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The Modes of Firm Growth and Their Effects on Firm Performance – View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Elektronische Veröffentlichungen der Universitätsbibliothek Wuppertal Bergische Universität Wuppertal – Schumpeter School of Business and Economics Doctoral Thesis To obtain the academic degree Dr. rer. oec. (Doctor rerum oeconomicarum) The Modes of Firm Growth and Their Effects on Firm Performance – An Empirical Analysis of the Chemical Industry Name: Stephan Tingler Place of Birth: Bremerhaven, Germany Address: Fehrbelliner Straße 83, 10119 Berlin, Germany Submitted to: Prof. Dr. André Betzer, Prof. Dr. Stefan Thiele Submission Date: Wuppertal, September 2015 Die Dissertation kann wie folgt zitiert werden: urn:nbn:de:hbz:468-20160419-114304-1 [http://nbn-resolving.de/urn/resolver.pl?urn=urn%3Anbn%3Ade%3Ahbz%3A468-20160419-114304-1] Performance Effects of Firm Growth Modes i Table of Contents List of Abbreviations ..................................................................................................... iv List of Figures and Tables .............................................................................................. v 1 Introduction .............................................................................................................. 1 Problem Definition and Objectives .................................................................... 1 Course of the study ............................................................................................. 4 Summary of Major Findings .............................................................................. 5 2 Theoretical Basics of Firm Growth and Firm Performance .............................. 11 Definition of the Firm ....................................................................................... 11 2.1.1 Economics-Based Definition of the Firm ..................................................... 11 2.1.2 Business-Based Definition of the Firm ......................................................... 14 Definition of Firm Growth ............................................................................... 15 2.2.1 General Definition of Firm Growth .............................................................. 15 2.2.2 Definition of a Firm Growth Measure .......................................................... 17 2.2.3 Definition of a Firm Growth Formula .......................................................... 19 2.2.4 Definition of a Firm Growth Time Frame .................................................... 21 Definition of Firm Growth Modes ................................................................... 23 Definition of Firm Performance ....................................................................... 26 2.4.1 Objective Indicators of Firm Performance ................................................... 26 2.4.2 Subjective Indicators of Firm Performance .................................................. 32 3 The Academic Research Streams of Firm Growth ............................................. 35 4 The Determinants of Firm Growth ....................................................................... 37 Determinants of Organic Firm Growth ............................................................ 37 4.1.1 Firm-Internal Determinants .......................................................................... 37 Firm‐Structure Determinants ...................................................................... 37 Financial Determinants ............................................................................... 41 Personnel Determinants ............................................................................. 43 Strategic Determinants ............................................................................... 44 Other Firm‐Internal Determinants .............................................................. 46 4.1.2 Firm-External Determinants ......................................................................... 49 ii Performance Effects of Firm Growth Modes Industry or Market Determinants ............................................................... 49 Other Firm‐External Determinants ............................................................. 51 Determinants of Inorganic Growth ................................................................... 52 4.2.1 Firm-Internal Determinants of Inorganic Firm Growth ................................ 53 4.2.2 Firm-External Determinants of Inorganic Firm Growth .............................. 55 5 The Effects of Firm Growth .................................................................................. 57 The General Role of Firm Growth ................................................................... 57 The Performance Effect of Firm Growth ......................................................... 58 5.2.1 Theory Review on the Performance Effect of Firm Growth ........................ 58 Positive Theories on the Performance Effect of Firm Growth .................... 59 Negative Theories on the Performance Effect of Firm Growth .................. 64 5.2.2 Empiricism Review on the Performance Effect of Firm Growth ................. 65 Empiricism on the Accounting Performance Effect of Firm Growth .......... 66 Empiricism on the Market Performance Effect of Firm Growth ................. 68 Effect of Firm Growth Modes on Firm Performance ....................................... 70 5.3.1 Effect of Inorganic Firm Growth on Firm Performance ............................... 71 Effect of Inorganic Firm Growth on Accounting Performance ................... 71 Effect of Inorganic Firm Growth on Market Performance .......................... 75 5.3.2 Effect of Organic Firm Growth on Firm Performance ................................. 81 Effect of Market Momentum on Firm Performance ................................... 84 Effect of Market Share Gain on Firm Performance ..................................... 89 Derivation of Research Hypotheses for Empirical Analysis ............................ 96 6 An Introduction to the Chemical Industry ........................................................ 101 Business Purpose and Segments of the Chemical Industry ............................ 101 The Role of the Chemical Industry ................................................................ 102 Rationale for Chemical Industry Focus of the Empirical Analysis ................ 104 7 Introductory Methodology of the Empirical Analysis ...................................... 107 Selection of Firm Sample ............................................................................... 107 Data Sources ................................................................................................... 110 Methodology for Firm Growth Mode Analysis ............................................. 112 Determinants of Firm Performance ................................................................ 119 Performance Effects of Firm Growth Modes iii Dependent Variables ...................................................................................... 123 8 The Empirical Analysis ........................................................................................ 125 Descriptive Statistics ...................................................................................... 125 Mean Comparison of Performance Effects of Firm Growth Modes .............. 127 8.2.1 Mean Comparison Methodology ................................................................ 128 8.2.2 Mean Comparison Results .......................................................................... 131 Results of Two‐Growth‐Modes Mean Comparison .................................. 132 Results of Three‐Growth‐Modes Mean Comparison ................................ 135 Panel Regression Analysis ............................................................................. 138 8.3.1 Choice of Panel Regression Model ............................................................. 138 8.3.2 Regression Equations .................................................................................. 144 8.3.3 Test of Regression Model Assumptions ..................................................... 145 8.3.4 Results of Panel Regression ........................................................................ 150 Results of the Two‐Growth‐Modes‐Model Panel Regression ................... 150 Results of the Three‐Growth‐Modes‐Model Panel Regression ................ 153 8.3.5 Robustness of Results ................................................................................. 156 Robustness of Results of the Two‐Growth‐Modes‐Model ....................... 156 Robustness of Results of the Three‐Growth‐Modes‐Model ..................... 167 Summary of Empirical Results ....................................................................... 178 9 Conclusion ............................................................................................................. 181 Reference List .............................................................................................................. 185 Appendix ...................................................................................................................... 239 Declaration ................................................................................................................... 273 iv Performance Effects of Firm Growth Modes List of Abbreviations ANOVA Analysis of variance CAR Cumulative abnormal return EBIT Earnings before interest and taxes EBITD Earnings before interest, taxes, and depreciation
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