Professional Documents
Culture Documents
Successfully Launching
New Ventures, 1/e
Bruce R. Barringer
R. Duane Ireland
Chapter 13
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©2006 Prentice Hall
Chapter Objectives
(1 of 2)
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Growth: A Double-Edge Sword
(1 of 2)
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Growth: A Double-Edge Sword
(2 of 2)
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Reasons for Firm Growth
(1 of 2)
Reason for Growth Why This Reason May Motivate a Firm to Grow
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Reasons for Firm Growth
(2 of 2)
Reason for Growth Why This Reason May Motivate a Firm to Grow
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Benchmarking Against Successful Growth
Firms
(1 of 1)
• Benchmarking
– The basic idea behind benchmarking is that a firm can
improve the quality of an activity by identifying and
copying the methods of other firms that have been
successful in that area.
• For example, if a small electronics firm in the Midwest decided to
start exporting to Europe, it would be wise to identify other small
electronics firms in the Midwest that export to Europe so it could
study their methods and experiences.
• If the firm you try to “benchmark against” is not a direct or indirect
competitor, it will usually be willing to help.
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©2006 Prentice Hall
Managerial Capacity Problem
(1 of 4)
• Managerial Capacity
– In her thoughtful book, The Theory of the Growth of the
Firm, Edith T. Penrose argues that firms are collections of
productive resources that are organized in an administrative
framework.
– As a firm goes about its routine activities, it recognizes
opportunities to grow.
– The problem with this is that firms are not always prepared
or able to grow, because of limited “managerial capacity."
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©2006 Prentice Hall
Managerial Capacity Problem
(2 of 4)
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Managerial Capacity Problem
(4 of 4)
• Additional Challenges
– As a firm grows, it is faced with the dual challenges of
adverse selection and moral hazard.
• Adverse selection means that as the number of employees a firm
needs increases, it becomes increasingly difficult for it to find the
right employees, place them in appropriate positions, and provide
adequate supervision.
• Moral hazard means that as a firm grows and adds personnel, the
new hires typically do not have the same ownership incentives as
the original founders, so the new hires may not be as motivated as
the founders to put in long hours and may even try to avoid hard
work.
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Typical Challenges of Growing a Firm
(1 of 2)
Challenges
Challenge Explanation
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Typical Challenges of Growing a Firm
(2 of 2)
Challenges
Challenge Explanation
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©2006 Prentice Hall
Myths About Growth
(1 of 2)
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©2006 Prentice Hall
Myths About Growth
(2 of 2)
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©2006 Prentice Hall