can find several general measures to overcome financing constraints: (1) outsourcing production, research and development or other activities (Xiao 2011), as in some cases, research has positively linked the measure with the performance of the company (Giustiniano and Giulio 2013; Kamyabi and Devi 2011; Görg and Hanley 2004) and its competitive advantage (Hines and Rich 1998); (2) reduction of labour costs (Xiao 2011), since Su and Tang (2016) have found that the cost-­ reduction strategy, as one of the measures in terms of the financial performance of a company, can be a complementary strategy for product innovation, while Egbunike and Adeniyi (2017) believe that cost reduction (in the form of lowering wages and the number of employees) negatively affects the financial performance of the company, which should therefore result in poor accessibility to financial resources; (3) employment of a marketing agent/expert, which can result in an increased volume of sales and thus better access to financial resources (Greenaway et al. 2007); (4) transfer of funds from another company in the group, as the companies financed within the group may have access to more financial resources than other companies (Buchuk et  al. 2014); (5) exploitation of network connections, as they play an important role in forming access to available information (Doh and Zolnik 2011; Shane 2003); (6) better time management (Hadjimanolis 1999); (7) use (sale) of surplus production resources (Xiao 2011); and (8) exploitation of the economy of scale (Day 1997). Nevertheless, study of entrepreneurial orientation in connection with the measures implemented by HGCs to overcome the financial constraints is a deficit research area that has been examined only indirectly. While research can be found on the link between innovation and financial constraints (Mohnen et al. 2008; Hyytinen and Toivanen 2005), and between risk-taking and financial constraints (Clemens and Heinemann 2010), research on implemented measures to overcome financing constraints in connection with entrepreneurial orientation is scarce. Several reasonings can thus be found that a company’s innovation can reduce costs in the long term (Su and Tang 2016; Laton et  al. 2015), that companies are more likely to enter joint innovative projects—network connections (Lee et al. 2012), and innovation, for example, is also associated with a measure of a greater export orientation (sales) (Villena-Manzanares and Souto-­ Perez 2016). The chosen response to a particular situation also depends

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

59

on the risk-taking. In the decision-making and response phase of a given situation, managers (entrepreneurs) make decisions on the basis of risk-­ taking, which can be consistent with managerial and organizational expectations (Raiborn et al. 2009, p. 353). It is also more likely that companies that are more prone to risk will want to obtain as many different pieces of information as possible in their operations, as this will assist them in managing the situation of the company. Similar can be said of the other dimensions of entrepreneurial orientation, that is proactivity and competitive aggressiveness. Entrepreneurial orientation and, above all, innovation and proactivity lead the company to the acquisition and inclusion of all types of market information in its operations (Garri and Konstantopoulos 2013, p. 646). Entrepreneurial orientation thus represents the factors of the strategic orientation of a company (Wiklund and Shepherd 2005, p. 72) that could significantly form the decisions taken in conjunction with the implementation of measures to overcome financing constraints. On the basis of the above, we have devised the following hypothesis for empirical verification: H2  : The company’s entrepreneurial orientation affects the measures taken to overcome financing constraints or the measures that the company implements to ensure optimal access to different sources of financing, and the following sub-hypothesis: H2; i,k  : the i-th element of entrepreneurial orientation affects the adoption of the k-th measure (or group of measures) for overcoming financing constraints or the measures the company implements to ensure optimal access to different sources of financing. (i = 1, 2,…n); (k = 1, 2,…p). 3.2.3   High-Growth Companies’ Intangible Capital and Perceived Financial Resources Availability In examining the intangible capital of HGCs, we are limiting ourselves to human and social capital (within which we examine organizational networking capacity as one of the most important components of structural social capital) of HGCs or the human and social capital of all key employees in the company tasked with operations and the acquisition of financial resources. Social capital and networking as a dimension of social capital have often been studied in past research as factors influencing accessibility

60 

B. FREŠER ET AL.

to individual forms of financial resources. Long-term network contacts have been shown to have an impact on the reduction of the price of external sources of financing, in particular the prices of bank loans (Uzzi 1999, p.  498). The social capital of network connections can also shape the stances of venture capital investors, as it can decisively shape perceived predictions about an entrepreneur’s success in the eyes of others (Batjargal and Liu 2004), and can also influence the ability to obtain crowdfinance resources (Lukkarinen et al. 2016). Furthermore, in the case of developing countries, it has been shown that social capital can facilitate the acquisition of loans (debt financing) by networking and that companies that cooperate more closely with government officials and other entrepreneurs can obtain longer-term loans (Pham and Talavera 2018, p. 228). Another important area of the intangible capital of HGCs to which research has paid much attention in the past is human capital (treatment of human capital as a whole in the company, of course through the human capital of persons employed in this company). Past research has shown the important role of human capital in financing and financial decision-­ making. Thus, in the case of emerging companies, the education of the top-ranking manager (CEO) about the ability to obtain financial resources has been demonstrated to have a significant impact (Talaia et  al. 2016, p. 363). There is also a belief that different investors pay a lot of attention to individual elements of human capital when making decisions. This impact has been shown in cases of venture capital investors (Baum and Silverman 2004, p.  411; Shepherd 1999), business angels (Clark 2008, p. 257) and microfinance (Allison et al. 2013, p. 690) as well as in the case of banks (Carter et  al. 2007, p.  434), which also take into account the experience of the borrower, along with financial position and other factors, when making their decisions. On the basis of the above, we have devised the following hypothesis for empirical verification: H3  : The intangible capital of HGCs (or of the employees in the company) has a positive impact on perceived access to different forms of financing, and the following sub-hypothesis:

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

61

H3; j,h  : the j-th element of the intangible capital of HGCs (or employees in the enterprise) has a positive impact on the perception of accessibility to the h-th source of financing. (j = 1, 2,…r); (h = 1, 2,…m). 3.2.4   High-Growth Companies’ Intangible Capital and Measures Implemented to Overcome Financial Constraints As is characteristic of the link between the entrepreneurial orientation and the measures implemented to overcome financing constraints, the link between the intangible capital of HGCs and the measures implemented to overcome financing constraints is also characterized by a fairly modest set of existing insights. The intangible capital of HGCs can definitely be linked to the measure of obtaining additional information to find other possible alternatives for the acquisition of financial resources, since, in particular, social capital, through networking, shapes the quality and format of information to which individuals (and, consequently, enterprises) have access (Shane 2003, p.  49). Companies experiencing a lack of financial resources can benefit from their network connections by organizing and concluding alliances and seeking business partners (Freeman et al. 2006, p. 33) for joint projects. Some past research has also linked social capital, especially in terms of networking, with decisions on the outsourcing of certain fields, such as the field of information technology (Chou et  al. 2006), as well as production functions (Antonietti et al. 2016). It should be noted that researchers also linked social capital to the measure of export orientation—increased sales volume (Arjawa et  al. 2016; Zhang et  al. 2012). We believe that human capital could also play an important role in adopting measures to overcome financial constraints. In the process of implementing the measure of finding business partners for joint projects (Freeman et al. 2006), both human capital and the existing social capital of the company can have some influence through information about the business partner and building trust, which can be built on past experience with business partners. The aforementioned criteria, which affect the process of selecting business partners, are enormous, which was also demonstrated by Wu and Barnes (2010, pp. 286–287), and some of these criteria can be directly or indirectly linked to the intangible capital of the enterprise, that is to both human and social capital. On the basis of the above, we have devised the following hypothesis for empirical verification:

62 

B. FREŠER ET AL.

H4  : The intangible capital of HGCs (or employees in the company) has a positive impact on the adoption of measures to overcome financing constraints or the measures that the company implements to ensure optimal access to different sources of financing, and the following sub-hypothesis: H4; j,k  : the j-th element of the intangible capital of HGCs (or employees in the company) has a positive impact on the adoption of the k-th measure (or group of measures) to overcome financing constraints or measures taken by the company to ensure optimal access to various financial resources. (j = 1, 2,…r); (k = 1, 2,…p). 3.2.5  Measures Implemented to Overcome Financial Constraints and Perceived Financial Resources Availability The measures implemented by the company to overcome financing constraints may affect the perceived accessibility to financial resources. We believe that the measures implemented may affect the company’s strategies, which could affect their position in their continuing business and financing. Past research also suggests the drastic importance of long-term cooperation with banks as one of the possible measures, as this can significantly affect the cost of financing—lower interest (Uzzi 1999) as well as potential access to bank loans. The longer the period of cooperation between the individual company and the provider of financial resources, the smaller the information asymmetry between them (ECB 2018, p. 16) and the greater the mutual trust. The measures implemented can provide investors with a variety of financial information and help form impressions—which have been shown to have a significant connection with lower levels of difficulties in obtaining financial resources (Hope et  al. 2011, p. 935). It is also possible to find research that considers the measure of long-term building of the good name of the company as an important determinant of the investor’s decision to invest in the company, and this area is associated with investor satisfaction and loyalty to the company (Helm 2007). On the basis of the above, we have devised the following hypothesis for empirical verification:

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

63

H5  : Measures taken by a company to overcome financing constraints or implemented in order to ensure optimal access to different financial resources have a positive impact on perceived accessibility to different sources of financing, and the following sub-hypothesis: H5; k,h  : the adoption of the k-th measure (or group of measures) has a positive impact on the perception of accessibility to the h-th source of financing (k = 1, 2,…p); (h = 1, 2,…m). 3.2.6  Perceived Financial Resources Availability and  High-Growth Companies’ Perceived Financial Performance Numerous studies (White et  al. 2015; Bunyasi et  al. 2014; Kisaka and Mwewa 2014) have shown that there is an important link between access to financial resources and financial performance. Of course, we should emphasize that financial performance is dependent on a number of influencing factors and not just on the accessibility to financial resources. In dealing with actual accessibility to financial resources and actual financial performance, past surveys are unambiguous and clear, but the same cannot be said of the perceived accessibility to financial resources and perceived financial performance. Existing literature contains findings suggesting that the entrepreneur’s satisfaction can be regarded as a basic benchmark of performance, as it can affect the adoption of a wide range of decisions as well as operational performance (Cooper and Artz 1995). Thus, it was shown that entrepreneurs who were initially more optimistic would also become more satisfied later on, especially in terms of success (ibid., p.  440). In the existing literature, we did not make any findings regarding the perceived financial performance of the company in relation to the perceived accessibility to financial resources. Nevertheless, we start from the assumption (1) that the perception of success and satisfaction with success could also relate to financial performance, and (2) that those results are also transferred in general to entrepreneurs/managers (not necessarily the (co)owners of companies) and to the financial performance of the company (and not on the perception of their personal performance only). On the basis of the above, we have devised the following hypothesis for empirical verification:

64 

B. FREŠER ET AL.

H6  : Higher perceived accessibility to different sources of financing positively affects the financial performance of the company, and the following sub-hypothesis: H6; h,m  : the h-th element of perceived accessibility to different sources of financing has a positive impact on the company’s financial performance construct. (h = 1, 2,…m). 3.2.7  Measures Implemented to Overcome Financial Constraints and High-Growth Companies’ Perceived Financial Performance Measures to overcome financing constraints can shape the financial performance of a company. In past research, it is possible to find links between certain measures to overcome financing constraints and the financial performance of the company. Thus, the measure of outsourcing of production, research and development and other activities has been positively linked to the performance of the company in some past surveys (Giustiniano and Giulio 2013; Kamyabi and Devi 2011; Görg and Hanley 2004), as well as its competitive advantage (Hines and Rich 1998). Research by Kotabe and Mol (2009) showed that there is, in particular, a negative link between the measure of outsourcing and financial performance. For the measure of lowering labour costs, past research suggests the possibility of both positive and negative links with the financial performance of the company. Su and Tang (2016) found that the cost-reduction strategy, as a measure, can be a complementary strategy for product innovation in terms of the financial performance of the company (positive connection with financial performance). Conversely, Egbunike and Adeniyi (2017) believe that lowering costs (in the form of a reduction in employees and wages) was negatively linked to the financial performance. For the measure of transfer of funds from another company in the group, previous research (e.g. Buchuk et al. 2014) also indicates that companies financed within the group have more financial resources that they can use for investments, and they show better financial performance (measured by ROE) than other companies. As we can see, past research in this area is very diverse, and the findings suggest the possibility of both positive and negative links. On the basis of the above, we have devised the following hypothesis for empirical verification:

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

65

H7  : Measures to overcome financing constraints or measures implemented by a company in order to ensure optimal access to different financial resources affect the financial performance of the company, and the following sub-hypothesis: H7; k,m  : the k-th element of the implemented measures has a positive/ negative impact on the company’s financial performance. (k = 1, 2,…m).

Bibliography Abeywardhana, D. K. Y. (2017). Capital structure theory: An overview. Accounting and Finance Research, 6(1), 133–138. Allison, H. T., McKenny, F. A., & Short, C. J. (2013). The effect of entrepreneurial rhetoric on microlending investment: An examination of the warm-glow effect. Journal of Business Venturing, 28(6), 690–707. Alvarez, A. S., & Busenitz, W. L. (2001). The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755–775. Antonietti, R., Ferrante, R. M., & Leoncini, R. (2016). Local market size, social capital and outsourcing: Evidence from Emilia Romagna. Small Business Economics, 47(1), 243–260. Arjawa, W. G., Setiawina, D. N., Budhi, M. K. S., & Budiasa, G. S. (2016). The role of government, social capital and entrepreneurial orientation to export performance of craft SME at Bali Province. European Journal of Business and Management, 8(27), 105–114. Avlonitis, J. G., & Salavou, E. H. (2007). Entrepreneurial orientation of SMEs, product innovativeness, and performance. Journal of Business Research, 60(5), 566–575. Barbero, L. J., Casillas, C. J., & Feldman, D. H. (2011). Managerial capabilities and paths to growth as determinants of high-growth small and medium-sized enterprises. International Small Business Journal, 29(6), 671–694. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. Barney, J. (1995). Looking inside for competitive advantage. Academy of Management Perspectives, 9(4), 49–61. Barney, J., Wright, M., & Ketchen, J. D., Jr. (2001). The resource-based view of the firm: Ten years after 1991. Journal of Management, 27(6), 625–641. Batjargal, B., & Liu, M. (2004). Entrepreneurs’ access to private equity in China: The role of social capital. Organization Science, 15(2), 159–172.

66 

B. FREŠER ET AL.

Baum, C.  A. J., & Silverman, S.  B. (2004). Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups. Journal of Business Venturing, 19(3), 411–436. Bilau, J., & Sarkar, S. (2016). Financing innovative start-ups in Portuguese context: What is the role of business angels networks? Journal of the Knowledge Economy, 7(4), 920–934. Brealey, A. R., Myers, C. S., & Allen, F. (2011). Principles of corporate finance (10 izd.). New York: McGraw-Hill Irwin. Buchuk, D., Larrain, B., Munoz, F., & Urzua, I. F. (2014). The internal capital markets of business groups: Evidence from intra-group loans. Journal of Financial Economics, 112(2), 190–212. Buckley, P. J., & Casson, M. (2007). Edith Penrose’s theory of the growth of the firm and the strategic management of multinational enterprises. Management International Review, 47(2), 151–173. Bunyasi, G. W. N., Bwisa, H., & Namusonge, G. (2014). Effects of entrepreneurial finance on growth of small and medium enterprises in Kenya. European Journal of Business and Management, 6(31), 113–123. Carter, S., Shaw, E., Lam, W., & Wilson, F. (2007). Gender, entrepreneurship, and bank leading: The criteria and processes used by bank loan officers in assessing applications. Entrepreneurship Theory and Practice, 31(3), 427–444. Cho, J.  H., & Pucik, V. (2005). Relationship between innovativeness, quality, growth, profitability, and market value. Strategic Management Journal, 26(6), 555–575. Chou, C.-T., Chen, R.-J., & Pan, L. S. (2006). The impacts of social capital on information technology outsourcing decisions: A case study of a Taiwanese high-tech firm. International Journal of Information Management, 26(3), 249–256. Clark, C. (2008). The impact of entrepreneurs’ oral ‘pitch’ presentation skills on business angels’ initial screening investment decisions. Venture Capital, 10(3), 257–279. Clemens, C., & Heinemann, M. (2010). On entrepreneurial risk-taking and the macroeconomic effects of financial constraints. Journal of Economic Dynamics and Control, 34(9), 1610–1626. Coad, A., & Guenther, C. (2014). Processes of firm growth and diversification: Theory and evidence. Small Business Economics, 43(4), 857–871. Cooper, C. A., & Artz, W. K. (1995). Determinants of satisfaction for entrepreneurs. Journal of Business Venturing, 10(6), 439–457. Cowling, M., Liu, W., & Ledger, A. (2012). Small business financing in the UK before and during the current financial crisis. International Small Business Journal, 30(7), 778–800.

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

67

Dahlström, N., & Persson, A. (2010). Capital structure decisions: A case study on high growth SMEs listed on NGM equity in Sweden. Umeå: Umeå School of Business. Daniels, C., Herrington, M., & Kew, P. (2016). Global entrepreneurship monitor 2015/2016: Special report on entrepreneurial finance. Global Entrepreneurship Research Association. Das, T. K., & Teng, B.-S. (2000). A resource-based theory of strategic alliances. Journal of Management, 26(1), 31–61. Davis, L. J., Bell, G. R., Payne, T. G., & Kreiser, M. P. (2010). Entrepreneurial orientation and firm performance: The moderating role of managerial power. American Journal of Business, 25(2), 41–54. Day, G. S. (1997). Strategies for surviving a shakeout. Harvard Business Review, 75(2), 92–102. Doh, S., & Zolnik, J. E. (2011). Social capital and entrepreneurship: An exploratory analysis. African Journal of Business Management, 5(12), 4961–4975. ECB. (2018). Survey on the access to finance of enterprises in the Euro area—October 2017 to March 2018. Frankfurt: European Central Bank. Retrieved December 5, 2019, from https://www.ecb.europa.eu/pub/pdf/other/ecb.accesstofinancesmallmediumsizedenterprises201806.en.pdf. Egbunike, P. A., & Adeniyi, I. S. (2017). Cost reduction strategy and firm profitability during recession period: Nigerian banking industry experience. Acta Universitatis Danubius, 13(6), 148–155. Engel, D., & Keilbach, M. (2007). Firm-level implications of early stage venture capital investment—An empirical investigation. Journal of Empirical Finance, 14(2), 150–167. Feerrando, A., & Mulier, K. (2015). Firms’ financing constraints: Do perceptions match the actual situation? The Economic and Social Review, 46(1), 87–117. Fisher, G. (2012). Effectuation, causation, and Bricolage: A behavioral comparison of emerging theories in entrepreneurship research. Entrepreneurship Theory and Practice, 36(5), 1019–1051. Freel, S. M. (2007). Are small innovators credit rationed? Small Business Economics, 28(1), 23–35. Freeman, S., Edwards, R., & Schroder, B. (2006). How smaller born-global firms use networks and alliances to overcome constraints to rapid internationalization. Journal of International Marketing, 14(3), 33–63. Garri, M., & Konstantopoulos, N. (2013). Market information acquisition: A prerequisite for successful strategic entrepreneurship. Procedia—Social and Behavioral Sciences, 73, 643–651. Giustiniano, L., & Giulio, C. (2013). The impact of outsourcing on business performance: An empirical analysis. Journal of Modern Accounting and Auditing, 9(2), 153–168.

68 

B. FREŠER ET AL.

Görg, H., & Hanley, A. (2004). Does outsourcing increase profitability? The Economic and Social Review, 35(3), 267–288. Greenaway, D., Guariglia, A., & Kneller, R. (2007). Financial factors and exporting decisions. Journal of International Economics, 73(2), 377–395. Hadjimanolis, A. (1999). Barriers to innovation for SMEs in a small less developed country (Cyprus). Technovation, 19(9), 561–570. Halilović, P., Cankar, F., & Tominc, P. (2014). Innovation and entrepreneurship can be learned and built on = Inovativnost i poduzetništvo može se naučiti i nadograditi. Hrvatski časopis za odgoj i obrazovanje, 16(3), 133–153. Helm, S. (2007). The role of corporate reputation in determining investor satisfaction and loyalty. Corporate Reputation Review, 10(1), 22–37. Henry, C., Hill, F., & Leitch, C. (2005a). Entrepreneurship education and training: Can entrepreneurship be taught? Part I. Education and Training, 47(2), 98–111. Henry, C., Hill, F., & Leitch, C. (2005b). Entrepreneurship education and training: Can entrepreneurship be taught? Part II. Education and Training, 47(3), 158–169. Hines, P., & Rich, N. (1998). Outsourcing competitive advantage: The use of supplier associations. International Journal of Physical Distribution & Logistics Management, 28(7), 524–546. Hope, K.-O., Thomas, W., & Vyas, D. (2011). Financial credibility, ownership, and financing constraints in private firms. Journal of International Business Studies, 42(7), 935–957. Hyytinen, A., & Toivanen, O. (2005). Do financial constraints hold back innovation and growth?: Evidence on the role of public policy. Research Policy, 34(9), 1385–1403. Kamyabi, Y., & Devi, S. (2011). Accounting outsourcing and firm performance in Iranian SMEs. International Journal of Economics and Finance, 3(4), 181–192. Kaplan, S. R., & Norton, P. D. (1992). The balanced scorecard—Measures that drive performance. Harvard Business Review, January–February, 71–79. Kisaka, S. E., & Mwewa, M. N. (2014). Effects of micro-credit, micro-savings and training on the growth of small and medium enterprises in Machakos County, Kenya. Research Journal of Finance and Accounting, 5(7), 43–49. Kor, Y. Y., Mahoney, T. J., Siemsen, E., & Tan, D. (2016). Penrose’s the theory of the growth of the firm: An exemplar of engaged scholarship. Production and Operations Management, 25(10), 1727–1744. Kotabe, M., & Mol, J. M. (2009). Outsourcing and financial performance: A negative curvilinear effect. Journal of Purchasing and Supply Management, 15(4), 205–213. Laton, Z. M., Yunus, H., & Razak, A. A. M. (2015). Innovation and organizational cost saving: A case from Malaysian innovation project. Mediterranean Journal of Social Sciences, 6(5), 495–502.

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

69

Lee, M. S., Olson, L. D., & Trimi, S. (2012). Co-innovation: Convergenomics, collaboration, and co-creation for organizational values. Management Decision, 50(5), 817–831. Lee, N., Sameen, H., & Cowling, M. (2015). Access to finance for innovative SMEs since the financial crisis. Research Policy, 44(2), 370–380. Lewellen, K. (2006). Financing decisions when managers are risk averse. Journal of Financial Economics, 82(99), 551–589. Lockett, A., & Thompson, S. (2004). Edith Penrose’s contributions to the resource-based view: An alternative perspective. Journal of Management Studies, 41(1), 193–204. Lockett, A., Wiklund, J., Davidsson, P., & Girma, S. (2011). Organic and acquisitive growth: Re-examining, testing and extending Penrose’s growth theory. Journal of Management Studies, 48(1), 48–74. Luigi, P., & Sorin, V. (2009). A review of the capital structure theories. Annals of Faculty of Economics, 3(1), 315–320. Lukkarinen, A., Teich, E. J., Wallenius, H., & Wallenius, J. (2016). Success drivers of online equity crowdfunding campaigns. Decision Support Systems, 87, 26–38. Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16(5), 429–451. Mohnen, P., Palm, F.  C., Van Der Loeff, S.  S., & Tiwari, A. (2008). Financial constraints and other obstacles: Are they a threat to innovation activity? De Economist, 156(2), 201–214. Moreno, M. A., & Casillas, C. J. (2007). High-growth SMEs versus non-high-­ growth SMEs: A discriminant analysis. Entrepreneurship & Regional Development, 19(1), 69–88. OECD. (2018). Enhancing SME access to diversified financing instruments: Discussion paper. Mexico City: SME Ministerial Conference. Retrieved July 21, 2018, from https://www.oecd.org/cfe/smes/ministerial/documents/2018SME-Ministerial-Conference-Plenary-Session-2.pdf. Papadakis, M. V., & Barwise, P. (2002). How much do CEOs and top managers matter in strategic decision-making? British Journal of Management, 13(1), 83–95. Paul, S., Whittam, G., & Wyper, J. (2007). The pecking order hypothesis: Does it apply to start-up firms? Journal of Small Business and Enterprise Development, 14(1), 8–21. Penrose, E. (1959). The theory of the growth of the firm. Oxford: Oxford University Press. Peteraf, A.  M. (1993). The cornerstones of competitive advantage: A resource-­ based view. Strategic Management Journal, 14(3), 179–191. Pham, T., & Talavera, O. (2018). Discrimination, social capital, and financial constraints: The case of Viet Nam. World Development, 102, 228–242.

70 

B. FREŠER ET AL.

Rahman, A., Civelek, M., & Kozubikova, L. (2016). Proactiveness, competitive aggressiveness and autonomy: A comparative study from the Czech Republic. Equilibrium: Quarterly Journal of Economics and Economic Policy, 11(3), 631–650. Raiborn, A.  C., Butler, B.  J., & Massoud, F.  M. (2009). Outsourcing support functions: Identifying and managing the good, the bad, and the ugly. Business Horizons, 52(4), 347–356. Rangone, A. (1999). A resource-based approach to strategy analysis in small-­ medium sized enterprises. Small Business Economics, 12(3), 233–248. Roshaiza, T., & Nur Azura, S. (2014). Overview of capital structure theory. Studies in Business and Economics, 9(2), 108–116. Ross, A. S., Westerfield, W. R., & Jaffe, F. J. (2002). Corporate finance (6th ed.). The McGraw-Hill Companies. Sahlman, A. W. (1990). The structure and governance of venture-capital organizations. Journal of Financial Economics, 27(2), 473–521. Sarasvathy, S. D. (2001). Causation and effectuation: Towards a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2), 243–288. Sarasvathy, S.  D. (2008). Effectuation. Elements of entrepreneurial expertise. Cheltenham, UK: Edward Elgar. Sarasvathy, S. D., Kumar, K., York, G. J., & Bhagavatula, S. (2014). An effectual approach to international entrepreneurship: Overlaps, challenges, and provocative possibilities. Entrepreneurship Theory and Practice, 38(1), 71–93. Schillo, S. (2011). Entrepreneurial orientation and company performance: Can the academic literature guide managers? Technology Innovation Management Review, 1(2), 20–25. Schneider, C., & Veugelers, R. (2010). On young highly innovative companies: Why they matter and how (not) to policy support them. Industrial and Corporate Change, 19(4), 969–1007. Shane, S. (2003). A general theory of entrepreneurship. The individual-opportunity nexus. Cheltenham, UK: Edward Elgar. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217–226. Shane, S., Locke, A.  E., & Collins, J.  C. (2003). Entrepreneurial motivation. Human Resource Management Review, 13(2), 257–279. Shepherd, A. D. (1999). Venture capitalists’ assessment of new venture survival. Management Science, 45(5), 621–632. Širec, K. (2007). The impact of entrepreneurial opportunities, firm abilities and entrepreneurs’ personal characteristics on SMEs growth. PhD thesis. Maribor: Faculty of Economics and Business. Širec, K. (2009). Teorija proizvodnih virov in podjetništvo (=Resource based theory and entrepreneurship). Naše gospodarstvo/Our Economy, 55(1–2), 85–95.

3  MULTIDIMENSIONAL MODEL OF HIGH-GROWTH COMPANIES’… 

71

Širec, K. (2011). Izzivi in predlog multidimenzionalnega modela proučevanja rasti malih in srednje velikih podjetij (Challenges and suggestions of multidimensional model in studying SMEs’ growth). Naše gospodarstvo/Our Economy, 57(5–6), 20–29. Stiglitz, J. E. (2000). The contributions of the economics of information to twentieth century economics. Quarterly Journal of Economics, 115(4), 1441–1478. Su, Z., & Tang, J. (2016). Product innovation, cost-cutting and firm economic performance in the post-crisis context: Canadian micro evidence. Journal of Centrum Cathedra: The Business and Economics Research Journal, 9(1), 4–26. Tajnikar, M., Ponikvar, N., & Bonča, D. P. (2016). Characteristics of firms with different types of growth: The case of Slovenia. Economic Annals, 61(208), 27–47. Talaia, M., Pisoni, A., & Onetti, A. (2016). Factors influencing the fund raising process for innovative new ventures: An empirical study. Journal of Small Business and Enterprise Development, 23(2), 363–378. Uzzi, B. (1999). Embeddedness in the making of financial capital: How social relations and networks benefit firms seeking financing. American Sociological Review, 64(4), 481–505. Villena-Manzanares, F., & Souto-Perez, E.  J. (2016). Sustainability, innovative orientation and export performance of manufacturing SMEs: An empirical analysis of the mediating role of corporate image. Journal of Industrial Engineering and Management, 9(1), 35–58. White, M., Maru, L., & Boit, J. R. (2015). Financial resource as drivers of performance in small and micro enterprises in service retail sector: A case of Eldoret municipality, Uasin Gishu County, Kenya. Global Journal of Human-Social Science: E Economics, 15(4), 5–15. Wiklund, J., & Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71–91. Wiklund, J., Patzel, H., & Shepherd, A. D. (2009). Building an integrative model of small business growth. Small Business Economics, 32, 351–374. Wu, C., & Barnes, D. (2010). Formulating partner selection criteria for agile supply chains: A Dempster-Shafer belief acceptability optimisation approach. International Journal of Production Economics, 125(2), 284–293. Xiao, L. (2011). Financing high-tech SMEs in China: A three-stage model of business development. Entrepreneurship & Regional Development, 23(3–4), 217–234. Zhang, X., Ma, X., & Wang, Y. (2012). Entrepreneurial orientation, social capital, and the internationalization of SMEs: Evidence from China. Thunderbird International Business Review, 54(2), 195–210.

CHAPTER 4

Empirical Research: Case of Slovenia

Abstract  The chapter provides important insights into the empirical research carried out. The theoretical research model presented in the third chapter is empirically tested and verified using a random sample (n = 150) of high-growth companies from the Republic of Slovenia. The extensive research and methodological background is presented. For quantitative research methods, expert readers are provided with statistical analyses, which are then simply deepened for discussion of the results. Keywords  Case of Slovenia • Questionnaire • Random sample • SEM • Hypothesis verifying

4.1   Introduction into Empirical Research We empirically tested the developed theoretical conceptual model on a sample of high-growth companies (HGCs), as the literature suggests that these companies on average require more financing (Brüderl and Preisendörfer 2000), and they also use several different sources of financing (Brown and Lee 2014, p.  1). HGCs are also, on average, characterized by the development of entrepreneurial orientation and intangible capital, as in past surveys both the dimensions of entrepreneurial orientation (Oliveira 2015; North and Smallbone 2000; Coad and Rao 2008; Freel 2000) and intangible capital (Rauch et  al. 2005;

© The Author(s) 2020 B. Frešer et al., Financial Determinants of High-Growth Companies, https://doi.org/10.1007/978-3-030-59350-6_4

73

74 

B. FREŠER ET AL.

Kangasharju and Pekkala 2002; Lee and Tsang 2001; Cooper et al. 1994) have been found to be key determinants of enabling and achieving high growth of companies. The empirical research is founded on several assumptions and limitations. The assumptions that form the basis for the research are: (i) the questionnaire (in the survey on a random sample of HGCs) was fully completed, in accordance with the instructions, by competent persons whose experience in the management of HGCs and knowledge of financing HGCs allow for the delivery of reliable assessments for a company as a whole. We assume that these persons are responsible persons in companies (directors or managers of companies—financial directors, members of the management), and (ii) the answers of every respondent are appropriately related to the level of the company. We asked the respondents to answer those questions from the perspective of the whole company or all of the key employees who are involved in the acquisition of financial assets and the financial position of the company. We also adjusted the measurement instrument accordingly. The key constraints of the survey include the focus on external sources of financing and the elimination of the discussion of autonomy (the dimension of entrepreneurial orientation) from the analysis. Autonomy in entrepreneurial orientation, unlike other dimensions of entrepreneurial orientation that can be adjusted to the level of the company (organization), is slightly more focused on the autonomy of individual employees and their independence in the performance of work tasks (e.g. the scale by Hughes and Morgan 2007). The aforementioned can lead to a number of weaknesses and ambiguities in dealing with the dimensions of autonomy in entrepreneurial orientation, which was noted by Antončič and Hisrich (2001, p. 499). 4.1.1  Data Sources and Sample The statistical set of researches included HGCs that, according to the methodology of Agency of the Republic of Slovenia for Public Legal Records and Related Services (SI: AJPES), were included in the list of HGCs at least once between 2011 and 2016. These are companies of all size classes established in the Republic of Slovenia. The survey took place in May 2018. Random survey was performed; 2788 companies were randomly selected and contacted from a list of 8194 phone numbers of HGCs. The survey methods used were CATI (n = 110), and in the second

4  EMPIRICAL RESEARCH: CASE OF SLOVENIA 

75

step, respondents who did not want to or did not have time to answer by phone were able to complete the questionnaire by means of a computer-­ assisted online survey—CAWI (n = 40). The final realized sample size was n = 150, and the response rate was expectedly low in terms of reachable companies at 10.71%. We then further refined the sample of n = 150 companies. We eliminated companies with negative capital (4 HGCs), with loss in the last year in which they were listed as HGCs (3 HGCs), companies that answered that they had never wished to access external sources of financing (17 HGCs) and the company (1 HGC) that, according to the data obtained, employed only one employee. In the analysis, we only wanted to include the HGCs that achieved high growth on healthy foundations. The final sample from which we conducted the survey was thus n  =  125 HGCs (CATI n  =  89; CAWI n  =  39). The random sample of HGCs reflects the characteristics of the HGC population in the Republic of Slovenia. 4.1.2  Methodology The empirical analysis of the developed conceptual model was performed through structural equation modelling (SEM), based on exploratory factor analysis (EFA) and confirmatory factor analysis (CFA). We conducted EFA with the help of the IBM SPSS statistics 24 program, while CFA and SEM were conducted with the help of the WarpPLS 6.0 statistical program. In designing the EFA, we followed key recommendations in past literature. We verified the relevance of using EFA using Bartlett’s Test of Sphericity (BTS) and the Kaiser-Meyer-Olkin (KMO) Test for Sampling Adequacy, taking into account that the KMO statistic must not be less than 0.5 (Field 2009, p. 647), the BTS should be as high as possible and the corresponding Chi-squared test should be statistically significant (P