Abstract

This paper focuses on firm-level growth implications of knowledge strategies in order to investigate the question why so many successful ventures stop growing and why some begin to decline. Existing organizational capabilities function as enablers when they provide opportunity for expansion by exploiting firm-specific knowledge. Firm specific knowledge, however, is only valuable when expansion occurs into fields that are already in some way related to the domain of current operations. As a result most firms tend to favor and pursue opportunities only if that follows the path they originally took. Growth opportunities that fall outside of or only marginally relate to firm-specific knowledge are likely to be perceived as outside of reach. Hence, early investment into intellectual capital increases the firm’s ability to learn and harvest knowledge that is new to the firm, improving corporate entrepreneurship capacity. Knowledge – especially in young firms – is a key determinant of a firm’s growth potential: how fast (what rate) and at what direction (path dependent or undetermined) a firm is likely to grow.

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