Looking inside the black box of growth efforts in declining small firms: The role of growth factors, planning, and implementation

Richard Demartino, Saunders College of Business
Rajendran Sriramachandramurthy, Saunders College of Business
Joseph C. Miller, Saunders College of Business
John N. Angelis, Elizabethtown College


Despite a large and growing literature on the subject, little is understood about the phenomenon of small business growth. Specifically, the small business growth literature has often emphasized "why" opposed to "how" firms grow. This chapter sheds light on this black box of growth by investigating the phases of planning and implementation processes separately to explore the choice of strategic expansion modes. It examines a much under-researched firm category: declining small firms. Employing a three-year longitudinal study using a multi-case study method, we find that while growth approaches are typically contextually (industry) derived, formalized planning greatly affects implementation. Further, resources are the key mediating variable between formal planning and implementation - firms with slack resources will typically implement their contextually influenced planned growth course, and firms with inadequate resources will typically implement through interactive learning, which causes them to downscale the growth plans or exit the market (merger or sale).