Medium-sized firms and the limits to growth: A case study in the evolution of a spin-off firm

This paper explores potential barriers to growth in key areas which can become increasingly problematic for some smaller to medium-sized firms (SMEs) as they grow and evolve from their early status as small scale spin-offs. These potential growth barriers can occur in: finance, competition from new firms or products and organizational integration of resources. Finns that fail to properly plan, manage and allocate resources will encounter difficulties in each area. Such firms are said to have poor 'governance systems'. While not proposing a universal theory about small firm behaviour, we argue that firms can encounter the same problems associated with poor communication, bureaucracy and loss of entrepreneurial spirit that plague large firms. We also show that the routines used to promote growth based on collaboration can sometimes create problems for firms as they ignore new challenges. We elaborate various theories on the limits to growth by examining the case of IV, a university spin-off.