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Abstract:
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Although there are several theories of growth of the firm, the literature is limited in
two interrelated respects. First, empirical evidence does not match well theoretical
predictions. Second, the firm growth literature does not address the structure of
knowledge both in firms and sectors as well as knowledge flows between them. Based
on existing theoretical and empirical literature, the paper outlines an ‘appreciative’
theory of firm growth and presents new testable hypotheses to inform present and
future empirical research. The paper seeks to address this gap by analysing not only
levels of human capital, but also its composition both on a firm and sector level. A
key departure from earlier approaches is the inclusion of the role of ‘knowledge
structures’ played in the growth of the firm. In this context make a distinction between
(a) levels of human capital available to firms, (b) the composition of various kinds of
human capital (‘firm- specific’, ‘industry-specific’, and ‘general knowledge’)
contained, and (c) the diversity of knowledge domains represented to characterise the
knowledge structure of firms.
In addition, we present our first empirical results, using the knowledge structure
approach. In the first part of our empirical analysis we find – while controlling for
intial size and industry affiliation – that the availability of a high fraction of
employees with higher education within each establishment (an aspect of ‘general
kowledge’), is in general conducive to establishment growth. In the second part of the
empirical analysis, we find important sectoral differences with respect to the ability of
the level of formal education to explain firms growth. |
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