1.1 BACK GROUND OF THE STUDY
Every business passes through identifiable stages in its life span. Several growth strategies related to business management approaches have been presented in the literature. Managing growth is a major strategic issue for a growing firm (Arbaugh and Camp, 2000). Strategy is the most important determinant of firm’s growth (Weinzimmer, 2000). Among high-growth firms, Dsouza (1990) identifies three primary strategic clusters
- Build strategy, emphasis on vertical integration.
- Expand strategy, emphasis on resource allocation and product differentiation; and
- Maintain strategy, emphasis on market dominance and/or efficiency.
Patel, (1995) gives an insight into how firm, particularly small firms, graduate from one stage of growth to another. In his analysis, (Patel, 1995) asserts that firms can be understood as progressing linearly overtime from one stage to another as one management problem after another is solved. Some firms remain small for years, while other small firms grow into medium- sized or even large organisations in a relatively short period. The possibility of small firms re-experiencing early crisis stages would also be seen to be excluded.
A key contribution of the framework of growth stages of small firms in the view of (Churchill and Lewis, 1984) is the identification of the success-disengagement stage, wherein, after reaching a level of stability, the firm’s owner-manager may voluntarily choose not to pursue further growth as an objective.
Literature in industrial economics typically views owner-managed firms as being “equally if not more likely to pursue growth oriented policies than management controlled companies”. (Hay and Morris, 1991). This is normally due to principal-agent problems associated with management-controlled firms. Thus, the expectation that growth is a desired objective for all small firms underlies most policy intervention tools which try to create conditions in which small and medium firm can grow.
Meanwhile, a growth state analysis of small firms needs to integrate issues specific to family firms since many small firms are owner-managed. Fundamental factors that make family firms different from other small businesses include: a strong identification of individuals with the business itself and the challenge of establishing a balance between family and business concerns (Kets, 1996).
Harvey and Evans, (1994) use a six-stage life cycle model for family businesses to integrate these issues with the growth stage literature; these studies indicate how family firms manage the issues of control and how owner’s involvements can affect the firm’s growth orientation. Thus the separation of growing firms into the success growth and the success disengage stages in the view of (Churchill and Levis, 1983) may be of greater importance to owner-managed firms than in other types of firms.
Meanwhile, available literature on small scale firms/industry contains a wealth of empirical information on the static aspects of their life cycle. Most of the information is the extent, composition, characteristics, factor proportions, and consumption patterns among others of the sector are based on cross-sectional data. According to (Chuta, 1995), time series data on the sub-sector are however not available for most developing countries including Nigeria. As such, discussions relating to the dynamism and growth of the sector have not yielded fruitful results. Policy formulation, project and programme design over the years have focused on the problem of short-term employment creation without proper understanding of their long-term implications.
Traditionally, scholars have used a biological analogy to explain the growth patterns of organisations (Kazanjian, 1988). A basic assumption in an organisation life cycle is that regularities occur in organisational development, and these regularities can be segmented into stages (Dodge and Robbins, 1992). Previous research according to (Lee, 2005) has contained varying numbers of life cycle stages. As noted by (Dodge and Robbins, 1992), there is a fair broad range in the number of stages specified as the organisation emerges from birth through maturity and eventually decline. Four general stages appear common to all, a start up or conceptual and developmental stage, a growth or commercialisation stage, a domain protection or expansion stage and stability or consolidation stage (Dodge and Robbins, 1992; Hanks and Chandler, 1994; Miller and Friesen, 1994).
This study as initiated is aimed at assessing the growth orientation of a small firms located in different industries in Eastern Nigeria. These firms belong to the pharmaceutical, oil (petroleum) and manufacturing industries respectively.