The Conceptualisation of Growth: Are Employment and Turnover Interchangeable Criteria?

Abstract

Many different variables have been used to measure the firm’s growth. Employment and sales are the two most used criteria within the literature on growth determinants. Most of the time, researchers do not provide any theoretical justification for using one or the other criterion and appear to use them interchangeably, as if they constituted equivalent representations of the same observable reality, that is, the firm’s size. Using a sample of Belgian small and medium sized enterprises (SMEs), we have tested the interchangeability of these two criteria. Our results show that these two types of growth are determined by factors that are largely distinct. Organisational growth is thus shown to be a multifaceted phenomenon that cannot be reduced to a single dimension. This also means that growth cannot be measured through composite indicators, mixing different variables like sales or workforce, because they do not measure the same phenomenon. From a managerial point of view, this means that the resources that are mobilised and the strategies that are implemented by a firm should vary depending on whether it wishes to attain one or the other type of growth.