Rapid growth and rapid internationalization: the case of smaller enterprises from Canada

Management DecisionRapid growth and rapid internationalization: the case of smaller enterprises fromCanadaChristian Keen Hamid Etemad

Article information:To cite this document:Christian Keen Hamid Etemad, (2012),"Rapid growth and rapid internationalization: the case of smallerenterprises from Canada", Management Decision, Vol. 50 Iss 4 pp. 569 - 590Permanent link to this document:http://dx.doi.org/10.1108/00251741211220138

Downloaded on: 29 February 2016, At: 16:18 (PT)References: this document contains references to 92 other documents.To copy this document: [email protected] fulltext of this document has been downloaded 1176 times since 2012*

Users who downloaded this article also downloaded:Xinmin Huang, Lingling Meng, Qufu Wei, Linyu Wang, (2014),"Morphology and properties of nanoscalecopper films deposited on polyester substrates", International Journal of Clothing Science and Technology,Vol. 26 Iss 5 pp. 367-376 http://dx.doi.org/10.1108/IJCST-06-2013-0073Abderrahim Bourouis, Abdeslam Omara, Said Abboudi, (2016),"Upward and downward conjugate mixedconvection heat transfer in a partially porous cavity", International Journal of Numerical Methods for Heat& Fluid Flow, Vol. 26 Iss 1 pp. 159-188 http://dx.doi.org/10.1108/HFF-01-2015-0037Geoff Buxey, (2005),"Aggregate planning for seasonal demand: reconciling theory with practice",International Journal of Operations & Production Management, Vol. 25 Iss 11 pp. 1083-1100 http://dx.doi.org/10.1108/01443570510626907

Access to this document was granted through an Emerald subscription provided by emerald-srm:149884 []

For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald forAuthors service information about how to choose which publication to write for and submission guidelinesare available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The companymanages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well asproviding an extensive range of online products and additional customer resources and services.

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committeeon Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archivepreservation.

*Related content and download information correct at time of download.

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Rapid growth and rapidinternationalization: the case ofsmaller enterprises from Canada

Christian KeenDepartment of Management, Universidad ORT Uruguay, Montevideo,

Uruguay, and

Hamid EtemadDepartment of International Business, McGill University, Montreal, Canada

Abstract

Purpose – The main objective of this paper is to develop a deeper understanding of high growth andrapid internationalization characteristics in terms of: empirically characterizing growth deriving the profileof high-growth enterprises, exploring influential factors in high-growth, pointing out the factors thatstimulate internationalization, presenting the combined influence of these factors in both the high-growthand early internationalizing enterprises, and formulating research-based policy recommendation for longerand higher growth rates and for decreasing the chances of demise in such younger firms.

Design/methodology/approach – The authors have built a longitudinal sample of more than 1,140micro, small and medium-sized enterprises that have grown at exceptionally high rates for at least fiveyears at the earlier stages of their life-cycle, and even from inception in some cases. The data-base’sorigin is a popular Canadian business publication, the Canadian Business Magazine, which annuallyidentifies and ranks growing firms in order to publish an annual list called “Profit 100: Canada’s 200fastest-growing companies”.

Findings – The findings of this analysis point to a rich population of high-growth enterprises withdiverse ages, locations, sizes and revenues that manage to achieve high domestic and internationalgrowth for much longer and in ways not explained by the extant literature across time and industries.

Research limitations/implications – This research carries the limitations of secondary data. In spiteof its richness in terms of the high growth rates, annual lists offer a limited number of attributes per firm.It would be highly recommendable to use case studies in future research and broadly based surveys arenecessary for deeper understanding of both the high and rapid growth and internationalization as well asthe influential factors, including the internal characteristics of its agents, especially the management.

Practical implications – This research indicates that rapid growing enterprises (RGEs) and rapidinternationalizing enterprises (RIEs) are distinctive firms and are primarily small and medium-sizedenterprises. Although the relative frequency of the appearance of various firm size-categories variesover time, RGEs are found across all the size and age categories. Although their total number as aproportion of all continuing firms in the economy is small, they are among the highly prominent andcontributing corporate citizens.

Social implications – This topic deserves the attention of scholars for the remarkable potential itoffers to uncover the puzzle of growth, which is a time-dependent phenomenon. HGEs attain highergrowths in shorter times; thus requiring a relatively shorter tracing of the growing firms. The topicalso deserves the special attention of policy makers as HGEs generate employment, income, socialbenefits, taxes and wealth at much higher and faster rates than an average growing firm.

Originality/value – The attractive features of HGEs’ and RIEs’ high-growth phenomenon compelledthe authors to explore the topic in more depth than initially intended. By examining rapidly-growingsmaller and younger enterprises, this study covers a wide gap in the extant literature of growth pertainingto the internationalization of smaller firms and thereby contributes the interaction of the two fields.

Keywords Small to medium-sized enterprises, Entrepreneurialism, Competitive strategy

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0025-1747.htm

Rapid growth

569

Management DecisionVol. 50 No. 4, 2012

pp. 569-590q Emerald Group Publishing Limited

0025-1747DOI 10.1108/00251741211220138

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

IntroductionRapid-growth enterprises are a selected group of firms with significant impact on theirrespective economies as they create more jobs while their larger counter parts lose netjobs (Acs and Mueller, 2007; Halabisky et al., 2006). They also create more wealth andinnovate more effectively (Markman and Gartner, 2002; Rothwell and Dodgson, 2007;Van Praag and Versloot, 2008) than other firms. Most of these types of companiesinternationalize[1] their activities early-on in their life and tend to have greaterproductivity growth (Baldwin and Gu, 2003). For example, a recent Industry Canadareport states that “growth firms are very important to the Canadian economy; hypergrowth firms accounted for 4 percent of continuing business between 1993 and 2003,but were responsible for 45 percent of net jobs created by continuing firms” (Parsleyand Halabisky, 2008, p. 1). Business community has long recognized the importance ofrapid and high-growth enterprises, celebrated their success and held-them up asmodels to be emulated. Similarly, a UK NESTA report, suggests that high-growthfirms are “responsible for 1.3 million out of the increase of 2.4 million new jobs inestablished businesses employing ten or more people between 2005 and 2008 (54 percent).” (Anyadike-Dane et al., 2009, p. 4). Business publications, such as CanadianBusiness and Inc. Magazine (a US-based publication), have carefully identified andpublished annual lists of such firms in Canada and the US for the past quarter century.Best seller books, such as the Blue Print to a Billion: 7 Essentials to Achieve ExponentialGrowth (Thomson, 2005), have prominently featured high-growth firms for theirachievements and impact for the general population[2].

However, with the notable exception of a few (Davidsson et al., 2009; Shepherd andWiklund, 2009) there is little systematic and analytically-based knowledge aboutgrowth processes in these firms and factors influencing the growth process. Similarly,we do not know how these firms attain higher-growth, while some of their largercounter-parts with rich resources fail to do so and even cannot survive. To the extentthat other entrepreneurs and firms learn from and emulate such firms they enable thesociety to attain economic and social benefits associated with the high and rapidgrowth phenomenon; thus pointing to the importance of potent public policyformulation to induce high-growth. This resonates with the Bygrave and Minnti’s(2000) and Minniti and Bygrave’s (1999) analysis suggesting that entrepreneurs learnfrom one-another and their enterprises contribute to the society’ well-being andeconomic growth (Bygrave and Minniti, 2000, p. 25)[3].

The main objective of this paper is to develop a deeper understanding thecharacteristics of high-growth and rapid internationalization in general, and those ofCanadian enterprises in particular, in terms of:

. empirically characterizing growth by deriving the profile of high-growthenterprises;

. exploring influential factors in high-growth;

. pointing out the factors that stimulate internationalization; and

. presenting the combined influence of these factors in both the high-growth andearly internationalizing enterprises.

Following this introduction, a brief background and a survey of literature will bepresented. A discussion of research question and the literature review provide for the

MD50,4

570

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

theoretical underpinnings of the phenomenon and will allow for formulation of sixhypotheses. The methodology for forming a database of Canadian high-growthenterprises and selecting a sample of high-growth enterprise for further analyticalexamination will appear next. Prominent characteristics of these enterprises, includingage, location, growth in revenue and number of employees, temporal andinternationalization processes of these firms are presented next. Then, the analysis ofthe hypotheses and findings will be presented and discussed. Finally, conclusions,implications and suggestions for further research and public-policy formation appear last.

Literature reviewThe high and rapid growth phenomenonThe phenomenon of rapid growth was initially viewed as special case of “normal”growth, which has been of interest to scholars from different perspectives for a longtime, including economic growth, job creation, entrepreneurship, management of smallenterprises, and strategy (Fischer and Reuber, 2003; Lotti et al., 2003). Birch (1987)drew attention to the significant contributions of rapid growth of smaller firms tocreation of jobs, generation of income and positive impacts at the local and nationallevels, but he did not reflect on how rapid growth is achieved. However, appropriatedata did not exist then and the lack of information still persists in many countries(Hoffman and Junge, 2006; Schreyer, 2000). A further complicating factor is thatdefinitional aspects have not reached a consensus (Delmar et al., 2003; Shepherd andWiklund, 2009).

In general, rapidly growing enterprises (RGEs) refer to companies that achievehigh-growth in a relatively short period of time. Birch (1987) profiled a family of firmsthat grow at higher rates and made more extensive contributions to employment thanothers. Birch et al. (1993) characterized firms that grow at higher than 20 percent perannum as “gazelles”. This annual growth rate corresponds with a five-year compoundgrowth rate (FYCGR) exceeding 149 percent. Markman and Gartner (2002, p. 67)reported on speedier gazelles, with even higher FYCGRs, falling between 500 and30,000 percent. They characterized that range as “extraordinary growth”. The abovediscussion suggests that there exists a continuum of growth rates, ranging fromnormal growth (1 to 10 percent) to extraordinary growth (over 200 percent per annum),parts of which are well-populated and well-characterized and others are not yet welldefined. Currently, only two categories of firms – gazelles and firms withextraordinary growth – have been empirically identified and characterized, butother categories remain under-defined or uncovered, as highlighted in Table I.

Annual growth rates (%) 0 to 10 10 to 20 20 to 43.1 43.1 to 213.2 213.2 and higher

Corresponding FYCGR (%) * 0.0 to 61 61 to 149 149 to 500 500 to 30,000 30,000 þ

Birch, Hagerty and Parson’scharacterization Uncovered Uncovered Gazelles Gazelles Gazelles

Markman and Gartner’scharacterization Uncovered Uncovered Uncovered

Extraordinarygrowth Uncovered

Current characterization Normalgrowth

Normalgrowth

Gazelles/RGEs RGEs RGEs

Table I.The continuum of growth

rates and theircorresponding

characterizations

Rapid growth

571

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

As shown in Table I, gazelles are defined as firms with growth rates exceeding 20percent per annum (or FYCGR $ 149 percent) with no upper bound and a lower boundthat has not been too difficult to achieve, while the range for extraordinary growth isbounded on both ends (500 percent # FYCGR # 30,000 percent), with a higher lowerbound than that for gazelles, leaving an undefined gap between 149 and 500 percent(FYCGRs). Similarly, growth rates higher than 30,000 percent (FYCGRs) are alsounder-defined and not frequently achieved. This perspective suggests a need for afurther exploration of growth rates. Furthermore, although a few empirical studieshave suggested certain bounded ranges for different growth rate (Birch, 1987;Markman and Gartner, 2002), the agents contributing to high and rapid growth havenot been profiled. We suggest that this lack of clarity may have hindered research andcontributed to RGEs being viewed as “illusive” (Barnard et al., 1998; Parker et al., 2005).However, there is little disagreement that RGEs’ contribute to job and income creationsignificantly. However, since these firms represent a small portion of the continuingdomestic population of firms, less than 5 percent in Canada and in the UK(Anyadike-Dane et al., 2009; Halabisky et al., 2005), they are difficult to study. Thisdiscussion suggests that there is a strong need for an examination of the rapid growthphenomenon and portraying an empirically-based profile of its agents.

Towards high-growth and rapidly internationalizing enterprisesDavid Birch’s (1987) seminal research pointed to the high impact of rapidly growingenterprises (RGEs) on the economy of the US. He also showed that such firms createdmore net jobs as larger firms contracted. This phenomenon is well recognized inCanada (Bordt et al., 2005; Parsley and Halabisky, 2008) and UK (Anyadike-Dane et al.,2009) as noted earlier. Although the management of strategy and employment areinternal challenges, the external impact of the high-growth phenomena are significant.In addition to high employment, some 50 percent of innovations and 95 percent ofradical innovations are also attributed to such firms (Robson et al., 1993). Furthermore,the literature suggests that high-growth in small and medium size enterprises (SMEs)tend to be in part due to entrepreneurial initiatives, R&D expenditures, innovativeness,and faster commercialization of knowledge in these firms (Bordt et al., 2005; Dechenauxet al., 2003; Yang and Huang, 2005).

High and rapid-growing enterprises gain further competitiveness as their scaleeconomies increases thereby enabling them to expand beyond their domestic marketand penetrate into the international markets. We refer to this international expansionas internationalization. When RGEs continue their rapid growth in internationalmarkets, we call them as rapidly internationalizing enterprises (RIEs). However,different terms and terminologies are also used. Rennie (1993) reported on smalleryounger Australian firms that entered larger international markets at or near inceptionto overcome home market limitations and called them “Born Global”. McDougall andOviatt (1994) identified a family of smaller and younger firms in some eleven countriesthat generated a “significant” portion of their revenues from international markets at,or near, inceptions and called them as international new ventures (INVs). Knight andCavusgil (1996) suggested that “born global” in the US generated some 25 percent ofrevenues in international markets. Furthermore, McDougall and Oviatt (1994)suggested that these firms’ pattern of growth and internationalization would not followthe extant theory. Etemad and Keen (2009) has found that most of the high-growth

MD50,4

572

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

enterprises were true born global that derived a large portion of their revenues frominternational sources. About 65 percent of the firms in their sample derived more than50 percent of their revenues from international sources. Keen and Etemad (2008, 2011)have identified a large number of Canadian high-growth firms that have attainedhigh-growth and internationalized rapidly and extensively. The fundamental questionis what accounts for such high-growth at home and international market(internationalization). In the next section, we examine potentially influential factors.

Economies of agglomeration and externalities: location and rapid-growthThis aspect is related to the expansive literature on the economics of proximity andagglomeration in a region (Torre and Rallett, 2005; Breschi and Lissioni, 2001), whichhave served as the policy instrument for enterprise and job creation in regionalindustrial clusters (Porter, 1998). The idea of agglomeration economies, based ongeographical proximity, goes back to Alfred Marshall (1961). Marshall’s argumentsserved as the genesis for the formulation of public policy that encouraged theformation of regional industrial clusters later on. Marshall attributed certain positiveexternalities to being located in the geographic proximity of an industrial region,resulting in additional competitiveness for firms active in the region. He observed, forexample, that a cluster of firms in a region would result in higher demand for labor,which would in turn attract higher supply of laborers, leading to lower wage ratesenabling specialization and division of labor enhancing the cluster firms’competitiveness.

One of the market manifestation of the added competitiveness would, among others,be higher or faster growth. Porter (1998) further elaborated on Marshall’sagglomeration and the concept of externality by arguing that cluster of firms withinan industry, as well as the related and support firms, would prefer to be located close totheir competitors for monitoring them and also close to their suppliers and buyers inorder to benefit from higher supply of skilled workers and new market developments.Porter (1998) defined an industrial regional cluster as the “geographical concentrationof interconnected companies and institutions in a particular field” (p. 2). Most of thepolicy instruments designed for providing environmental incentives (Krugman, 1991a;Shirley, 2005) for increasing a region’s innovativeness (Porter, 1998) and creatingfunctional cities or regions (Pouder and St John, 1996; McEvily and Zaheer, 1999) arebased on conceptual extensions and variations of regional clusters’ economies and theexternalities associated with the economics of geographic proximity (Maccarini et al.,2004; Johansson, 2004; Feldman et al., 2005). One of the main characteristics of“economics of proximity” in regional cluster is to enable firms to collaborate withothers within the proximity of the region. Such proximity, both in geographical andindustrial terms, may facilitate participation in collaborative arrangements and innetworks to further enable high-growth and rapid internationalization through highercompetitiveness. Similarly, such collaborative arrangements may also allowcompanies to access resources embedded in the regional networks, including theunused or underutilized resources of network members, thus reducing the adverseimpact of SME’s resource constraints. It may also help firms to capitalize on economiesof scale and scope through the division of labor within the regional and industrialnetworks. Overall, it may reduce their combined costs, enhance their joint efficienciesand competitiveness for enabling higher and earlier growth that would not be

Rapid growth

573

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

otherwise possible without networks, network membership and their mutualcollaborations (Brunello and Gambarotto, 2007; Combes and Duranton, 2006; Gulati,1995) in the region. Geographical proximity also provides easier access to a highdensity of competitive information and spill over (Breschi and Lissioni, 2001; Acs et al.,2009) associated with a regional industrial cluster thereby providing for higherefficiencies not available elsewhere. The formation of alliances and collaboration withothers embedded (Granovetter, 1985) in a synergistic network such as those in aglobally competitive industrial regional clusters, or in functional regions (Karlssonet al., 2008), might reduce firm’s search, acquisition and transaction costs (Bougrainand Haudeville, 2002; Williamson, 1975) in areas that may otherwise expose them tohigher costs and risks, especially in highly competitive foreign markets (Hymer, 1960;Covin and Slevin, 1989).

The presence of such policies resonates with Hallberg (2001, p. 8), who discussesenabling environments that “provide an enabling business environment that opensaccess to markets and reduces policy-induced biases against small forms”. Thisdiscussion can be summarized in three related arguments. First, collaborativebuyer-supplier relations within the cluster, or the region, would regulate competition,reduce opportunism and encourage a cooperative hyper-competition among the firms(D’Avani, 1999; Chen and Glen, 2004; Jack et al., 2004) within the cluster environment,which will distinguish firms based in such regions from others. Similarly, Karlssonet al. (2008) point to increased innovation, knowledge creation in what they call“functional regions”, which in turn enable internationally-oriented entrepreneurs andfirms based in such regions to sustain or further their growth through access tointernational markets. Second, Audertsch and Sanders (2008) suggest thatglobalization has given rise to the emergence of “entrepreneurial economy”, wherebyinternationally oriented smaller firms take advantage of the falling barriers inglobalized markets to grow even further than they would have at home. Third, thehigher competitiveness enables rapid and intense internationalization that represent ameans for cluster-based firms to exploit the advantages embeddedness in a giventerritory to exploit the associated positive externalities (skilled and specialized labor,specialized services, access to “collective international knowledge”, easy access toinformation on the internationalization strategies of main local competitors) on a largerscale in international markets (Maccarini et al., 2004). In sum, the above literaturesuggest that firm’s growth is related to their location and size, incentives associatedwith that location and its positive environmental incentives enable higher growth.Consequently, a higher concentration of rapidly growing smaller firms is more likely tobe found in certain functional and enabling locations. The above discussion suggeststhe formulation of the first family of hypotheses, in the null form, as follows:

H1a. There is no significant regional difference in the RGEs’ growth rate-relatedcharacteristics.

H1b. There is no significant difference in the growth rates of RGEs with differentsizes in terms of the number of employees.

H1c. There is no significant difference in the growth rates of RGEs of different age(age of the enterprise from inception).

MD50,4

574

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

International expansion and resource-based view (RBV) of the firmThere is a wealth of literature pointing to the higher and faster growth of smaller firmsthat also internationalize earlier-on and are among the newly-emerging forms oforganizations to which McDougall and Oviatt (1994) referred as international newventures (INVs). The literature of entrepreneurship and small firm growth document ahost of influential factors, both internal and external to the firm, stimulating growth(Covin and Slevin, 1989; Lu and Beamish, 2001; Wiklund et al., 2009). These smallerfirms manage to rise above the adverse confluences of factors that cause demise inother similar firms and even grow at high rate beyond the short term. While some oftheir growth patterns are partially explained by the extant theories of growth andinternationalization of smaller firms from different perspectives, including thoseemanating from entrepreneurship (Acs and Yeung, 1999; Morena and Casillas, 2007;Fischer and Reuber, 2003), international business (Maccarini et al., 2004; Nummela et al.,2004), economics of agglomeration and regional clusters (Huggins, 2008; Johansson,2004) and management of small enterprise (Covin and Slevin, 1989; Wiklund et al.,2009), there is a need for an integrated explanation.

From a more encompassing perspective, Penrose (1959, p. 24) considered the firm as“a collection of productive resources”, including management resources, and suggestedthat growth is the result of a manager’s strategic use of firm’s resources efficiently.Logically, the state of management impacts smaller firms’ growth more than that of thelarger firms, as smaller younger firms suffer more from constrained resources,especially management experience and capabilities, than the larger firms. The abovediscussion is best captured by Penrose’s (1959) view that a company may or may nothave better resources, but will achieve rents because of making a better use of itsresources (in strategic and efficiency terms). This resonates highly with the issue at theheart of entrepreneurship: it is not the state of resources that motivate enentrepreneurs, but it is the ambitions of capable entrepreneurs and managers (Gundryand Welch, 2001; Wiklund et al., 2003) and their beliefs, attitudes and expectations(Wiklund et al., 2003), regardless of their resources, that put an entrepreneurial firm onstrategically more efficient path that enables its higher growth. High-growth has beendirectly attributed to the presence and preponderance of other influential factors,prominent among them are the firm’s age and size (Dunne and Hughes, 1994; Knightet al., 2004), the type of small firms (Verhees and Meulenberg, 2004), firm’s strategicflexibility. Similarly, the resource-based view of the firm in particular (Barney, 1991;Grant, 1991; Wernerfelt, 1984) maintains that certain resources are required forsupporting competitive strategy (Porter, 1998) to lead to the higher competitivenessnecessary for higher growth. This higher growth is posted to be contingent upon moreresources.

In contrast, the entrepreneurship literature has focused on opportunity and theentrepreneur as the enabling factors of growth (Aldrich and Martinez, 2001; Gundryand Welch, 2001; Upton et al., 2001). Entrepreneurial theories (Kirzner, 1973; Aldrichand Martinez, 2001; Shane and Venkataramen, 2000) have maintained that a firm’sgrowth and overall success emanate from the confluence of the entrepreneurialcharacteristics or the fit in entrepreneur-owner-mangers and exploitation ofopportunities (Acs and Yeung, 1999; Shane and Venkataramen, 2000). WhileSchumpeter (1934) saw a firm’s growth as the consequence of creating opportunity inthe market place and fulfilling it through the process of creative destruction, Kirzner

Rapid growth

575

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

(1973) suggested that firms would only need to identify and then respond to suchopportunities through strategic arbitrage. Therefore, the managers’ cognition of how toidentify and fulfill opportunity (e.g. effectively formulating strategies for operating atthe dynamic nexus of opportunity, information and resources as Shane andVenkataramen (2000) put it) may have a significant impact on the firm’s growth.However, this stance can be combined with the Penrose’s view of resource utilizationby managers: For example, when earmarked resources are not efficiently utilized torealize an opportunity, a firm will have to bear the additional costs of acquiring moreresources. Such inefficiencies result in lower, or slower, growth. This argumentsuggests that size, as a proxy for the possession of resources, may not be anappropriate indicator, because entrepreneurial firms with highly efficient and effectiveentrepreneur-owner-managers can compensate for their relatively poorer state ofresources, whereas firms with richer resources but ineffective managers may fail torealize their full resource potentials. Size and age may enable higher growth, but theyneither are necessary nor sufficient conditions[4].

There is a general agreement that the younger smaller firms suffer from constrainedresources, which may include management capability and experience, especially in theearly stages of their lifecycles (Davidsson and Honig, 2003; Karra and Phillips, 2004;Upton et al., 2001), which may inhibit rapid growth. However, the entry into the muchlarger international markets offer higher opportunities than a firm’s domestic market(which are necessary for higher growth) may compensate for the initially weaker stateof entrepreneurship in smaller firms. Not only does the larger size and the higherdiversity of international markets offer richer opportunities, but also the risk ofrealizing opportunities may be reduced as diversity may create room for new and novelactivities not possible in the domestic context. This suggests that not only growth isdependent on the firm’s state of management (with number of employees as a proxy)but growth is also moderated by managerial acumen in seeking opportunity and on theway opportunities are exploited. In summary, the extant theory points to an unclear, ifnot contradictory, a-priori relation between internationalization and rapid growth. Weformulate the second family of hypotheses, in a null form, to enable results to point tothe actual direction, as follows:

H2a. There is no significant difference in the growth rates of strictly domesticallyoriented and internationalized firms.

H2b. There is no significant difference between the internationalization intensityfor RGEs with different number of employees.

H2c. There is no significant difference between the internationalization intensityfor RGEs of different ages.

These families of hypotheses enable us to explore selected aspects of rapid growth andinternationalization and examine their variations across a few factors such as location,size, age, and internationalization intensity.

MethodologyWe have built a longitudinal sample of more than 1,140 micro, small and medium-sizedhigh-growth enterprises that have grown at exceptionally high rates for at least fiveyears at relatively earlier stages of their life-span and in some cases from inception[5].

MD50,4

576

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

The data-base’s origin is he most prominent Canadian business publication, theCanadian Business, which annually identifies and ranks growing firms in order topublish a highly-popular annual list called “Profit 200: Canada’s 200 fastest growingcompanies”[6]. Although there are other lists of high-growth companies(e.g. McKinsey’s Top 50 High Technology, Touch Ross Top Fifty, etc.), we decidedto use this list as a starting point because it uses a five-year time span and for itsmethodological and measurement prudence. In building the data base, we werecognizant of the recommendations of researchers regarding validity and concurrentreliability of growth measurements (Shepherd and Wiklund, 2009; Davidsson et al.,2009; Weinzimmer et al., 1998) and complied with them throughout this research.

The annual members of the list had attained the highest growth in revenues overfive consecutive years ending at the beginning of the publication year. We havecompiled selected characteristics of all 200 members of six annual listings, from 2003 to2008. As a small number of firms sustain their high-growth for more than five yearsand appear in more than one annual list, we decided to keep only the first appearanceof the firm in the annual listing of such firms to avoid double counting. As a result,each firm appears only once in the database.

The criteria for eligibility are very strict (also methodical, rigorous and transparent).In order to be eligible for consideration, certain pre-requisites must be met and muchinformation must be submitted for further analysis:

(1) All firms must submit complete financial statements based on GAAP for fiveconsecutive years for calculating their five-year growth rates.

(2) They must have been founded and been generating revenues for at least fiveconsecutive fiscal years from the first week of their fiscal year five years ago(called the base of “t”, hereafter) and to show continued five full years of revenuegrowth (called “t þ 5”, hereafter).

(3) All firms must have had their headquarters in Canada with a significantCanadian operation and be independent as of December 31st of the nominationyear.

(4) All firms must have had more than 50 percent Canadian ownership if aprivately owned company, while public companies with 50 percent or lessCanadian ownership are judged on a case-by-case basis).

(5) All firms must have had a minimum revenue of $100,000 in the base year “t” inorder to ensure that their rapid growth had been built-upon a substantial base.

(6) All firms must have had a minimum revenue of $1,000,000 in the most recentyear (t þ 5); and independent contractors are excluded.

(7) All firms must have also had some full-time and part-time employees in thebase year, which are both included in the head count.

(8) Subsidiaries or divisions of other companies, except for holding companies areexcluded from consideration.

Sample characteristicsAlthough the majority of the 1,200 fastest growing, Canadian-based andindependent companies in the original database qualify as SMEs, the selectioncriteria does not impose size restrictions; and as a result, the list includes firm with

Rapid growth

577

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

sizes ranging from micro to large firms. Table II provides a summary profile ofthese high-growth and rapidly internationalizing firms. A total of 46 of thesecompanies are micro enterprises with one to nine employees, while there are 108large firms with more than 500 employees with a wide range; but more than 85percent are SMEs (see Tables II and III).

Internationalization appeared to have had a positive impact on growth rates andother characteristics. We dichotomized the sample based on internationalizationintensity in order to compare the impact of internationalization. As shown in Table II,internationalized firms have more impressive characteristics across all variables. Forexample, while the local enterprises (i.e. no reported international sales) attainimpressive average FYCAGR of 1,560 percent, firms with internationalized activitiesachieve even higher FYCAGR of 1,883 percent.

For this latter group, about 72.5 percent of the sample, the averageinternationalization intensity measured in terms of the proportion of revenues frominternational sources is about 55 percent with a median of 65 percent. These young firmshave an average age of less than 11 years with the median of nine years from inception.Their revenues after five years of high-growth increase by a factor of 10, more than $27million for the local firms and more than $50 Million for internationalized firms. Finally,the median FYCAGR for the local high-growth firms is consistently smaller than thecorresponding average FYCAGR for internationalized firms, indicating that thecumulative growth distribution is skewed to the left of the median for the entire sample.In other words, more than 50 percent of the firms in the sample attained largerFYCAGRs than that of the median over five year.

Median Average Maximum Minimum

Exports as % revenues (n ¼ 1136) 0.26 0.396 100 0Revenues @ t (n ¼ 1139) $1,011,760 $4,803,537 $184,000,000 $16,980Revenue @ t þ 5 (n ¼ 1139) $10,123,0630 $44,300,054 $2,130,210,580 $512,850Age (n ¼ 1139) 9 10.64 40 5Staff @ t (n ¼ 1112) 13 36 484 2Staff @ t þ 5 (n ¼ 1138) 67 202 6,993 2Delta staff (n ¼ 1138) 48 182 6,520 0Growth rate (n ¼ 1138) (%) 729.5 1,795 112,519 179

Table II.Summary profiles ofsample characteristics ofselected characteristics

Local firms (n ¼ 313) International firms (n ¼ 826)Average Median Average Median

Exports as % of revenues 0 0 0.547 0.65Revenue @ t $3,233,023 $853,908 $5,398,660 $1,147,792Revenue @ t þ 5 $27,400,00 $7,530,641 $50,700,00 $11,500,000Age 11.48 9 10.98 9Staff @ t 31 10 38 15Staff @ t þ 5 175 41 213 77Delta staff 145 29 56 197Growth rate (%) 1,560.5 613 1,883.7 786

Table III.Comparison of selectedcharacteristics for localfirms andinternationalized firms

MD50,4

578

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

AnalysisGiven the distributional properties of the data and the non-random sampling, wechoose non-parametric tests because they assume fewer statistical restrictions(Robinson and Hofer, 1997) and produce more conservative results than parametrictests (Siegel, 1956) as statistical requirements are not violated. As we aim to comparefirm characteristics across geographical locations, size (defined by both the revenueand employment sizes), age and incremental employment over five years (i.e. Staff @t þ 5 less Staff @ t, called Delta Staff in Tables II and III and hereafter) rather thanexplaining the causality in potential relationships, we used two-tailed tests ofsignificance. The Wilcoxon-Mann-Whitney and Chi-square tests were used to test thedifference of the means in pair-wise comparisons. Similarly, the Kruskal-Wallis test, anonparametric alternative to the analysis of covariance, was utilized to test forsignificance in n-sample cases (for a detail description see Siegel, 1956).

Consistent with the extant literature on different categories of firm sizes, weassigned firms to four categories based on the number of employees: micro (1-9), small(10-99), medium, (100-499) and large (500 and more employees). Given the relativelylower number of firms based in the Canadian Prairie (Manitoba and Saskatchewan),Maritime (New Brunswick, Nova Scotia and Prince Edward Island) and the northernprovinces and territories, we pooled them all together in a category called the “rest ofCanada”. Therefore, we will be analyzing regional influence of five “regions” that referto Alberta, British Columbia, Ontario, Quebec Provinces and the rest of Canada pooledtogether. We also followed Statistics Canada’s practice of assigning each firm’slocation to one of five “regions” and referring to them as such hereafter. As notedearlier, we have stated our hypotheses in the null form to allow for objectiveinterpretation of the empirical results of the statistical tests.

The first hypothesis was designed to detect the potential differential impact ofdifferent geographic locations on the firms’ growth-related characteristics resultingfrom high-growth after five years. In our extensive statistical testing in search ofdifferential regional impacts, we did not find significant statistical difference ingrowth-related characteristics of different firm sizes across the five regions. However,we found significant difference between the two extremes (i.e. micro and large firms).These two firm sizes have more pronounced differences regardless of theirinternationalization. Location seems to be relevant only when small and large firms(in pair-wise comparison) are compared at 5 percent significance level and the microand large firms at a 10 percent significant level. The results for the tests aresummarized in Tables III and IV. Stated differently, we found strong evidence (at a 5percent significance level) that small-large firms and weak evidence that micro-largediffer with respect to their location. The comparative impact of different growth-relatedcharacteristics of different firm sizes for local and internationalized firms are shown inTable III. The differential impact of location for both the local and internationalizedfirms are shown in the column entitled “location” in Tables IV and V respectively.

Regarding age and size hypotheses, the results for age and the two indicators of sizeare shown in Tables IV and V under three different columns entitled “Age”, “Revenue@ t þ 5” and “Delta Staff”. The relationships between the indicators of age and sizecategories are mixed. The Wilcoxon-Mann-Whitney tests suggest that there exists astatistically significant difference between the means of firms in terms of age except forthe case of micro and small firms at a 5 percent significant level. The revenue @ t þ 5

Rapid growth

579

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

and delta staff significantly differ by size of firms. However, the pair-wise comparisonof different size categories suggests that there is no evidence that growth rate differsacross the various size categories except for the pair-wise comparison of small andlarge firms. We found evidence that micro-small, micro-medium firms and smallmedium firms do not differs significantly on their growth rates. However, the evidenceindicates that large firms grow faster than small and medium-sized firms and there isweak evidence to suggest the same for the case of micro-large firms. Similarly, we didnot find evidence that the size in terms of number of employees is influenced by thefirms’ regional location. The results of the tests are summarized in Tables IV and Vunder the corresponding columns.

With respect to the impact of internationalization, we found strong evidence thatlocal firms statistically differ from their internationalized counterparts with respectpractically all growth related characteristics. Our overall comparison of local and

Prob . jzj and Z values Revenue @ t þ 5 Age Growth rate Delta staff Location

Micro-small 0.000 0.328 0.242 0.000 0.75424.159 20.977 1.170 27.790

Micro-medium 0.000 0.044 0.748 0.000 0.32525.950 22.009 0.321 27.315

Micro-large 0.000 0.274 0.062 0.000 0.07326.030 21.092 21.865 26.141

Small-medium 0.000 0.039 0.203 0.0000 0.25827.860 22.063 21.272 211.604

Small-large 0.000 0.582 0.0007 0.000 0.03827.875 20.550 23.376 28.272

Medium-large 0.000 0.443 0.017 0.000 0.26025.738 0.766 22.374 27.503

Table IV.Comparison of thegrowth-relatedcharacteristics of localfirms

Prob . jzj and Z values Revenue @ t þ 5 Age Growth rate Delta staff Location

Micro-small 0.003 0.263 0.448 0.000 0.62222.972 21.118 20.758 28.262

Micro-medium 0.000 0.016 0.235 0.000 0.81727.462 22.398 21.186 28.101

Micro-large 0.000 0.0010 0.080 0.000 0.7057.500 23.279 21.748 27.508

Small-medium 0.000 0.000 0.173 0.000 0.420217.451 24.294 21.361 221.295

Small-large 0.000 0.000 0.022 0.000 0.718214.855 25.450 22.287 214.987

Medium-large 0.000 0.003 0.222 0.000 0.861211.409 22.892 21.220 213.580

Table V.Comparison of thegrowth-relatedcharacteristics ofinternational firms

MD50,4

580

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

international firms showed that they significantly differs in term of revenue at t þ 5,growth rate, delta staff, staff at t, staff at t þ 5. Furthermore and as shown in Table VI,the sign of Z values is always in favor of the internationalized firms in comparison tolocal firms. For example, the increases in revenue (Revenue at t þ 5) and employmentsize (Delta staff) of the internationalized firms are significantly larger (using theWilcoxon-Mann-Whitney test). In terms of age, only micro-medium and small-mediumfirms showed weak evidence that their age differ (alpha ¼ 5 percent).

Based on the results presented in Table VI, we can strongly argue thatinternationalized firms have attained higher figures, while the local and internationalfirms have similar means.

DiscussionFactors enabling high-growth ratesOur analyses show that Canadian RGEs are not exclusively in high-knowledgeintensive or high-technology industries or specific to one or two regional industrialclusters. Nevertheless, Ontario, British Columbia, Alberta and Quebec have the highestconcentration of RGEs and RIEs but these companies are also present in the rest of theprovinces. Similarly, they are found in a diverse set of industries and different sizeswith different, but all high, growth rates across times. Interestingly, more than twothirds of them are active in the international markets. Their average five-yearcumulative growth rate is 1,795 percent. On average, they are less than ten-years old.The number of their average employees in the base year is about 36 staff members,which increases to more than 200 after five years of growth. While domesticallyoriented firms (RGEs) have impressive figures, their internationally orientedcounterparts (RIEs) achieve higher performance. For example, they achieve higheraverage growth rates (1,883 vs 1,560 percent), generate higher revenues ($50,700,000 vs$27,400,000) and become larger (213 vs 175 staff members) after five years ofhigh-growth at a younger age (10.98 vs 11.48 years). Although, they constitute a smallportion of continuing firms in Canada; they are by no means “illusive” as there is acontinuous stream of them in all sizes across time and industries. While Table Iprovides the profile of these firms in terms of selected characteristics of the entirepopulation of REs, Table II distinguishes RGEs that export from those who do not inour sample. We called them “internationalized firms” and “local firms”, respectively. Infact, the former characterize typical rapidly internationalizing enterprises (RIEs).

Regarding influential factors, the literature of growth points to a confluence of threeinfluential factors as noted earlier: external influences, internal factors and theirinteractions. The economics of agglomeration (Marshall, 1961), externalities (Combesand Duranton, 2006; Johansson, 2004; Scitovsky, 1954), regional industrial clusters(Marshall, 1961; Feldman et al., 2005) and conducive policy environment (Acemogluand Johnson, 2005; Porter, 1990) are among the external factors found to be influential.

Prob . jzj and Z valuesRevenue @

t þ 5 AgeGrowth

rateDeltastaff Staff t

Staff @t þ 5 Location

Local-international firms 0.000 0.922 0.000 0.000 0.0007 0.000 0.01725.174 20.097 24.712 25.016 23.404 24.948 2.386

Table VI.The comparison of the

growth-relatedcharacteristics of the local

and international firms

Rapid growth

581

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Such factors are capable of generating certain economies and conferring thecorresponding advantage on the firms located in a region that are not available to firmslocated elsewhere. These economies reduce the firm’s transaction costs (Williamson,1975), which contribute to the firm’s competitiveness and consequent high and rapidgrowth. Logically, when a firm’s management recognizes and exploits such regionalincentives and externalities to its advantage, it can grow faster.

However, our analysis provides almost no support for such external economies asfactors impacting rapid growth and rapid internationalization, although smaller firmsappear to benefit from location-specific advantages more than the larger firms. Wecould not accept the hypothesis regarding the impact of location (H1A) as we did notfind significant difference among RGEs located in different regions in Canada. Itappears that regional incentives and externalities may have fostered higherconcentrations of RGEs; but have not resulted in significantly higher growth rates.We suggest that this mixed result is because of behavioral factors: when positiveexternalities results in incremental competitiveness for some firms, competitors areforced to catch-up in order to compete for survival. Naturally, strategic emulation is alogical choice: by moving into enabling environments and regional industrial clusters,entering firms can access similar pertinent economies for exploitation to gaincomparable competitiveness (Karlsson et al., 2008). These economies would attractmore firms to the cluster, increase competition among them that results in the cluster’sand region’s growth, but may not lead to competing firms’ higher growth. Therefore,extra-market economies that are available within a region may confer differentialadvantages that help firms to gain initial competitiveness but it would erode over timeas more firms enter the region and vigorously compete for similar advantages.

On the subject of the internal influences, these firms appear to be highlyentrepreneurial. For example, they do not seem to have been hampered by insufficientresources by compensating for disadvantage, and other deficiencies, by rapidlycovering their potential gaps in order to avoid slowing-down their growth. Theirentrepreneur-owner-managers may have recognized early on that markets treats allfirms roughly in the same fashion and it is hard, if-not impossible, for a young firm toexploit intra-market externalities, if and when such externalities can be identifiedwithin the market. However, extra market externalities may confer any initialincremental comparative advantage on the firm to place itself on a higher growthplatform before others migrating to the location to take advantage of them. Thisexplains as to why location failed to account for RGEs’ higher growth rates averagedacross five years possibly in the later growth stages. This failure also suggests otherinteresting possibilities:

. the theory of agglomeration does not have much explanatory power for RGEs ashigh-growth firms use efficiencies that are far beyond regional agglomerationeconomies;

. the contribution of other potent factors may have over taken regionalexternalities; and

. our index of location was not powerful enough to have discriminated betweenfirms.

In addition, there is little evidence to suggest that these firms have not taken advantageof inter-firm externalities within their proximity which is not necessarily bounded by

MD50,4

582

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

geographical terms. In fact, Author suggest that RGEs and RIEs draw upon their socialnetwork and social capital that may be spread very widely. Such previously-notidentified advantages may have provided opportunities to build a competitive positionas rapidly as possible and to cover for families of gaps facing smaller growing firm(e.g. shortage of resources, inexperience, information, knowledge, contacts, lack ofinternational presence, etc.) to avoid the adversity of fundamental chasms that mostnewly-emerging firms cannot overcome. Some manage to survive but fall behindothers that grow faster.

Our analysis provides indirect support for internal influential factors. We drew onthe seminal work of Penrose (1959), who was among the earliest scholars to realize theimpact of management as a valuable resource, similar to other valuable firm resources,as suggested by the resource-based view of the firm (Barney, 1991; Wernerfelt, 1984).Assuming that management could identify and access all the necessary resources fromexternal and internal sources, the necessary time and efforts for doing so is bound totake a toll in terms of taking time and adding to operating costs and even reduce afirm’s effectiveness, which would adversely impact its growth potential. As Porter(1991, p. 108) points out, “resources are not valuable in and of themselves, but they arevaluable because they allow firms to perform activities [. . .] business processes are thesource of competitive advantage.” Porter’s suggestion resonates with Penrose’s (1959)view that a company may not have more resources but still achieve rents because it ofmaking better use of the resources at its disposal. Our results lend further support tothe potency of internal factors, especially management.

As noted earlier, the above review of literature formed the basis for the formulationfour hypotheses (H1b, H1c, H2b and H2c) designed to examine the impact of age and afirm’s size on growth in terms of number of employees and revenues as proxies forresources and endowments. Age presented us with complexity of its own. On the onehand, progression of time provides the younger, smaller firms with larger customerbase, experience and possibility of accessing larger and riche networks resulting inlarger pool of resources. On the other hand, however, it becomes much more difficult tomaintain the same growth, or attain higher growth rate, as the size of the firm becomeslarger due to growth over time. These conflictive effects may have contributed to thefailure of age in having significance impact on high-growth. Although we did notintend to show a cause-and-effect relations, both the overall test and pair-wisecomparison tests show that the age difference among firms are not significant. Basedon the results, we can refute the popular myth that only small firms are capable ofrapid and high-growth and high-growth is a small size phenomenon.

Regarding the impact of internationalization in terms of international intensity (thepercentage of revenues generated in international markets), internationalized firmsachieved higher average growth than the high-growth localized firms across the board.We argued that larger international markets offer larger potential opportunities forenabling further growth. This argument received empirical support asinternationalized firms have done significantly better than the domestic ones.

ConclusionThis research indicates that RGEs are distinctive firms and are primarily small andmedium-sized enterprises. Although the relative frequency of the appearance ofvarious firm size-categories varies overtime, RGEs are found across all the size and age

Rapid growth

583

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

categories. As discussed earlier, this suggests that rapid-growth is not specific to onlysmaller sizes. In other words, high-growth is not an argument about the small startingbase (the size @ t) enabling high-growth rates. Nor is it about the advantages of aparticular region, time period or economic conditions. We used a commonly-acceptedfour size-categories in terms of micro (one to nine employees), small (10 to 99employees), medium (100 to 499 employees), and large firms (more than 500employees). Our analysis clearly shows that high-growth is not specific to smallerfirms, nor is it specific to a particular region. Our analysis also shows that RGEs spanacross all the six time periods in our longitudinal sample and the five geographicalregions (four provinces and others combined in a category termed the “rest of Canada”)in Canada. Furthermore, our findings provide implicit support for the impact ofmanagement capabilities and strategy as influential factors in growth.

As regards the rarity of RGEs, the fact that Canadian Business has identified acontinuous stream of RGEs in most of the Canadian regions across time and sizes,suggests that they are not rare or illusive. We suggest that the notion of illusivenessmay have arisen in part due to the understudied and less-understood aspects of thehigh-growth phenomenon and in part due to the perceived rarity of growth ratesbeyond two to three times the normal rates of 1 to 10 percent per annum(corresponding to 5 percent to 61 percent FYCAGR, respectively). In this study, wefound that more than 300 firms attained FYCAGRs higher than 2000 percent andinternationalized firms achieved even higher rates across the board. Furthermore,broad country-based studies, as noted earlier, have reported that the number ofhigh-growth enterprise is in the range of four to five percent of continuing firms’population.

The topic of high-growth deserves the attention of entrepreneurship and growthscholars. As growth is a time-dependent phenomenon and RGEs attain higher growthsin shorter times, they offer a remarkably shorter, and thus richer, potential foruncovering the puzzle of growth and growing firms. The topic also deserves the specialattention of policy makers as high-growth firms generate employment, income, socialbenefits, taxes and wealth at much higher and faster rates than an average growingfirm. However, they may require a special policy environment as their overall benefitsseem to well outweigh the cost of such environments. We suggest that formulaic rulewithout due consideration for RGEs’ capacity to create knowledge, generate hightechnology and spill-over for other firms, foster change and act as catalyst for otherfirms to emulate, cannot well-serve the interest of any of the stake holders concerned.We suggest that RGEs deserve close attention for their high potentials. However, if ourobservation regarding HGEs as under-studied phenomenon is an indication of thedifficulties in examining them, the policy community faces even tougher challengesthan the academic community for creating highly conducive policy environments tostimulate the growth of potential firms to become RGEs. On the face of it, the a prioriodds are not in favor of typically smaller and younger firms turning into rapid growingenterprises. The silver lining, however, is in the empirical evidence that these firmsmaintain high-growth potentials beyond one or two years, which offer the policycommunity the opportunity to improve upon their diagnostic tools and measures toidentify them earlier-on in order to augment their growth with conducive policies.

This study covers a gap in the extant literature of growth pertaining to theinternationalization of smaller firms and thereby contributes to the interaction of the

MD50,4

584

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

both fields. However, in-depth case studies and broadly based surveys are necessaryfor deeper understanding of high-growth and internationalization as well as theinfluential factors, including the internal characteristics of its agents, especially thoseof the management. Although this research carries the limitations of using secondarydata, the publicity and prominence associated with the Profit Top 200 lists and thestrict standards of its publisher have instilled a high level of rigor and reliability in thelist over the past two decade that is at least matching, if not exceeding, characteristicsof primary data. Furthermore, the authors’ exercise of extreme prudence, as discussedearlier, gives this research a high level of reliability and validity.

Notes

1. Internationalization belongs to an extensive literature on the subject and is defined broadly asa firm conducting a part of its activities beyond its home country. “Forwardinternationalization” refers to generation of revenues in international markets; while“backward internationalization” refers to “out-sourcing” and “off-shoring” from internationalsources. For a more extensive definition and analysis of internationalization’s impact onsmaller firms’ competitiveness and growth, see Etemad (2011).

2. In his book, A Blue Print to a Billion: 7 Essentials to Achieve Exponential Growth, MrThompson, a former McKinsey consultant, examined the seven common essentials in a set of387 “Blueprint companies”. The book chronicled the common processes by which “billiondollar firms” grew rapidly from an IPO since 1980 and reached $1 billion in revenue by 2005.The book became available in 2006.

3. Using Bygrave and Minniti’s (2000) terms, entrepreneurial activities expand the society’s“production possibilities frontier”, which benefits the society as a whole (i.e. is a socialbenefit). Naturally, HGEs’ contribution to that expansion is relatively higher than that ofother firms and thus have higher social benefits.

4. The mixed empirical evidence regarding the relationship between size and age and rapidgrowth are consistent with the above arguments.

5. It is important to note the fact that high-growth rates are located on the right side of growthrate distribution and in that sense high-growth enterprises are representing the right-tail ofoverall population of continuing firms’ growths.

6. This lists serves as the bench marking baseline for others to emulate. It has become ade-facto list of young corporate heroes. Many companies on the lists are recognized by theChamber of Commerce, relevant industry associations and the government agencies. Theexecutive of these companies receive top awards for their achievements. As a result of thisattention the process of identifying them for the list has become methodical, rigorous andtransparent.

References

Acemoglu, D. and Johnson, S. (2005), “Unbundling institutions”, Journal of Political Economy,Vol. 113 No. 5, pp. 949-95.

Acs, Z.J. and Mueller, P. (2007), “Employment effects of business dynamics: mice, gazelles andelephants”, Small Business Economics, Vol. 30 No. 1, pp. 85-100.

Acs, Z. and Yeung, B. (1999), “Entrepreneurial discovery and the global economy”, Global Focus,Vol. 11 No. 3, pp. 63-71.

Acs, Z.J., Braunerhjelm, D.B., Audretsch, H. and Carlsson, B. (2009), “The knowledge spillovertheory of entrepreneurship”, Small Business Economics, Vol. 32 No. 1, pp. 15-30.

Rapid growth

585

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Aldrich, H. and Martinez, M. (2001), “Many are called, but few are chosen: an evolutionaryperspective for the study of entrepreneurship”, Entrepreneurship: Theory and Practice,Vol. 25 No. 4, pp. 41-56.

Audertsch, D. and Sanders, M. (2008), “Globalization and rise of the entrepreneurial economy”,discussion paper no. 08-21, Tjalling Koopmans Research Institute, University of Utrecht,Utrecht.

Baldwin, J.R. and Gu, W. (2003), “Export-market participation and productivity performance inCanadian manufacturing”, Canadian Journal of Economics, Vol. 36 No. 3, pp. 634-57.

Barnard, P., Fischer, E., Reuber, R. and Rumball, D. (1998), “Elusive gazelles: finding them andhelping them grow”, summary of a think tank organized by Fulcrum Partners, January.

Barney, J. (1991), “Firm resources and sustained competitive advantage”, Journal ofManagement, Vol. 17 No. 1, pp. 99-120.

Birch, D. (1987), Job Creation in America: How Our Smallest Companies Put the Most People toWork, Free Press, New York, NY.

Birch, D., Haggerty, A. and Parsons, W. (1993), Gazelle Jobs, Cognetics, Boston, MA.

Bordt, M., McVey, J. and Short, A. (2005), “Characteristics of firms that grow from small tomedium size: industrial and geographic distribution of small high-growth firms”, StatisticsCanada, Catalogue No. 880006XIE2005005, Ottawa.

Bougrain, F. and Haudeville, B. (2002), “Innovation, collaboration and SMEs internal researchcapacities”, Research Policy, Vol. 31, pp. 735-47.

Breschi, S. and Lissioni, F. (2001), “Knowledge spill over and local innovation system”, Industrialand Corporate Change, Vol. 10 No. 4, pp. 975-1005.

Brunello, B. and Gambarotto, F. (2007), “Do spatial agglomeration and local labor marketcompetition affect employer-provided training? Evidence from the UK”, Regional Scienceand Urban Economics, Vol. 37 No. 1, pp. 1-21.

Bygrave, W. and Minniti, M. (2000), “The social dynamics of entrepreneurship”,Entrepreneurship Theory and Practice, Vol. 24 No. 3, pp. 25-36.

Chen, X. and Glen, C. (2004), “On the intricacies of the Chinese guanxi: a process model of guanxidevelopment”, Asia Pacific Journal of Management, Vol. 21 No. 3, pp. 305-24.

Combes, P. and Duranton, G. (2006), “Labor pooling, labor poaching and spatial clustering”,Regional Science and Urban Economics, Vol. 36 No. 1, pp. 1-28.

Covin, J. and Slevin, D. (1989), “Strategic management of small firms in hostile and benignenvironments”, Strategic Management Journal, Vol. 10 No. 1, pp. 75-87.

D’Aveni, R.A. (1999), Hypercompetition: Managing the Dynamics of Strategic Maneuvering, FreePress, New York, NY.

Davidsson, P. and Honig, B. (2003), “The role of social and human capital among nascententrepreneurs”, Journal of Business Venturing, Vol. 18 No. 3, pp. 301-31.

Davidsson, P., Steffens, P. and Fitzsimmons, J. (2009), “Growing profitable or growing fromprofits: putting the cart before the horse”, Journal of Business Venturing, Vol. 24 No. 4,pp. 388-406.

Dechenaux, E., Goldfarb, B., Shane, S. and Thursby, M. (2003), “Appropriability and the timingof innovation: evidence from MIT inventions”, working paper 9735, National Bureau ofEconomic Research, Cambridge, MA.

Delmar, F., Davidson, P. and Gartner, W.B. (2003), “Arriving at the high-growth firm”, Journal ofBusiness Venturing, Vol. 18, pp. 189-216.

MD50,4

586

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Dunne, P. and Hughes, A. (1994), “Age, size, growth and survival: UK companies in the 1980s”,The Journal of Industrial Economics, Vol. 42 No. 2, pp. 115-40.

Etemad, H. (2011), “International growth of smaller firms from emerging economies andinternationalization theories”, in Etemad, H. (Ed.), The Process of Internationalization inEmerging SMEs and Emerging Economies, Edward Elgar Publishing, Northampton, MA.

Etemad, H. and Keen, C. (2009), “Profiling and modeling high-growth and rapidlyinternationalizing enterprises from Canada”, Proceedings of the Annual ASACConference, June 6-9, Niagara Falls.

Feldman, M., Francis, J. and Bercovitz, J. (2005), “Creating a cluster while building a firm:entrepreneurs and the formation of industrial clusters”, Regional Studies, Vol. 39 No. 1,pp. 129-41.

Fischer, E. and Reuber, R. (2003), “Support for rapid-growth firms: a comparison of the views offounders, government policymakers, and private sector resource providers”, Journal ofSmall Business Management, Vol. 41 No. 4, pp. 346-65.

Grant, R. (1991), Contemporary Strategic Analysis: Concepts, Techniques, Application, BasilBlackwell, Cambridge, MA.

Granovetter, M. (1985), “Economic action and social structure: the problem of embeddedness”,American Journal of Sociology, Vol. 91 No. 3, pp. 481-510.

Gulati, R. (1995), “Does familiarity breed trust? The implications of repeated ties for contractualchoice in alliances”, Academy of Management Review, Vol. 38 No. 1, pp. 85-112.

Gundry, L. and Welch, H. (2001), “The ambitious entrepreneur: high-growth strategies ofwomen-owned enterprises”, Journal of Business Venturing, Vol. 16 No. 5, pp. 453-70.

Halabisky, D., Dreessen, E. and Parsley, C. (2006), “Growth in firms in Canada, 1985-1999”,Journal of Small Business and Entrepreneurship, Vol. 19 No. 3, pp. 255-68.

Halabisky, D., Lee, B. and Parsley, C. (2005), Small Business Exporters: A Canadian Profile, SmallBusiness Policy Branch, Ottawa.

Hallberg, K. (2001), “A market-oriented strategy for small and medium-scale enterprises”,discussion paper no. 40, World Bank, Washington, DC.

Hoffman, A. and Junge, M. (2006), “Documenting data on high-growth firms and entrepreneursacross 17 countries”, mimeo, FOR A, Copenhagen.

Huggins, R. (2008), “The evolution of knowledge clusters”, Economic Development Quarterly,Vol. 22 No. 4, pp. 277-89.

Hymer, S. (1960), The International Operations of National Firms: A Study of Foreign DirectInvestment, MIT Press, Cambridge, MA.

Jack, S.L., Dodd, S.D. and Anderson, A.R. (2004), “Social structures and entrepreneurial networks:the strength of strong ties”, International Journal of Entrepreneurship and Innovation,Vol. 5 No. 2, pp. 107-28.

Johansson, B. (2004), “Parsing the menagerie of agglomeration and network externalities”,CESIS Electronic Working Paper Series No. 2, CESIS (Centre of Excellence for Science andInnovation Studies), The Royal Institute of Technology, Stockholm, available at: www.inra.kth.se/cesis/research/workpap.htm (accessed 21 October 2010).

Karlsson, C., Johansson, B. and Stough, R. (2008), “Entrepreneurship and innovation in functionalregions”, CESIS Electronic Working Paper Series No. 144, CESIS (Centre of Excellence forScience and Innovation Studies), The Royal Institute of Technology, Stockholm.

Karra, N. and Phillips, N. (2004), “Entrepreneurship goes global”, Ivey Business Journal Online, p. A1.

Rapid growth

587

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Keen, C. and Etemad, H. (2008), “High-growth and rapidly internationalizing smaller enterprisesfrom Canada”, 11th McGill International Entrepreneurship Conference, December 15-18,2008, Dunedin, New Zealand.

Keen, C. and Etemad, H. (2011), “The impact of entrepreneurial capital and rapidly growingfirms: the Canadian example”, International Journal of Entrepreneurship and SmallBusiness, Vol. 12 No. 3, pp. 273-89.

Knight, G. and Cavusgil, T. (1996), “The born global firm: a challenge to traditionalinternationalization theory”, in Cavusgil, S. and Madsen, T. (Eds), Advances inInternational Marketing, JAI Press, Greenwich, CT, pp. 11-26.

Knight, G., Madsen, T.K. and Servais, P. (2004), “An inquiry into born-global firms in Europe andthe USA”, International Marketing Review, Vol. 21 No. 6, pp. 645-65.

Kirzner, I. (1973), Competition and Entrepreneurship, University of Chicago, Chicago, IL.

Krugman, P. (1991), “Increasing returns and economic geography”, Journal of Political Economy,Vol. 99 No. 3, pp. 483-99.

Lotti, F., Santarelli, E. and Vivarelli, M. (2003), “Does Gibrat’s law hold among young, smallfirms?”, Journal of Evolutionary Economics, Vol. 14, pp. 213-35.

Lu, J. and Beamish, P. (2001), “The internationalization and performance of SMEs”, StrategicManagement Journal, Vol. 22 Nos 6/7, pp. 565-86.

McDougall, P. and Oviatt, B. (1994), “Toward a theory of international new ventures”, Journal ofInternational Business Studies, Vol. 25 No. 1, pp. 45-64.

McEvily, B. and Zaheer, A. (1999), “Bridging ties: a source of firm heterogeneity in competitivecapabilities”, Strategic Management Journal, Vol. 20 No. 12, pp. 1133-56.

Maccarini, M., Scabini, P. and Zuchella, A. (2004), “Internationalisation strategies in Italiandistrict-based firms: theoretical modeling and empirical evidence”, working paper 2004/3,Facolta di Economia, Universita dell’Insubria, Varese.

Markman, G. and Gartner, W. (2002), “Is extraordinary growth profitable? A study of Inc. 500high growth companies”, Entrepreneurship Theory and Practice, Vol. 27 No. 1, pp. 65-75.

Marshall, A. (1961), Principles of Economics, An Introductory Volume, 8th ed., Macmillan,London.

Minniti, M. and Bygrave, W. (1999), “The microfoundations of entrepreneurship”,Entrepreneurship Theory and Practice, Vol. 23 No. 4, pp. 41-52.

Morena, A.M. and Casillas, J.C. (2007), “High-growth SMEs versus non-high-growth SMEs:a discriminant analysis”, Entrepreneurship and Regional Development, Vol. 19 No. 1,pp. 69-88.

Nummela, N., Saarenketo, S. and Puumalainen, K. (2004), “A global mindset-a prerequisite forsuccessful internationalization?”, Canadian Journal of Administrative Sciences, Vol. 21No. 1, pp. 51-64.

Parker, S.C., Storey, D.J. and van Witteloostuijn, A. (2005), “What happens to gazelles?The importance of dynamic management strategy”, research report, EntrepreneurshipResearch Series, Centre for Entrepreneurship, Durham Business School, DurhamUniversity, Durham.

Parsley, C. and Halabisky, D. (2008), “Profile of growth firms: a summary of Industry Canadaresearch”, Industry Canada, Government of Canada, Ottawa, March.

Penrose, E. (1959), The Theory of the Growth of the Firm, Wiley, New York, NY.

Porter, M. (1990), The Competitive Advantage of Nations, Macmillan, London.

MD50,4

588

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Porter, M. (1991), “Towards a dynamic theory of strategy”, Strategic Management Journal,Vol. 12 No. 2, pp. 95-117.

Porter, M. (1998), “Cluster and the new economics of competition”, Harvard Business Review,Vol. 90 No. 2, pp. 73-93.

Pouder, R. and St John, C. (1996), “Hot spots and blind spots: geographical clusters of firms andinnovation”, The Academy of Management Review, Vol. 21 No. 4, pp. 1192-225.

Rennie, M. (1993), “Global competitiveness: born global”, The McKinsey Quarterly, Vol. 4,pp. 45-52.

Robinson, K.C. and Hofer, C.W. (1954), A Methodological Investigation of the Validity andUsefulness of Parametric and Nonparametric Statistical Data Analysis Techniques for NewVenture Research, Babson College Press, Wellesley, MA, pp. 143-705, Frontiers ofEntrepreneurship.

Robson, G., Gallagher, C. and Daly, M. (1993), “Diversification strategy and practice in smallfirms”, International Small Business Journal, Vol. 11 No. 2, pp. 31-40.

Rothwell, R. and Dodgson, M. (2007), “External linkages and innovation in small andmedium-sized enterprises”, R&D Management, Vol. 21 No. 2, pp. 125-38.

Schreyer, P. (2000), “High-growth firms and employment”, OECD Science, Technology andIndustry working papers 2000/3, OECD Publishing, Paris.

Schumpeter, J. (1934), The Theory of Economic Development, Harvard University Press, Boston,MA.

Scitovsky, T. (1954), “Two concepts of external economies”, Journal of Political Economy, Vol. 62,pp. 143-51.

Shane, S. and Venkataramen, S. (2000), “The promise of entrepreneurship as a field of research”,Academy of Management Review, Vol. 25 No. 1, pp. 217-26.

Shepherd, D. and Wiklund, J. (2009), “Are we comparing apples with apples or apples withoranges? Appropriateness of knowledge accumulation of growth studies”,Entrepreneurship Theory and Practice, Vol. 33 No. 1, pp. 105-23.

Shirley, M. (2005), “Institutions and development”, in Menard, C. and Shirley, M. (Eds), Handbookof New Institutional Economics, Springer, Dordrecht, pp. 611-38.

Siegel, S. (1956), Nonparametric Statistics for the Behavioral Sciences, McGraw-Hill, New York,NY.

Thomson, D. (2005), Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth, Wiley& Sons, New York, NY.

Torre, A. and Rallett, A. (2005), “Proximity and localization”, Regional Studies, Vol. 1 No. 39,pp. 1-13.

Upton, N., Teal, E. and Felan, J. (2001), “Strategic and business planning practices of fast growthfamily firms”, Journal of Small Business Management, Vol. 39 No. 1, pp. 60-72.

Van Praag, M.C. and Versloot, P.H. (2008), “The economic benefits and costs of entrepreneurship:a review of the research”, Foundations and Trends in Entrepreneurship Research, Vol. 4No. 2, pp. 65-154.

Verhees, F. and Meulenberg, M. (2004), “Market orientation, innovativeness, product innovation,and performance in small firms”, Journal of Small Business Management, Vol. 42,pp. 134-54.

Weinzimmer, L., Nystrom, P. and Freeman, S. (1998), “Measuring organizational growth: issues,consequences and guidelines”, Journal of Management, Vol. 24 No. 2, pp. 235-62.

Rapid growth

589

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

Wernerfelt, B. (1984), “A resource based view of the firm”, Strategic Management Journal, Vol. 5No. 2, pp. 171-80.

Wiklund, J., Davidsson, P. and Delmar, F. (2003), “What do they think and feel about growth?An expectancy-value approach to small business managers’ attitudes toward growth”,Entrepreneurship Theory and Practice, Vol. 27 No. 3, pp. 247-70.

Wiklund, J., Patzelt, H. and Shepherd, D. (2009), “Building an integrative model of small businessgrowth”, Small Business Economics, Vol. 32 No. 4, pp. 351-74.

Williamson, O. (1975), Markets and Hierarchies: Analysis and Anti-Trust Implications, Free Press,New York, NY.

Yang, C.-H. and Huang, C.-H. (2005), “R&D, size and firm growth in Taiwan’s electronicsindustry”, Business Economics, Vol. 25 No. 5, pp. 477-87.

Further reading

Baldwin, J.R. (1998), “Were small producers the engines of growth in the Canadianmanufacturing sector in the 1980s?”, Small Business Economics, Vol. 10 No. 4, pp. 349-64.

Birch, D.L. and Medoff, J. (1994), “Gazelles”, in Solmon, L.C. and Levenson, A.R. (Eds), LaborMarkets, Employment Policy and Job Creation, Westview, Boulder, CO, pp. 159-67.

Gomes-Casseres, B. (1997), “Alliance strategies of small firms”, Small Business Economics, Vol. 9No. 1, pp. 33-44.

Makino, S., Isobe, T. and Chan, C. (2004), “Does country matter?”, Strategic Management Journal,Vol. 25 No. 10, pp. 1027-43.

Corresponding authorChristian Keen can be contacted at: [email protected]

MD50,4

590

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)

This article has been cited by:

1. Simone Guercini, Andrea RunfolaSmall-Medium Sized Manufacturers’ Internationalization throughRetail Store Openings Abroad: A Study of the Italian Fashion Industry 61-84. [Abstract] [Full Text][PDF] [PDF]

2. Francisco Puig, Miguel González-Loureiro, Pervez N. Ghauri. 2014. Internationalisation for Survival: TheCase of New Ventures. Management International Review . [CrossRef]

3. Birgit Hagen, Stefano Denicolai, Antonella Zucchella. 2014. International entrepreneurship at thecrossroads between innovation and internationalization. Journal of International Entrepreneurship 12,111-114. [CrossRef]

4. Alistair R. Anderson, Farid Ullah. 2014. The condition of smallness: how what it means to be small detersfirms from getting bigger. Management Decision 52:2, 326-349. [Abstract] [Full Text] [PDF]

5. Lynn Childs Michelle, Jin Byoungho. 2014. Is Uppsala model valid to fashion retailers? An analysis frominternationalisation patterns of fast fashion retailers. Journal of Fashion Marketing and Management: AnInternational Journal 18:1, 36-51. [Abstract] [Full Text] [PDF]

6. In Hyeock Lee, Eunsuk Hong, Laixiang Sun. 2013. Regional knowledge production and entrepreneurialfirm creation: Spatial Dynamic Analyses. Journal of Business Research 66, 2106-2115. [CrossRef]

7. David Urbano, Andreu Turró. 2013. Conditioning factors for corporate entrepreneurship: an in(ex)ternalapproach. International Entrepreneurship and Management Journal 9, 379-396. [CrossRef]

8. Maribel Guerrero, Iñaki Peña-Legazkue. 2013. The effect of intrapreneurial experience on corporateventuring: Evidence from developed economies. International Entrepreneurship and Management Journal9, 397-416. [CrossRef]

9. Pablo Cortés, Luis Onieva, José Guadix, Jesús Muñuzuri. 2013. Designing fixed-income securitiesinvestment portfolios under different scenarios. The Service Industries Journal 33, 859-875. [CrossRef]

10. Pei-Chun Lin, Zhou-Hern Lin. 2013. Buying impulse triggered by digital media. The Service IndustriesJournal 33, 892-908. [CrossRef]

11. Yi-Min Chen, Feng-Jyh Lin. 2013. Do financially innovative futures matter?. The Service Industries Journal33, 941-957. [CrossRef]

12. Jaume Argerich, Esther Hormiga, Jaume Valls-Pasola. 2013. Financial services support for entrepreneurialprojects: key issues in the business angels investment decision process. The Service Industries Journal 33,806-819. [CrossRef]

13. Tiffany Hui-Kuang Yu, Kun-Huang Huarng. 2013. Entrepreneurial firms' wealth creation via forecasting.The Service Industries Journal 33, 833-845. [CrossRef]

14. Kun‐Huang Huarng, Tiffany Hui‐Kuang Yu. 2013. Forecasting regime switches to assist decision making.Management Decision 51:3, 515-523. [Abstract] [Full Text] [PDF]

15. Antonia Mohedano-Suanes, María Mar Benavides-Espinosa. 2013. Technology transfer, specificlocal knowledge and entrepreneurial partner control in international joint ventures. InternationalEntrepreneurship and Management Journal 9, 95-112. [CrossRef]

Dow

nloa

ded

by C

onco

rdia

Uni

vers

ity A

t 16:

18 2

9 Fe

brua

ry 2

016

(PT

)