Explaining Size Differences in Smaller Firms

Abstract

R.T. HAMI1ITON IS FACULTY DEAN AND Professor of Management at the University of Canterbury, Christchurch, New Zealanid; Lucy Lawrence is employed in imianagemnent consultancy with Deloitte Touche Tohnmatsu in Wellington, New Zealand and was previously a graduate studeint at the University of Canterbury. The puirpose of this paper is to contribute some New Zealand evidence to the understanding of two important facets of small business research. The first of these is the explanation of the imiarked size differences that develop over time in cohorts of small firms of the same age. This was the main focus of the sttidy reported here. Second, the paper traces the imiiplication of increased size for the miianagement struicture adopted by small firrmis. Two cohorts of small firms of different ages were employed and the work derives its main findings from a multivariate analysis of employment size differences in each cohort. Size attained at a point in time some years after starttup may be used as a proxy measure foi the growth achieved by the firm. However, in making this leap from size to growth it must be borne in mind that the atithors have only cross-sectional data and cannot take into account the particular growth paths followed by individuial fir-ms, a point returned to at the enid ol the paper.