Sustainable rapid growth: Why some firms succeed and others fail

This dissertation seeks to understand how capabilities themselves, the management of capabilities, and the intensity with which capabilities are built or reconfigured impact a firm's ability to sustain rapid growth. In short, "how are firms that can sustain growth different from those that can not?" The research methodology addresses the two largest shortcomings of growth research. First, it includes both a large sample size and firm business unit data. Second, it uses Structural Equation Modeling (SEM) which allows and validates not only abstract factors, but interrelationships and feedback loops between the different factors. Highly significant and reliable models revealed six key differences. (1) Capabilities create a broad web of benefit for firms that sustain Size and Wealth Growth. A strong top management team (TMT Capability), and owning an insulatable, competence destroying innovation or process (IDI Capability) determine whether a firm will be able to sustain growth. This is the essential result of the research. IDI Capability serves as the foundation for sustainable growth, while TMT Capability plays critical but subordinate role. (2) Successful growth firms have a higher absorptive tolerance; faltering firms are more brittle and fragile. (3) They achieve more allocative flexibility--no build buy trade-off. (4) They enjoy more "pickings." (5) They "cherry pick" better--superior synergy. (6) They have TMT's that dynamically optimize, not maximize resource commitment. This research makes several unique contributions. Four new factors were formulated, operationalized, quantified, and validated for the first time: IDI Capability, TMT Capability, Mode of Growth, and Turbulence. The first two largely determine whether a firm will be able to sustain rapid growth. This is also the first work to gauge the direct and indirect impact of these factors on growth and each other. This proved essential as most of the six key differences between sustaining and decelerating firms would not have been observable without SEM. Most important, it identified a complex set of direct and indirect relationships that show why some firms are able to sustain growth and others are not.