Method for and Analysis of Early-Stage Firm Growth Patterns Using World Bank Data

Abstract

Venture growth and entrepreneurial activity impact aspects of modern societies, such as wealth creation, employment, and innovation, and also potentially influence sustainable development, a key focus in the social sciences. The study of firms has benefitted from solid theoretical foundations dating back to Edith Penrose’s The Theory of the Growth of the Firm. Yet, early-stage firms, as one of the fastest-growing types of firms, continue to be poorly understood. Therefore, we focus our analysis on the specificities of the growth patterns of new firms. Our contribution to the literature is to derive an empirically based set of growth patterns observed among early-stage firms that can be used for theory testing and in proofs. Our analysis, grounded in data from the World Bank Enterprise Surveys (WBES) encompassing over 140,000 entries, provides insights into growth patterns in early-stage firms, indirectly indicating potential intersections with sustainable business practices related, for example, to management team experience. More importantly, to make our research applicable to current real-world decisions, we evaluate the predictive capacity of these growth patterns and provide a series of conclusions that could help practitioners better evaluate the growth potential of early-stage firms.