Do managers’ characteristics influence the employment growth of SMEs?

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Do Managers’ Characteristics Influence the EmploymentGrowth of SMEs?Frank Janssen aa Université catholique de LouvainVersion of record first published: 19 Dec 2012.

To cite this article: Frank Janssen (2006): Do Managers’ Characteristics Influence the Employment Growth of SMEs?, Journalof Small Business & Entrepreneurship, 19:3, 293-315

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Do Managers’ Characteristics Influence theEmployment Growth of SMEs?

Frank Janssen, Université catholique de LouvainABSTRACT. Considerable empirical research has been devoted to the impact of the manager’s characteristicson the growth of his/her firm. However, the majority of this work is centered on the analysis of one or of a lim-ited number of predictors. Furthermore, no research has provided an exhaustive list of all of the variables pre-viously studied. We have filled this gap and tested the potential influence on employment growth of 28 variables,grouped into five sub-categories: psychological characteristics, expertise and family background, motivations,demographic characteristics and the presence of a managerial team. If our results stress the importance of themanager’s expertise, or at least some aspects of it, and of demographic variables, they also prune some otherbranches of research on firm growth, or at least call for a more refined approach. It does not come as a surprisethat traits do not exert any significant impact on growth. More surprisingly, we find an absence of impact ofmotivations, which calls for a more refined classification than the simple “push-pull” dichotomy. The conclu-sions we reach about family background show that, if coming from an entrepreneurial family can impact firmcreation, it has no influence on growth. Finally, contrary to a widespread belief, the fact that the firm is startedand/or led by a team of managers does not seem to offer enough advantages to stimulate employment growth.

SOMMAIRE. De nombreuses recherches empiriques ont été consacrées à l’impact des caractéristiques dudirigeant sur la croissance de son entreprise. Cependant, la majorité de ces travaux s’est concentrée sur l’analysed’un nombre limité d’indicateurs. De plus, aucune recherche n’a identifié de manière exhaustive l’ensemble desvariables précédemment étudiées. Pour combler cette lacune, nous avons testé l’influence potentielle de 28 vari-ables sur la croissance de l’emploi. Ces variables ont été regroupées en cinq sous catégories : caractéristiquespsychologiques, expertise et contexte familial, motivations, caractéristiques démographiques et présence d’uneéquipe de dirigeants. Si nos résultats montrent l’importance de l’expertise du dirigeant, plus précisément decertains de ses aspects, et des variables démographiques, ils élaguent également d’autres branches de larecherche sur la croissance des entreprises ou, du moins, appellent une démarche plus nuancée. S’il n’est guèreétonnant de s’apercevoir que les trait n’exercent pas d’influence sur la croissance, il est, en revanche, plussurprenant de constater une absence d’impact des motivations, ce qui, à notre sens, rend nécessaire une classifi-cation plus raffinée que la simple dichotomie « push-pull ». Nos conclusions concernant le contexte familialmontrent par ailleurs que, si le fait d’avoir des origines familiales entrepreneuriales peut influencer la créationd’entreprise, celles-ci n’ont par contre aucun impact sur la croissance. Finalement, et contrairement à unecroyance répandue, le fait que la firme soit créée et/ou dirigée par une équipe de dirigeants ne semble pasprésenter suffisamment d’avantages pour stimuler la croissance de l’emploi.

IntroductionSince the publication of Birch’s work in 1979, an impressive number of studies have

been carried out on the role of SMEs in job creation. The data and methodology used byBirch (1979) have given rise to criticisms (Armington and Odle, 1982). Another Americaneconomist, Bennett Harrison (1997), made the most resounding of these criticisms. Apartfrom the fact that Birch did apparently not establish a difference between SMEs and sub-sidiaries of large companies, Harrison stated that Birch did not underline that a tiny pro-portion of firms, that is fast-growing firms, created most employment. However, Birch didobserve this phenomenon in a book published in 1987. Moreover, he invented the term“gazelles,” commonly used to refer to high-growth firms (Birch, 1987).

Several studies, both European and American, confirm the importance of fast-growing

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firms for employment. In a study on the European Economic Community, Storey andJohnson (1987) observed that in 12 years, less than 10% of firms created at the start ofthe period had grown beyond 20 workers and less than 1% of them had surpassed 100workers.

Along the same lines, a recent OECD study (1999) shows that, out of the SMEs withbetween 20 and 5001 employees at the start of the period, firms that had doubled theiremployment over recent years only represented between 2% and 10% of the survivingfirms, but had generated between 48%2 and 88%3 of new employment created by this typeof firm in France, Italy, the Netherlands, Spain and Quebec. These tendencies are con-firmed by studies on Germany, Greece and Sweden (Julien, 2000), Ireland (O’Farrel,1984), the United States (Dunkelberg and Cooper, 1982), Canada (McMullan and Vesper,1987) or some regions in the United Kingdom (Gallagher and Miller, 1991).

High-growth firms are a relatively marginal phenomenon (Deakins, 1996). The major-ity of SMEs’ managers do not include growth in their objectives (Kolvereid, 1992;Davidsson, 1989; Hakim, 1989; Gibb and Scott, 1986; Chell, 1986). Beyond a certainstage, sometimes called the “comfort zone” (Perry, 1987), it becomes for instance impos-sible for the manager to exert direct control over the tasks carried out within the firm.

According to Starbuck (1965), growth is neither a spontaneous nor a random phe-nomenon, but rather the consequence of a decision: the decision to hire and/or not to fire,the decision to increase output in response to an increase in demand or the decision tostimulate demand. He stresses that growth can be an objective in itself. It can constitute ayardstick for the success of the manager and his/her firm, and for the “progress” achievedby the latter.

Growth has been measured on the basis of an impressive number of variables, the twoindicators most widely used by literature being employment and sales. We have chosen tolimit this article to the study of employment growth. Apart from the fact that it is a meas-ure of economic growth (Kirchoff, 1991), for the entrepreneur, it can serve as an indica-tor of his/her success and, for the company as a whole, it is a measure of the economiccontribution of the firm to common good (Dunkelberg and Cooper, 1982). This is whynumerous economists and sociologists have used this criterion. However, within firms,success seems to be measured more in terms of sales growth (Hughes, 1998; Donckels,1990) and this criterion has been privileged by researchers in management sciences(Weinzimmer, 1993). Moreover, according to Child (1973), employment is an adequatecriterion for the measurement of the size of an organization, because it is above all humanbeings who are “organized.” Finally, since the manager in principle expects demand tostabilize before recruiting personnel, employment is theoretically a less volatile measurethan sales (Delmar, 1997). In some European countries, such as Belgium, the stability ofthis criterion is heightened by rigidities on the labor market linked to restrictive sociallegislation.

As growth is a complex and multidimensional phenomenon (Weinzimmer, 1993), apurely internal approach, limited to the impact of the resources and in particular to thedetermining factors linked to the manager, neglects the prediction potential of variableslinked to the firm, the strategy, the environment and the interactions between thesedifferent types of variables. Literature shows that these variables (firm characteristics,

294 JANSSEN

_________________________1. Between 10 and 500 for Quebec.2. Italy.3. Spain.

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strategy, environment and interactions) also impact growth (Janssen, 2002). However,within the limited framework of this paper, it would have been impossible to give thewhole picture and we have chosen to concentrate on factors relating to the manager.4

The decision to create a firm is made by the entrepreneur and, therefore, it can beassumed the decision to grow this firm will also depend on the same person (Gundry andWelsch, 2001). When asked about success factors, venture capitalists, business angels andmanagers themselves consider that the entrepreneur is the main explanatory element of afirm’s performance (Herron and Robinson, 1993). Some researchers, such as Sandberg(1986), share this opinion.

The analysis of the relations between the manager’s characteristics and the growth ofhis/her firm has already given rise to numerous empirical studies. However, the vastmajority of research on growth has only studied the impact of a limited number of vari-ables. Moreover, the theoretical anchorage of most of this work is relatively weak. Theconcept of growth is rarely theoretically founded and this field of research is highly frag-mented. The following table summarizes the characteristics of the main empirical studieson managerial growth determinants or including managerial growth determinants.

As shown in Table 1, the type of firms studied and, as a result, the samples vary a lotfrom one study to the other. Some samples consist of public firms, some of SMEs and oth-ers of newly created firms or high-technology firms. The criteria used to define SMEs arenot homogeneous. The definitions vary from less than 50 to less than 500 workers. Someuse an independence, a turnover or an ownership criterion. Many studies even do notdefine the concept of SME. This table also shows that some studies only concentrate onthe manufacturing sector.5 This heterogeneity is accentuated by large differences in timeperiods. These can vary from static measures for newly created firms to 8 years. Staticmeasures are used in research on newly created firms if a firm has been launched duringthe last year of the study. This is of course nonsense because growth is a dynamic phe-nomenon by essence. Moreover, studying firms that are created at different moments ofthe analyzed period introduces a bias because the firms are not all exposed to the samemacro-economic conditions. Sample sizes also vary a lot (from 52 to 15,000).Operationalization of the growth measure is also far from being homogeneous. However,most studies use a relative growth measure. Finally, apart from certain recent Swedish,British, Italian and German studies, few European researchers have taken an interest inthis issue.

Several authors (Grinyer, McKiernan and Yasai-Ardekani, 1988; Miller and Friesen,1984) consider it necessary to test the impact of a large number of variables simultane-ously in order to create a more complete and realistic image of the growth phenomenon.To our knowledge, there has been no attempt made to establish an exhaustive list of all ofthe independent variables examined by previous studies.

Based on a “state of the art” of the research on manager-related growth determinants,we developed 28 hypotheses. These hypotheses use all of the determining factors that wehave identified in the literature on growth, as well as a certain number of hypothesizesbased on growth theory which have not been tested yet.

Rather than making value judgments on the relative importance of one or the othervariable, which would have meant retaining only a more limited number of hypotheses,

DO MANAGERS’ CHARACTERISTICS INFLUENCE EMPLOYMENT GROWTH? 295

_________________________4. For an analysis of a complete growth model, see Janssen (2002).5. Probably because this sector has more and better quality data available.

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296 JANSSEN

Tab

le 1

. Ove

rvie

w o

f the

mai

n em

piri

cal s

tudi

es e

xam

inin

g or

incl

udin

g m

anag

eria

l gro

wth

det

erm

inan

ts

Stud

y C

ount

ry

Top

ic

Typ

es o

f fir

ms s

tudi

ed

Sect

or(s

) Pe

riod

stud

ied

(yea

rs)

Sam

ple

size

G

row

th c

once

ptua

lizat

ion

O

pera

tiona

lizat

ion

Dun

kelb

erg

and

Coo

per

(198

2)

USA

Im

pact

of m

anag

ers’

cha

ract

erist

ics a

nd

obje

ctiv

es, a

nd fi

rms’

cha

ract

erist

ics o

n gr

owth

SMEs

(und

efin

ed)

M

ultip

le

Var

ies f

rom

one

fir

m to

the

othe

r

1,80

5 Em

ploy

men

t (T

0/T1)

** (1

/ yea

rs o

f ow

ners

hip

of th

e fir

m)

Mill

er a

nd T

oulo

use

(198

6)

Can

ada

(Que

bec)

Im

pact

of m

anag

ers’

psy

chol

ogic

al

char

acte

ristic

s on

perfo

rman

ce

SMEs

(und

efin

ed)

Mul

tiple

5

97

Firm

per

form

ance

com

pare

d to

indu

stry

aver

age

Sa

les

Net

reve

nues

R

OI

Subj

ectiv

e m

easu

re

Ave

rage

gro

wth

rate

A

vera

ge g

row

th ra

te

Ave

rage

gro

wth

rate

Ei

senh

ardt

and

Sch

oonh

oven

(1

990)

U

SA

Impa

ct o

f fou

ndin

g te

am’s

cha

ract

erist

ics,

strat

egy

and

envi

ronm

ent o

n gr

owth

New

ly c

reat

ed fi

rms

Se

mi-

cond

ucto

rs

Var

ies f

rom

one

fir

m to

the

othe

r 92

Sa

les

T 1-T

0

Kal

lebe

rg a

nd L

eich

t (19

91)

USA

Im

pact

of

man

ager

s’ c

hara

cter

istic

s, or

gani

zatio

nal s

truct

ure

and

indu

stry

on

surv

ival

and

per

form

ance

of S

MEs

m

anag

ed b

y m

en o

r wom

en

SMEs

(und

efin

ed)

Com

pute

r Fo

od

Hea

lth

3 41

1 G

ross

reve

nues

Lo

g (T

1-T 0

)

McC

arth

y et

al.

(199

3)

USA

Im

pact

of e

scal

atio

n of

com

mit

men

t on

rein

vest

men

t dec

ision

s

New

ly c

reat

ed fi

rms

M

ultip

le

3 1,

112

Ass

ets

(T1-

T 0 )/

T0

Wei

nzim

mer

(199

3)

USA

Im

pact

of m

anag

emen

t tea

m

char

acte

ristic

s, str

ateg

y an

d en

viro

nmen

t on

gro

wth

Publ

ic fi

rms

Mul

tiple

5

197

Sale

s A

sset

s Em

ploy

men

t

Beta

coe

ffici

ent (

estim

ated

slo

pe o

f the

regr

essio

n lin

e)

Sieg

el e

t al.

(199

3)

USA

C

hara

cter

istic

s of h

igh

-gro

wth

firm

s SM

Es (u

ndef

ined

) M

ultip

le

3 Sm

all :

1,6

00

Med

ium

: 105

R

even

ues

(T1-

T 0 )/

T0

Nko

ngol

o-Ba

kend

a et

al.

(199

4)

Can

ada

(Que

bec)

Im

pact

of s

trate

gic

vis

ion

on p

erfo

rman

ce

SMEs

(ind

epen

dent

fir

ms;

man

aged

by

thei

r ow

ner ;

turn

over

< 2

0 m

illio

ns C

AD

)

Man

ufac

turin

g

2–3

60

Empl

oym

ent

Sale

s N

et p

rofit

s

((T1-

T 0)/T

0)/((

T1s

ect-

T 0se

ct)/T

0sec

t)

((T1-

T 0)/T

0)/((

T1s

ect-

T 0se

ct)/T

0sec

t)

Cha

nge

in fi

rm’s

net

pr

ofits

com

pare

d to

cha

nge

in se

ctor

’s n

et p

rofit

s

Wes

thea

d an

d B

irley

(199

5)

UK

Im

pact

of m

anag

er’s

and

firm

’s

char

acte

ristic

s, an

d e

nviro

nmen

t on

grow

th

Firm

s with

less

than

5

year

s exi

stenc

e

Mul

tiple

V

arie

s fro

m o

ne

firm

to th

e ot

her

Not

m

entio

ned

Empl

oym

ent

(T1-

T 0)/

age

of th

e fir

m

Wes

thea

d (1

995)

U

K

Impa

ct o

f man

ager

’s a

nd fi

rm’s

ch

arac

teris

tics,

and

stra

tegy

on

grow

th

Hig

h-te

ch fi

rms

Not

men

tione

d

7

73

Empl

oym

ent

Log

(T1-

T 0)

Brus

h an

d C

haga

nti (

1998

)

USA

In

fluen

ce o

f res

ourc

es o

n p

erfo

rman

ce

SMEs

(< 1

00

empl

oyee

s)

Serv

ices

R

etai

l 3

19

5 Em

ploy

men

t N

et c

ash

flow

Lo

g (T

1-T 0

) Su

bjec

tive

mea

sure

D

ahlq

vist

et a

l. (1

999)

R

eplic

atio

n of

Coo

per e

t al.

(199

4)

Swed

en

Impa

ct o

f firm

cre

atio

n co

nditi

ons o

n pe

rform

ance

N

ewly

cre

ated

firm

s

Mul

tiple

3

7,

256

Empl

oym

ent

Sale

s Pr

ofita

bilit

y

Not

men

tione

d

Not

men

tione

d

Subj

ectiv

e m

easu

re

Del

mar

(199

9)

Swed

en

Rel

atio

n be

twee

n gr

owth

mot

ivat

ions

and

ac

tual

gro

wth

SM

Es (i

ndep

ende

nt

firm

s; <

50 e

mpl

oyee

s)

Mul

tiple

4

34

3 Em

ploy

men

t Sa

les

T 1-T

0 (T

1-T 0

)/ T

0 Ju

lien

(200

0)

Can

ada

(Que

bec)

C

hara

cter

istic

s of h

igh

-gro

wth

firm

s H

igh-

grow

th fi

rms

Mul

tiple

(but

mai

nly

man

ufac

turin

g)

8 52

Em

ploy

men

t Tu

rnov

er

(T1-

T 0 )/

T0

Gun

dry

and

Wel

sch

(200

1)

USA

D

iffer

ence

s be

twee

n hi

gh a

nd lo

w-g

row

th

entre

pren

eurs

W

omen

-ow

ned

busi

ness

es

Mul

tiple

2

83

2 Sa

les

(T1-

T 0 )/

T0

Woy

wod

e an

d Le

sat (

2001

)

Ger

man

y C

hara

cter

istic

s of h

igh

-gro

wth

firm

s A

ll ty

pes o

f firm

s

Mul

tiple

4–

6

15,0

00

Empl

oym

ent

Log

(T1-

T 0 )/

(T1-

T 0

Bram

anti

(200

1)

Italy

C

hara

cter

istic

s of h

igh

-gro

wth

firm

s SM

Es (2

0-49

9 em

pl.)

Man

ufac

turin

g

6

70

Empl

oym

ent

(T1-

T 0 ).

I(T

1-T 0

) / T

0I

Alm

us (2

002)

G

erm

any

Cha

ract

erist

ics o

f hig

h-g

row

th fi

rms

New

ly c

reat

ed fi

rms

M

ultip

le

5

1,94

9 Em

ploy

men

t (ln

T0 –

ln T

1) /

(T1-

T 0)

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we preferred to test all of them, as some recent empirical work had demonstrated the sur-prising importance of factors that may at first sight seem of minor interest (see, for exam-ple, Gartner and Bhat, 2000).

These hypotheses were tested on a sample of Belgian SMEs. As SMEs are often char-acterized by an interpenetration between managers and their firm (Janssen, 1998), thestrategic decision-making power is frequently concentrated in the hands of the manager(Dromby, 2000). Determining factors relating to managers are therefore more liable tohave an impact on the growth of an SME than on that of a larger firm. This is why wehave limited our research to this type of firm.

Determinants Linked to the Manager and Research HypothesesWe have categorized the growth determinants relative to the characteristics of the

manager into five groups: the psychological characteristics of the manager, his/her expert-ise and family background, his/her motivations, his/her demographic characteristics andthe presence of a team of managers.

Psychological CharacteristicsResearch on the link between the psychological characteristics of the manager and the

growth of his/her firm finds it source in past studies on “traits,”6 which aim to differenti-ate entrepreneurs from other professional groups.

The aim of these studies has been, for instance, to demonstrate that one of the maincharacteristics of entrepreneurial behavior lies in the need for achievement, that is, theneed to excel and to fulfill a certain goal with a view to personal achievement(McClelland, 1961). To this day, it has not been proven that a causal link exists betweena significant need for achievement and the act of managing and owning a firm(Brockhaus, 1982). Concerning growth, Murray, Brand and Van Susteren (1995) haveobserved that managers of growing firms have a need for achievement that is more simi-lar to that of large firms’ managers than to new venture creators.

Another psychological characteristic examined by researchers relates to the locus ofcontrol, a concept taken from a theory developed by Rotter in the 1960s (Rotter, 1966).The entrepreneur is supposed to have an internal locus of control. In other words, he/sheperceives the consequences of his/her actions as depending on his/her own behaviour. Onthe other hand, a person with an external locus of control perceives the consequences ofhis/her actions as the result of other causes, such as chance or another person’s action ordecision. Empirical work targeting the validation of this theory has however only estab-lished a weak positive correlation between this feature and the entrepreneur (Perry,MacArthur, Meredith and Cunnington, 1986; Brockhaus, 1982) or has led to the conclu-sion of an absence of relationship between these variables (Hull, Bosley and Udell, 1980).However, Miller and Toulouse (1986) observe a positive relationship between this traitand the performance of the firm.7

Numerous studies have also been carried out in order to determine whether thepropensity to take risks could be considered as one of the fundamental characteristics ofthe entrepreneur (Brockhaus, 1982). Authors are far from reaching unanimity on thisnotion (Timmons, Smollen and Dingee, 1985; Hull, Bosley and Udell, 1980). Gasse

DO MANAGERS’ CHARACTERISTICS INFLUENCE EMPLOYMENT GROWTH? 297

_________________________6. Traits can be defined as being the ongoing characteristics of the personality that become evident through rel-

atively constant behaviour in a wide variety of situations (Herron and Robinson, 1993).7. A feeling of overall confidence on the part of the manager also seems to stimulate growth, unlike the will to

ensure safety and protection (Ivanaj and Géhin, 1997).

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(1987) points out that some researchers simply reject it, others think that the entrepreneurwould take moderate risks, while others are still of the opinion that the propensity to takerisks is the very essence of entrepreneurial activity. Concerning growth, Siegel, Siegel andMacMillan (1993) observe an absence of relationship between the latter and the willing-ness to take risks.

Still others have looked into the link between growth and the flexibility of the man-ager’s character or his/her IQ (Delmar, 1996; Miller and Toulouse,1986), without reach-ing clear-cut results.

The analysis of the traits of the entrepreneur has given rise to equivocal results that donot allow to isolate the psychological characteristics that would make it possible to iden-tify entrepreneurs who are more liable to succeed than others (Chell, 1985). Likewise,with the exception of locus of control, research relating to the impact of personality traitson growth has so far not revealed any significant relationship between these variables(Snuif and Zwart, 1994). Delmar (1996) underlines that these traits only allow an expla-nation for a minor number of differences in performance between firms. He attributes thedisappointing character of the results to problems that are both theoretical and method-ological. Firstly, advocates of this school of thought have not been able to reach a con-sensus on the importance of the numerous traits studied, nor on the way in which theyvary according to the situation. Secondly, these researchers generally postulate that thecharacteristics of the entrepreneur and of their environment are stable. However, the envi-ronment is liable to change and traits alone do not allow an explanation for entrepreneur-ial behaviour. Finally, the methodologies used are outdated in the light of modern psy-chology. For example, the personality of an individual is no longer measured unidimen-sionally.

Internal locus of control being the sole trait for which a positive relationship with per-formance has been observed (Miller and Toulouse, 1986), we will only test the followinghypothesis:

H1: growth is positively influenced by an internal locus of control onthe part of the manager.

Expertise and Family Background of the ManagerAside from traits, researchers have studied other incubating factors in an individual’s

entrepreneurial behavior, such as professional experience, education or family context.Beyond their influence on entrepreneurship in the broader sense, numerous authors haveexamined the impact of the manager’s expertise on the firm’s development.

This expertise of the manager can result from previous functional experience, venturecreation or self-employment experience, sector experience, education or family context.

According to Gasse (1982), the impact of an entrepreneur’s experience can be positiveor negative. Experience can help the manager to avoid or to more easily solve previouslyencountered problems. It could, however, also inhibit their creativity and degree of adapt-ability by pushing them to cling to solutions that have been tried and tested in the past. Aconservative management style, which is limited to products and managerial approachesthat have already been proven, inhibits growth (Grinyer, McKiernan and Yasai-Ardekani,1988).

In principle, previous functional experience allows the development of expertise liableto promote growth. Certain empirical studies show that previous management (Storey,Watson and Wynarczyk, 1989) or supervision (Dunkelberg and Cooper, 1982) experiences

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have a positive impact on growth. Previous experience in the field of marketing alsoseems to stimulate growth (Storey, 1994). Functions linked to output, i.e., in the field ofmarketing, sales or R&D, are supposed to lay emphasis on growth (Hambrick and Mason,1984). We presume that the fact that the manager has previously worked in consulting willalso give him/her a certain expertise in a large number of areas of management liable tofoster growth. Having analyzed other firms in multiple sectors and having advised othermanagers in multiple managerial areas certainly constitutes an important source foropportunity detection, but also requires or generates multifunctional managerial skills. Onthe other hand, previous experience in higher education seems to inhibit growth(Westhead, 1995). Although one study does not confirm the influence of previous func-tional experience (Brush and Chaganti, 1998), we make the hypothesis of a positive linkbetween these variables:

H2: growth is positively influenced by previous management or super-visory experience.H3: growth is positively influenced by previous experience in the fieldof marketing, sales or R&D.H4: growth is positively influenced by previous experience in the fieldof consulting.H5: growth is negatively influenced by previous experience in highereducation.

The size of the firm in which the manager was previously employed can also have animpact on growth. Having worked in a large firm has allowed him/her to familiarizehim/herself with management techniques that are favorable for growth. Westhead andBirley (1995) observe a positive relationship between the fact that the manager has previ-ously worked in a large firm and growth. Several studies show that the founders of hightechnology, high-growth companies have frequently worked for large firms, even quotedcompanies (Feeser and Willard, 1989; Cooper and Bruno, 1977). Dunkelberg and Cooper(1982), on the other hand, observe that the size of the firm in which the manager has pre-viously been employed does not exert an influence on growth, unless the firm employsless than 100 people, in which case the influence on growth is negative. As Dunkelbergand Cooper’s study is relatively isolated, we will assume a positive relationship:

H6: growth is positively influenced by the fact that the manager has pre-vious experience in a large firm.

Some authors have studied the influence of past experience in firm creation (Dahlqvist,Davidsson and Wiklund, 1999) and have observed a positive influence of this variable ongrowth. Likewise, the same conclusion should apply to previous self-employment, whichis motivated by the same objectives as firm creation and requires the same kind of skills.This view also corresponds to the current definition of an enterprise in use within the EU,which includes self-employed persons.8 Like firm creation, it is an important source ofexperience that could positively influence growth. Previous professional experience in thebroad sense is also a source of expertise, which could stimulate growth. This experience

DO MANAGERS’ CHARACTERISTICS INFLUENCE EMPLOYMENT GROWTH? 299

_________________________8. “An enterprise is considered to be any entity engaged in an economic activity, irrespective of its legal form.

This includes, in particular, self-employed persons…” (article 1 of the Commission Recommendation of 6May 2003 concerning the definition of micro, small and medium-sized enterprises, document C(2003) 1422,Official Journal of the European Union L 124/36, 20.5.2003).

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can help the manager to avoid previously encountered problems or to solve these moreeasily. This is why it can be assumed that the number of years of professional experiencein the broad sense positively influences growth. As a result, we assume the following pos-itive relationships:

H7: growth is positively influenced by previous experience in new ven-ture creation.H8: growth is positively influenced by previous self-employment.H9: growth is positively influenced by the number of years of profes-sional experience prior to the creation of the firm.

Sector expertise can also hold some importance. Siegel, Siegel and MacMillan (1993)note that sector knowledge has a positive impact on growth. Comparative studies betweenhigh technology, high-growth companies and companies in the same sector that have leftthe market or experienced slower growth also demonstrate that the former are more like-ly to use the same technology and serve the same markets as firms for which the foundershave worked (Feeser and Willard, 1990; Feeser and Willard, 1989; Cooper and Bruno,1977). Dunkelberg and Cooper (1982) observe that the production of the same product orprovision of the same service as during previous employment has a positive influence ongrowth. Three studies have concluded that there was no link between sector experienceand growth (Gundry and Welsch, 2001; Brush and Changati, 1998; Kalleberg and Leicht,1991). These studies being outnumbered by studies observing a positive influence, wewill test the hypothesis of a positive link:

H10: growth is positively influenced by previous experience in settingup a firm within the same sector.

The relationship between the number of firms owned and/or managed by the manag-er and growth has also given rise to some studies. According to Storey (1994), numerousowner-managers own more than one firm. In fact, multicreation constitutes a particularmeans of growth. Westhead (1995) observes that the fact that a manager owns and/or man-ages more than one firm has a negative impact on the growth of the isolated firm. Thisnegative impact may be due to the fact that they spend less time on the latter when theyown several firms. An American study confirms this relationship, but only for firms man-aged by women (Kalleberg and Leicht, 1991).9 We will therefore test the hypothesis of anegative impact on growth:

H11: the growth of one particular firm is negatively influenced by thefact that the manager owns several firms.

The fact that during the creation period the manager is still working as an employeefor another organization and does not dedicate him/herself permanently to the new firmcould have a positive influence on its subsequent growth. In fact, according to Storey(1994c), such a manager has been able to evaluate his/her entrepreneurial skills in a low-risk manner because he/she did not only rely on his/her new firm to secure revenues. Itcan therefore be considered as a form of learning:

H12: growth is positively influenced by the fact that, during the startingperiod of the firm, the manager has been employed by anotherorganization.

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_________________________9. This variable would not have an effect on the growth of firms managed by men.

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Strangely, the impact of a former entrepreneurial failure on the growth of a secondfirm set up by the same manager has, to our knowledge, not been empirically tested. Forreasons linked to a negative perception of this experience or an awareness of the limits oftheir managerial skills on the part of the manager, one could think that this factor shouldhave a negative influence on growth. Conversely, this failure could represent a learningfactor that is favorable to the development of skills that stimulate growth. We neverthe-less assume that the inhibitive factor will predominate:

H13: growth is negatively influenced by a previous entrepreneurialfailure.

Numerous studies establish that the level of education of the manager has a positiveimpact on growth (Almus, 2002; Woywode and Lessat, 2001; Julien, 2000; Hall, 1995;Westhead, 1995; Storey, Watson and Wynarczyk, 1989; Dunkelberg and Cooper, 1982).10

The fact that the manager has a higher education degree, or even additional post-graduatedegrees, seems to stimulate the growth of his/her firm. Likewise, we may suppose that thetype of studies pursued will have an impact on growth. Moreover, insufficient manage-ment skills are often seen as the main source of firm failure. If potential investors perceivethat the entrepreneur lacks some important management skills, they will refuse to fund thefirm, or only accept to do it if the manager provides more collateral (Watkins and Morton,1985). We therefore also set the hypothesis that studies with a direct link to the activitiesof the firm or in business administration, or a training in firm creation,11 contribute to thedevelopment of the latter:

H14: growth is positively influenced by the manager’s level ofeducation.H15: growth is positively influenced by the fact that the manager hasfollowed studies that are linked to the activities of the firm.H16: growth is positively influenced by education in management.H17: growth is positively influenced by education in firm creation.

Curiously enough, the impact of family background on growth has only gained theattention of a few researchers. However, the hypothesis of the influence of an intergener-ational heritage on entrepreneurship and more particularly on venture creation, is far fromnew (see Bolton, 1971). Some studies find that more than 50% of entrepreneurs have aparent involved in entrepreneurial activities (Gasse, 1987). With regard to growth, wecould suppose that a manager coming from a family with one or more owner-managerswill benefit from the experience of these people and can count on family financing.Consequently, we can make the hypothesis that this variable will have a positive influenceon growth (Storey, 1994). On the contrary, the family could impede growth so as not tolose control of the firm or to avoid taking overly high risks (Gibb and Davies, 1990).However, Julien (2000) observes a positive link between an entrepreneurial family originand growth. On the basis of this result, we suppose that the first aspect will predominate:

H18: growth is positively influenced by an entrepreneurial familybackground.

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_________________________10. However, Brush and Chaganti (1998) observe an absence of link.11. Although Dahlqvist, Davidsson and Wiklund (1999) note an absence of link between the two variables.

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Finally, several authors have examined the relationship between the type of link exist-ing between the manager and the founder of the firm, on one hand, and growth, on theother. Dunkelberg and Cooper (1982) observe that firms headed by a manager who hassucceeded the founder grow less than those that are still directed by the first generation.According to these authors, this phenomenon could be due to the fact that second gener-ation managers are not characterized by the same will to achieve as their elders. AEuropean study also observes a positive link between the fact that a firm is managed byits founder and growth (Delmar, 1997). In the same line of thought, McCarthy, Schoormanand Cooper (1993) show that growth in assets of firms managed by their founder is high-er than those of other firms. Dunkelberg and Cooper (1982) observe that firms managedby external managers generally have a relatively high growth rate. These managers areprobably professional managers. High-growth firms must deal with a series of problems,such as those related to delegation or leadership, which require managerial skills that thefounder does not necessarily possess (Willard, Krueger and Feeser, 1992; Hambrick andCrozier, 1985). These external managers are, in principle, less inclined to conserve a sta-tus quo. We will thus test the two following hypothesises:

H19: growth is positively influenced by the fact that the firm is managedby an external manager rather than by its founder.H20: growth is negatively influenced by the fact that the firm is headedby a family manager who has succeeded the founder.

MotivationsAccording to Delmar (1996), the motivations of the manager are important determin-

ing factors for growth. These can be either “push” or “pull” motivations. “Pull” type moti-vations are intrinsic factors that the manager controls, whereas “push” motivations areextrinsic factors over which the manager has little influence (Walker, Loughton andBrown, 1999).

Several studies reveal the existence of a positive link between growth and the presenceof a “pull” or “positive” motivation on the part of the manager at the time of creation, suchas the perception of a market opportunity (Storey, Watson and Wynarczyk, 1989;Kalleberg and Leicht, 1991), personal accomplishment motivations or the search for a cer-tain social status (Stratos Group, 1990; Kolvereid, 1991). On the other hand, growthwould not be influenced by pecuniary motivations (Davidsson, 1989). Julien (2000) nev-ertheless observes that the objectives of profit and of meeting a challenge promotestronger growth. More fundamentally, a motivation for growth on the part of the manag-er seems to stimulate the real growth of the firm (Gundry and Welsch, 2001; Delmar,1999). A few studies have, however, concluded that there is no link between these moti-vational variables and growth (Dahlqvist, Davidsson and Wiklund, 1999; Brush andChangati, 1998). To the extent that the majority of studies observe a positive link betweengrowth and “pull” type motivations, we make the following hypothesis:

H21: growth is positively influenced by “pull” type motivations on thepart of the manager at the time of creation, such as the perception of amarket opportunity, meeting a challenge, personal achievement, inde-pendence, improvement of social status, search for profit or a growthtarget.

According to some authors, growth prospects are lower in a firm initially set up in the

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light of a “push” or “negative” type of motivation, such as unemployment (Storey, 1994b;Wynarczyk et al., 1993). We can suppose that unemployment should result in a loss ofprofessional contacts and a weakening of professional skills (Dahlqvist, Davidsson andWiklund, 1999). Logically speaking, the same should apply in the case of firm creationfollowing previous unsatisfactory professional experience. However, in an empiricalstudy comparing successful entrepreneurs with those who have failed, Brockhaus (1980)observes that the former express a higher level of discontent than the latter with regard totheir previous employment. As the author notes, this phenomenon could be linked to thefact that these entrepreneurs had been more motivated to develop a successful activity inorder not to have to return to their former function or a similar job. It could also be theresult of a cognitive conflict, in other words, the desire to create congruency in apparent-ly contradictory facts. Dunkelberg and Cooper (1982) do not observe any significant linkbetween the reasons for which the manager has left his/her previous employment andgrowth. A Swedish study finds that “push” type motivations linked to unemployment donot affect the performance of the firm (Dahlqvist, Davidsson and Wiklund, 1999). As sev-eral studies observe a negative link and on the basis of theoretical arguments, we formu-late the following hypothesis:

H22: growth is negatively influenced by “push” type motivations on thepart of the manager at the time of establishment, such as a previoussituation of unemployment or a previous unsatisfactory professionalexperience.

Demographic VariablesDemographic variables, such as the age and gender of the entrepreneur or the fact that

he/she belongs to an ethnic minority, have also given rise to certain studies.Age is generally associated with more conservative behavior, and supposedly exerts a

negative impact on the performances of the firm for three reasons (Hambrick and Mason,1984). First, an older manager is in principle less inclined to adopt innovative behavior orto adhere to a new idea. Second, such a manager would be more attached to a certain orga-nizational status quo. Finally, objectives related to wage and professional security gener-ate a more prudent behaviour. A younger manager would, on the other hand, be moreinclined to take risks (Hambrick and Mason, 1984). In the same sense, some observe thatvalues, in other words the guiding principles in the life of an individual, such as con-formity and tradition, have a negative impact on firm performance (Delmar, 1996).

Several studies (Woywode and Lessat, 2001; Delmar, 1997; Weinzimmer, 1993;Dunkelberg and Cooper, 1982) indeed observe a negative impact of the manager’s age oraverage age of the management team on growth. Our hypothesis therefore follows theseconclusions:

H23: growth is negatively influenced by the age of the manager(s).Gender and ethnicity can contribute to determine employment opportunities and

access to professional networks for an individual (Dahlqvist, Davidsson and Wiklund,1999). For example, women who start a self-employment career would be at a disadvan-tage in comparison to men, due to the existence of barriers linked to education, familypressure and work environment (Kalleberg and Leicht, 1991). Moreover, a woman whosebehavior deviates from socially accepted behavioral standards according to the gender ofan individual is exposed to social disapproval, whereas nonconformist or innovative

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behaviour is tolerated and even encouraged for men (Papalia and Olds, 1981). A study car-ried out by Dahlqvist, Davidsson and Wiklund (1999) on newly created firms in Swedenobserves a negative link between the fact that the entrepreneur is female and growth. Thisstudy also notes that the fact that the entrepreneur is an immigrant to the country wherehe creates and runs his/her firm has a negative influence on growth. These immigrantsoften do not have a social network as strong as the “local” entrepreneurs and have to over-come social barriers probably inhibiting growth. We will also assume a negative link:

H24: growth is negatively influenced by the fact that the manager isfemale.H25: growth is negatively influenced by the fact that the manager is animmigrant.

Presence of a Team of ManagersAccording to Vesper (1990), the presence of a team of managers means a higher quan-

tity of work, in addition to greater variety and a greater balance of skills and resourcesliable to generate synergies. Each manager brings his/her own expertise. This also allowsrisks to be shared. Furthermore, Vesper underlines that, in this case, the firm can allowitself to grow to a greater extent than a firm managed by one single person before resort-ing to external managers. Moreover, the fact that the initial founder has assembled a teamis a signal of his/her capacity to attract and manage other people, whereas inability orreluctance to create a team could, in the eyes of potential investors, be symptomatic of anabsence of managerial qualities required for growth. Finally, Vesper considers that therecruitment of the management team members can lead to a first evaluation of the ideathat was at the basis of the new venture and of its potential success. However, the pres-ence of several managers may also slow down the decision-making process (Feeser andWillard, 1990).

Several studies show that firms established and owned by several people are moreinclined to grow than firms with just one single owner (Siegel, Siegel and MacMillan,1993; Weinzimmer, 1993; Feeser and Willard, 1990; Dunkelberg, Cooper, Woo andDennis, 1987; Woo et al., 1989). In addition to this, it also appears that high technology,high-growth firms have generally been set up by several people (Cooper and Bruno,1977). The higher quantity of work and the variety and balance of skills in firms lead bya team, as well as the positive signal given to the market, seem to facilitate growth. Onestudy nevertheless does not observes a significant link between the fact that a firm hasmore than one owner and reinvestment decisions, measured by growth in assets(McCarthy, Schoorman and Cooper, 1993). Another observes that it does not influence theprobability of becoming a fast-growing firm (Almus, 2002). As these studies are outnum-bered by studies showing a positive influence, we will also assume a positive link:

H26: growth is positively influenced by the fact that the firm is managedby a team.

Beyond the size of the group of managers itself, the heterogeneity of the group in termsof sector and/or functional experience has also been the subject of several studies.Homogeneity is likely to lead to a phenomenon called “groupthink” (Eisenhardt andSchoonhoven, 1990) which is a deterioration in the decision-making process caused by tooimportant desire for unanimity within the group (Kreitner and Kinicki, 1992). However,heterogeneity is also liable to provoke crises within the team and, consequently, to

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complicate the implementation of the decisions (Ensley, Ensley and Carland, 1998).Einsenhardt and Schoonhoven (1990) observe a positive impact of heterogeneity of previ-ous sector experiences among the members of the management team on growth. Likewise,Weinzimmer (1993) notes that heterogeneity, both functional and sector, positively influ-ences growth. Although an isolated study observes a negative impact of heterogeneity interms of sector, functional and educational experience on growth and performance(Ensley, Carland and Carland, 1998), we will assume a positive link between heterogene-ity and growth:

H27: growth is positively influenced by the fact that a firm is managedby a heterogeneous team in terms of functional, sector and/or educa-tional experience.

Previous joint work experience is also liable to accelerate the decision-makingprocess. Such joint experience makes it possible to increase the efficiency of the decision-making process (Eisenhardt and Schoonhoven, 1990). This hypothesis has been empiri-cally confirmed (Eisenhardt and Schoonhoven, 1990). We therefore make an identicalhypothesis:

H28: growth is positively influenced by the fact that the firm is managedby a team of people, some of whom have previous joint work experience.

MethodologyPopulation, Sample and Representativeness

In order to determine the population of SMEs to be analyzed, using a database com-piled by ING Bank (“Internationale Nederlandse Groep”) and including all firms estab-lished in Belgium that have delivered their annual accounts to the Accounts Central of theBelgian National Bank, we have retained all firms that were active over the period stud-ied (from 1994 to 2000), for which we have data on employment for 1994 and 2000 andwhich corresponded in 1994 to the definition of an SME given by the EuropeanCommission.12 Insofar as numerous firms in Belgium have been created purely for fiscalreasons13 and do not really undertake activities, we have eliminated firms that werealready active in 1994, but that still employed less than 5 people in 2000.

On the basis of these criteria, the population was composed of 11,481 firms. We ran-domly selected 788 firms, while at the same time ensuring proportions of micro- (less than

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_________________________12. According to the European Commission’s Recommendation of 3 April 1996 (OJEC, L 107/4, 1996), the fol-

lowing firms must be considered as SMEs:• those employing less than 250 people; the number of people employed corresponds to the number of annu-al work units;• those whose turnover does not exceed 40 million EUR., or whose annual balance sheet total does not exceed27 million EUR;• those that respect an independence criteria. Independent firms are those which are not owned as to 25% ormore of the capital or the voting rights by one or several large firms. We have not used this criterion, giventhat one of our hypotheses presupposed that the fact that a firm is dependent on another firm would have apositive influence on the growth of the former.The Commission also establishes a distinction between medium-sized, small and micro-sized entreprises. Thesmall firm is that which employs less than 50 people, which respects the independence criterion defined aboveand for which either the turnover does not exceed 7 million EUR, or the annual balance-sheet total does notexceed 5 million EUR. A firm is considered to be micro-sized if it has less than 10 workers.

13. The fiscal regime for companies is in fact more advantageous than the regime for physical persons. As aresult many people create “empty” firms only in order to deduce expenses. These empty shelves do, of course,not grow.

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10 people), small- (between 10 and 49 people) and medium-sized (between 50 and 249people) firms identical to those of the total population. In order to allow a dynamic analy-sis, this size criterion was checked at the beginning of the period studied, that is, in 1994.We also kept the proportions of firms from the three regions of the country (Flanders,Wallonia, Brussels) identical to those of the population.

Out of the 788 firms, 331 refused to participate in the survey and 186 were not avail-able during the interview period. For 121 other firms, the telephone number in the data-base was incorrect or corresponded to a fax number. Our study therefore focused on asample of 150 firms. According to Harris (1985), the size of the sample must exceed thenumber of predictors by at least 50. Our sample of 150 observations respects this rule.14

In order to determine the representativeness of our sample in relation to the originalpopulation, we compared the average growth15 of the sample firms to the one of the pop-ulation16 using a bilateral t test. One of the application conditions underlying this test ontwo independent samples is the homogeneity of variances (Howell, 1998). We first usedLevene’s test to check that there is no significant difference in the variances (F = 1.476and sign. = 0.224), and then tested the difference between the averages of employmentgrowth for the two groups. The results of the bilateral t test (t = -0.823; d.f. = 11.479; sign.= 0.411) indicate that the average employment growth of the firms in our sample is notsignificantly different from that of the firms of the overall population.

As our sample was composed on the basis of size and regional location constraintscharacteristic of the population, it is no longer necessary to examine the representative-ness of the sample in relation to the population with regard to these two criteria. Finally,we also examined the percentages of independent firms within the population and thesample. These are also identical (66.7%). These particular elements of comparison werechosen because they appear in the initial database.

Data Collection Method and Measure of the Dependent VariableThe data published by Belgian firms do not make it possible to test the vast majority

of the hypothesises developed in our research. Hence, we opted for a telephone survey.17

We first established a questionnaire consisting of closed questions that we had pre-testedon several SME managers. The managers of 150 SMEs were interviewed by phone inNovember 2001.

The value of the dependent variable was calculated using the initial database. Thechoice of an appropriate growth index has given rise to a number of theoretical discus-sions (Wooden and Hawke; 2000; OECD, 1998; Birch, 1986). As none of the proposedmeasures is neutral (Julien et al., 1998), we decided to use a simple measure, namely therelative variation “(Et - Et-1)/Et-1)”, as this is the most frequently used index in studieson growth determinants (Delmar, 1997). In our case, this measure reads (E2000 – E1994/E1994).

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_________________________14. According to other authors (Bernard, 1999), a minimum of 10 observations per predictor is necessary. Harris

(1985) underlines that this principle is not based on any empirical proof. Others suggest more liberal rules thanHarris and consider that the number of observations must only exceed the number of variables by 40 (seeHowell, 1998).

15. For the measure of this variable, see next section.16. From which we withdrew firms that belonged to the examined sample.17. The major advantage of this method compared to personal surveys or by post is its rapidity. In comparison

with the personal survey, it also presents a lower risk of bias linked to the person of the interviewer (Lambin,1990). Finally, it allows for the immediate codification of the responses, thus reducing risks of error.

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In order to carry out a logistical regression (see infra), these dependent variables weresplit into “high growth” (code 1) and “low growth, stagnation or regression” (code 0). Wedefined “high growth” as being growth above or equal to 50% over the period studied;34.3% of the firms in our sample can be considered as having undergone high growth.18

Previous studies differ enormously in terms of the time period studied. In order toidentify irregular short-term tendencies and to allow for a reliable estimation of organiza-tional performances, the time period studied should be at least five years (Weinzimmer,Nystrom and Freeman, 1998). On the basis of the constraints of our database, we havemeasured growth over a period of seven years, stretching from 1994 to 2000.19

So as to avoid static measures, when growth is essentially a dynamic phenomenon, wehave excluded firms that were established during the period studied.

Data ProcessingIn order to test our hypotheses, we have carried out a binomial logistic regression with

the help of SPSS software. This method presents certain advantages in comparison to thestandard multiple regression that is subject to more restrictive application conditions(Garson, 2001; Howell, 1998).20 Among these advantages, we could draw particular atten-tion to the fact that, contrary to standard regression, logistic regression does not presup-pose a linear relationship between the dependent variable and the independent variables,and does not require a normal distribution of the variables. We had observed that ourdependent variable did not present a normal distribution. The logistic regression alsomade it possible to integrate dichotomous or polytomous and metrical predictors into onesingle model. Each modality of an original variable gave rise to a dummy variable coded1 if the characteristic was realized and 0 in the opposite case. In order to avoid a linearrelation between the independent variables, for each original variable, one of the binaryvariables created was excluded from the model. In the case of “filtering,” in other wordswhen part of the sample is not concerned by a question, we created a dummy variablecomposed of the firms not concerned.

Results and DiscussionPrior to the regression, we compared the growth averages of firms that had responded

to our survey with those of the firms who had refused to respond by using a bilateral t test.The growth averages for the firms that had responded to the survey were not significant-ly different from those of the firms that had refused to respond. We then compared thesize, independence and regional location of the firms of the two groups using Pearson’s χ2

test. Whether the firm had responded or not to the survey is independent of its size at thestart of the period, its independence or dependence and also of its regional situation.

The statistically significant results at the threshold of 5% of the logistic regression ofemployment growth on the variables linked to the manager are found in Table 2.

Six variables linked to the manager have a significant influence on employmentgrowth.

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_________________________18. The cutoff point of 50% has been chosen in order to generate a proportion of high-growth firms (34.3%)

important enough to generate significant results.19. During this period, the average annual growth rate of the Belgian GDP in constant prices has been of 2.68%

(Banque Nationale de Belgique).20. This also represents certain advantages in comparison to the discriminant analysis that can also be used when

the dependent variable is dichotomised. Apart from the fact that the discriminant analysis involves a normaldistribution of the variables, it can give rise to “impossible” probabilities of success situated outside the 0–1range (Howell, 1998).

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Out of the five categories of independent variables linked to the manager that we havestudied while making the hypothesises, three groups exerted no significant influence onemployment growth. These are the variables linked to psychological characteristics, moti-vations and the presence of a team of managers.

We have stressed the fact that the analysis of entrepreneurial traits has given rise toequivocal results. These results do not allow to isolate the psychological characteristicsthat would make it possible to identify successful entrepreneurs (Chell, 1985). Likewise,research on the impact of traits on growth has not shown any significant relationshipbetween these variables (Snuif and Zwart, 1994). Locus of control does not seem to be anexception.

Contrary to a widespread belief that firms started from a pull motivation are high-potential ventures, while firms started from a push motivation are low-potential ventures,these variables do not impact growth. Those who wanted, for instance, to meet a chal-lenge, to create their firm in order to fulfill their need for achievement or for independ-ence, to improve their social status, or simply a lot of growth or profit do not grow moresignificantly than those who start a firm in order to create a job for themselves to escapeunemployment or an unsatisfactory job. Our results could also mean that there is need fora more refined classification of motivations. The dichotomic “push-pull” classification is,in some aspects, unsatisfactory. Independence or status motivations could, for instance,lead to growth or non-growth decisions.

Concerning the founding team, our study confirms the conclusion reached by Almus(2002): the presence of a team of managers does not offer enough advantages to stimulategrowth and/or these advantages are balanced out by disadvantages related to decisionalinconsistencies, e.g., conflicts on how to run the firm. These conflicts could lead to keydecision-implementation problems. Moreover, group heterogeneity can have negativeeffects on effectiveness in work groups (Hogg, 1987). This could also be true for entre-preneurial teams (Ensley et al., 1998).

Four variables that had a significant effect on employment growth are linked to theexpertise of the manager. Two of these variables are linked to their functional experience.None is related to family background.

The results relating to the fact that the manager has experience in marketing, sales orR&D invalidate our third hypothesis. Whereas, according to Hambrick and Mason (1984),output-related functions are supposed to lay emphasis on growth, we observe that thisexperience has a negative influence on employment growth. It can be supposed that this

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Table 2. Statistically significant predictors of the binomial logistic regression of employment growth on the variables linked to the manager of the firm Independent Variables Coeff. S.E. Wald D.F. Sig. Exp. (b) Hypothesis 3: experience in marketing, sa les or R&D

- 4.453 1.569 8.051 1 0.005 0.012

Hypothesis 4: consulting experience 3.092 1.425 4.706 1 0.030 22.023 Hypothesis 12: other activities at time of creation

4.574 2.221 4.242 1 0.039 96.969

Hypothesis 15: education related to the activities of the firm

3.237 1.283 6.361 1 0.012 25.446

Hypothesis 24: female manager - 4.948 2.178 5.161 1 0.023 0.007 Hypothesis 25: immigrant manager 3.626 1.408 6.630 1 0.010 35.571 χ2 of the model : 51.890 Sign. 0.015 Degree of concordance between the predic ted values and the values observed: 85.9%.

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experience will lead the manager to focus on these functions to the detriment of others,which could slow employment growth. It could also bring them to favor turnover insteadof employment growth.

Conversely, in accordance with our hypothesis 4, the fact that the manager has previ-ously worked in the field of consulting seems to give him/her an expertise that acceleratesthe development of his/her firm. This experience is a statistically significant predictor ofthe chances of employment growth. The influence of this variable on growth had not beentested yet.

Regarding the other functional experience variables that were tested, we found no sup-port for hypotheses 2 and 5. Confirming Brush and Chaganti’s results (1998), prior man-agement experience does not influence growth, nor does a previous experience in highereducation affect it. Being created and/or led by a former manager does not guarantee afirm will grow while, on the other hand, being led by an academic does not necessarilyprevent it from growing.

We can confirm Dunkelberg and Cooper’s (1982) results showing that the size of thefirm in which the owner was employed previously (hypothesis 6) has no significantimpact on growth. Neither does the duration of former professional experience (hypothe-sis 9). Like Gasse (1982) stressed, the experience factor can be outweighed by creativityinhibition and/or conservative management style resulting from former experience.Previous experience in firm creation or self-employment does not influence growth either(hypotheses 7 and 8). This could mean that such a former experience could work as anincentive to remain small, due to unsatisfactory growth experience, for instance. It couldalso mean that people who have created different firms at different moments are moremotivated by the creation process in itself than by the growth process. All these experi-ences are sources of skills development that could be favorable to growth, but they do notnecessarily imply a will to grow.

If some types of functional experience have an impact on growth, sector experience(hypothesis 10) does not seem to influence it. This observation confirms Brush andChaganti’s (1998), as well as Kalleberg and Leicht’s (1991), conclusions. Our results alsofail to support hypothesis 11, stating that the ownership of several firms at the same timenegatively influences growth. Kalleberg and Leicht (1991) found support for this hypoth-esis, but only for women-owned firms, while it did not impact men-owned businesses. Thisdifference was somehow puzzling. Our study shows that multiple ownership does not sig-nificantly impact growth at all. It also shows that previous failure does not impede growth(hypothesis 13), which could mean that the learning factor associated with failure couldneutralize the inhibitive factor associated with a negative perception of this experience.

As we presupposed in our hypothesis 12, the fact that the manager did not dedicatehim/herself permanently to the new firm at the time of its establishment has a positiveinfluence on its subsequent growth. It can be considered as a way of learning that allowsan evaluation of his/her entrepreneurial qualities while not relying uniquely on the rev-enues generated by his/her firm (Storey, 1994c).

In accordance with hypothesis 15, the fact that the manager has pursued studies thathave a direct link to the activities of the firm contributes positively to the development ofthe latter. This observation is interesting as this variable had not yet been the subject ofempirical studies. On the other hand, neither the level of the studies (hypothesis 14) northe fact that the entrepreneurs have followed management or firm creation training(hypothesis 16 and 17) has a significant influence on employment growth.

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The three last variables related to family background do no impact growth. We foundno support for the hypotheses related to entrepreneurial family background (hypothesis18) and to the fact that the manager has been hired by or belongs to the founding family(hypotheses 19 and 20). This means that if intergenerational heritage influences thedecision to start a venture, it does not necessarily foster growth. Loss of control or risk-avoidance are certainly potential inhibiting factors. It is also reassuring in the sense thatthere does not seem to be any family pre-determination in growth processes. The fact thatexternal managers do not necessarily seek growth is also consistent with our findingsabout the lack of influence of former managerial experience.

Two out of the three demographic variables tested have a significant impact onemployment growth of her firm. These are the gender of the manager and the fact thathe/she has an immigrant background. Only age does not constitute a significant deter-mining factor, contrary to a general belief.

Like the study carried out in Sweden (Dahlqvist, Davidsson and Wiklund, 1999) andin accordance with our hypothesis 24, the results of the regression demonstrate that thefact that the manager is female has a negative impact on employment growth of their firm.This observation confirms the theoretical arguments relating to the relative social disad-vantages for women who start an entrepreneurial career (Kalleberg and Leicht, 1991). AnAmerican study (Kalleberg and Leicht, 1991) nevertheless observed an absence of differ-ences in terms of impact of independent variables on the growth of firms according towhether they were managed by men or women. These differences between American andEuropean firms could be the result of cultural differences, as Europe is more conservativein this respect.

Finally, contrary to Dahlqvist, Davidsson and Wiklund (1999), whose study also part-ly concerned employment growth, and to our hypothesis based on the results of this study,we observe that the fact that the manager is an immigrant has a positive influence on thegrowth of his/her firm. Entrepreneurship can be a social integration factor (Wtterwulghe,1998). Hence, a potential explanation of the positive link between growth and the fact thatthe manager is an immigrant could lie in the fact that the firm’s growth would acceleratethis phenomenon of integration.

ConclusionsThe study of the impact of the manager’s characteristics on the growth of his/her firm

has given rise to numerous empirical studies. However, the focal point of most of thiswork has been the study of one or a reduced number of predictors. Moreover, no researchhas tried to establish an exhaustive list of all of the previously analyzed variables. We havetried to fill this gap and have tested the potential influence on employment growth of 28variables, which we grouped into five sub-categories: psychological characteristics,21 theexpertise and the family origins of the manager, his/her motivations, demographic vari-ables and the presence of a team of managers.

Our results show that employment growth within SMEs is only influenced by certainvariables linked to two sub-groups, namely, the expertise of the managers and their demo-graphic characteristics. Their psychological characteristics, their family background, theirmotivations and the presence of a team of managers have no significant impact on chancesof employment growth in the sample of Belgian SMEs that we studied.

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_________________________21. Note that we only made one single hypothesis regarding the psychological characteristics of the manager.

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Four variables affecting employment growth are linked to the expertise of the manag-er. Two of these variables are linked to functional experience, namely the fact of havingexperience in the field of marketing, sales or R&D and of having experience in the fieldof consulting. The sign of the relationship is not, however, necessarily the one which wehad presumed. The fact that the manager has carried out other professional activities dur-ing the establishment of his/her firm also has a significant influence on employmentgrowth. The fourth variable linked to expertise is the education of the manager, i.e., thefact that he/she has pursued studies that are linked to the activities of his/her firm. Theother variables linked to functional experience (management experience, academic expe-rience, experience in a large firm, experience in firm creation or in self-employment) haveno significant influence. The same can be said for sector experience, the number of yearsof professional experience, the possession of several firms, previous entrepreneurial fail-ure, entrepreneurial family background, the fact the manager has been hired or belongs tothe founding family, and other variables linked to education (education in new venturecreation or in management, and level of education).

Finally, two demographic variables are also significant predictors of employmentgrowth. These are the gender of the manager and whether he/she is an immigrant. Agedoes not represent a determining factor.

If this study stresses the importance of the manager’s expertise, or at least someaspects of it, and of demographic variables, it also prunes some other branches of researchon firm growth, or at least calls for a more refined approach. It does not come as a sur-prise that traits do not exert any significant impact on growth. More generally, the searchfor psychological characteristics allowing to identify successful entrepreneurs has castdoubt among some researchers for twenty years now (Chell, 1985). If this area of researchis not abandoned, it certainly requires other methodologies (Delmar, 1996). Our findingsabout the absence of impact of motivations also call for a more refined classification ofmotivations. The simple “push-pull” dichotomy is unsatisfactory. Some factors usuallybelonging to the same pull category, like search for profit or independence, probably donot lead to the same growth decisions. This is why motivations have to be tested individ-ually. The conclusions we reach about the impact of family background show that, if com-ing from an entrepreneurial family can impact firm creation, it has no influence on growth.Like we said before, this result is quite reassuring because it shows that intergenerationalheritage does not stimulate or inhibit growth. Likewise, the fact that the manager is a pro-fessional who does not belong to the founding family has no consequence on growth.Finally, contrary to a widespread belief, the fact that the firm is started and/or led by ateam of managers does not seem to offer enough advantages to stimulate growth and/orthese advantages could be neutralized by decision conflicts.

The conclusions of our research are subject to certain limitations. First of all, our con-clusions exclusively concern individual firms. However, some organizations are liable togrow through the creation of other firms or franchises by their manager. As groups offirms were not our analysis unit, this type of growth is necessarily ignored within theframework of our results. Furthermore, we measure growth on the basis of data relatingto the start and the end of the period. However, growth is not necessarily regular. In fact,the development process can be “serrated.” However, our study does not take this phe-nomenon into consideration, because it does not take account of the intermediate data.Moreover, the type of inquiry carried out and of questions posed prevented us fromobtaining longitudinal data for a certain number of variables. Finally, our methodological

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choice to test all the variables simultaneously and not to exclude factors that could per-haps appear to be minor generally dilutes the potential contribution of the various predic-tors. Another research possibility that would make it possible to overcome this problemwould consist in a more selective approach based on the results of the present research,concentrating on expertise and demographic characteristics.

Contact InformationFor further information on this article, contact

Frank Janssen, Holder of the Brederode Chair in Entrepreneurship, Center for Research in Change,Innovation and Strategy (CRECIS), IAG School of Management, Université catholique de Louvain,Place des Doyens, 1, 1348 Louvain-La-Neuve, Belgium.

Tel.: +32 (0)10 47 84 28Fax: +32 (0)10 47 83 24Mobile: +32 (0)495 565 236E-mail: [email protected]

AcknowledgementsThis study was carried out with the financial support of ING Bank.

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