Confronting Theories of Firm Growth in Light of Degrees-of-Freedom Analysis

Abstract

T his article aims to confront four theories of firm growth -Optimum Firm Size, Stage Theory of Growth, The Theory of the Growth of the Firm and Dynamic Capabilities -with empirical data derived from a backward-looking longitudinal qualitative case of the growth trajectory of a Brazilian capital goods firm. To do so, we employed Degree of Freedom-Analysis for data analysis. This technique aims to test the empirical strengths of competing theories using statistical tests, in particular Chi-square test. Our results suggest that none of the four theories fully explained the growth of the firm we chose as empirical case. Nevertheless, Dynamic Capabilities was regarded as providing a more satisfactory explanatory power.