A physiological approach to analysing SME growth patterns and to understanding the distinctions and similarities between normal and abnormal growth

Building on earlier work on abnormal SME growth trajectories, this paper investigates to what extent the analysis can be extended to the study of an unusual but “normal” growth pattern. The detailed case histories of two firms which might be called micro-giants are presented. These are companies that would be categorised as small firms but are actually competing, and competing successfully, in nonniche markets with much larger firms, or even multinational giants. The resource based view and modelling approaches developed in the earlier non-normal growth situations is then applied to these cases. Key-words: Small Firm Growth; Dwarfism, Gigantism, Micro-giants; Case Studies; Modelling & Simulation INTRODUCTION A programme of research based on case studies and analysis with quantitative models has been investigating patterns of abnormal SME growth using what might be considered a pathological approach – considering how various distortions or deformities have lead to deeply disappointing outcomes caused by business dwarfism and gigantism. This paper takes a different view to investigate to what extent the analysis can be extended to other small firm growth phenomena by using the model structures and processes established to date. This approach involves the study of an organisation's vital processes and the functioning of different internal structures using both diagrams to reflect possible mechanisms and processes and system models to examine the relationships between structure and behaviour. This might be considered a physiological approach. The literature is well served with general theories about small firm growth and a number of growth archetypes have been put forward usually involving some concept of a normal growth, typically following an “S” shaped trajectory. Previous research, which has been presented at the AGSE conferences and elsewhere, has identified two forms of abnormal growth – business “dwarfism” and “gigantism” – which can lead to missed opportunities for owners/entrepreneurs and local economies, and even to business crisis and collapse. It has also shown that stunted and inflated growth phenomena, rather than being characterised by completely different rules and rationales, are closely related and that certain fundamental structures and processes underpin both forms of “abnormal” company growth behaviour. This paper reports an examination of a further SME phenomenon – what we have chosen to call "micro-giants". This is where companies that would themselves be categorised as small firms are actually competing, and competing successfully, in non-niche markets with much larger firms, or even multinational giants. Such firms are likely to have access only to modest, smallfirm level strategic assets, and possibly operating in many regards like typical small firms (e.g. through close family-owner processes), and yet they have to maintain new product development processes, distribution networks, global materials sourcing, and so on, that are comparable to their giant competitors. A number of small firms have been identified which are – directly or indirectly – competing with much larger (often international) companies, albeit in geographically delineated sectors of markets. The AGSE 2010