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Growth, Diversification, and Business Group Formation in Entrepreneurial Firms

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  • Donato Iacobucci
  • Peter Rosa

Abstract

Recent empirical research has demonstrated that the growth process of entrepreneurial firms is frequently achieved through the formation of business groups: i.e. a set of companies run by the same entrepreneur (or entrepreneurial team). This has been hypothesised as result of a growth process by diversification of the original activity. This entrepreneurial growth process offers an alternative explanation for the formation of business Groups, than that arising from managerial efficiency and expediency. The main aim of the article is to explore group formation through entrepreneurial diversification using a sample of high growth entrepreneurial firms. The analysis demonstrates that the running of a group of companies by the same entrepreneur is not only induced by the geographical extension of their operation and by diversification but also by the differentiation policy aimed at serving different market segments within the same sector. This seems to contrast with the diversification policy and organisational setting of large, managerial firms Copyright Springer 2005

Suggested Citation

  • Donato Iacobucci & Peter Rosa, 2005. "Growth, Diversification, and Business Group Formation in Entrepreneurial Firms," Small Business Economics, Springer, vol. 25(1), pages 65-82, August.
    • Handle: RePEc:kap:sbusec:v:25:y:2005:i:1:p:65-82
    DOI: 10.1007/s11187-005-4258-8
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    References listed on IDEAS

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    1. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-369, June.
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    More about this item

    Keywords

    business groups; diversification; entrepreneurship; habitual entrepreneurs; L2; M13;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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