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AN EXPLORATORY FACTOR ANALYSIS OF FIRMS ENDOGENOUS GROWTH MEASURES
Corresponding Author(s) : Leonard Tchuta
Humanities & Social Sciences Reviews,
Vol. 7 No. 5 (2019): September
Abstract
Purpose: This study attempts to standardize firm endogenous growth measures by performing exploratory factor analysis on nine firm endogenous growth measures (equity book value, equity market value, working capital, stock R&D investments, stock advertisement investment, stock capital asset investment, operating expenses, sales revenue, and the number of employees).
Methodology: Data was generated by pooling a panel dataset of 116 firms and13 years timespan data.
Main Findings: The result of the analysis reveals three underlying firm growth factors (namely firm financials, operations, and capabilities) representing the initial nine growth measures.
Implications/Applications: The results of this research can be used as the bases for further research in firm endogenous growth model analysis.
Keywords
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- Arrow, K. J. (1962). The economic implications of learning by doing. The Review of Economic Studies, 29(3), 155-173. https://doi.org/10.2307/2295952 DOI: https://doi.org/10.2307/2295952
- Barreto, I. (2010). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36(1), 256-280. https://doi.org/10.1177/0149206309350776 DOI: https://doi.org/10.1177/0149206309350776
- Blundell, R., Griffith, R., & Van Reenen, J. (1999). Market share, market value and innovation in a panel of British manufacturing firms. The Review of Economic Studies, 66(3), 529-554. https://doi.org/10.1111/1467-937X.00097 DOI: https://doi.org/10.1111/1467-937X.00097
- Boonvut, S. (2017). The Quality Financial Statements of Small and Medium Enterprises Business (SME's) in View of the Tax Auditor. International Journal of Business and Economic Affairs, 2(6), 335-340. https://doi.org/10.24088/IJBEA-2017-26002 DOI: https://doi.org/10.24088/IJBEA-2017-26002
- Cebeci, I. (2016). Istanbul's position as a financial centre: An empirical analysis. International Journal of Business and Economic Affairs, 1(1), 1-5. https://doi.org/10.24088/IJBEA-2016-11001 DOI: https://doi.org/10.24088/IJBEA-2016-11001
- Chauvin, K. W., & Hirschey, M. (1993). Advertising, R&D expenditures and the market value of the firm. Financial management, 128-140. https://doi.org/10.2307/3665583 DOI: https://doi.org/10.2307/3665583
- Coad, A., & Rao, R. (2010). Firm growth and R&D expenditure. Economics of Innovation and New Technology, 19(2), 127-145. https://doi.org/10.1080/10438590802472531 DOI: https://doi.org/10.1080/10438590802472531
- Del Monte, A., & Papagni, E. (2003). R&D and the growth of firms: Empirical analysis of a panel of Italian firms. Research Policy, 32(6), 1003-1014. https://doi.org/10.1016/S0048-7333(02)00107-5 DOI: https://doi.org/10.1016/S0048-7333(02)00107-5
- Eveleens, C. (2010). Innovation management; a literature review of innovation process models and their implications. Science, 800: 900.
- Geroski, P., & Machin, S. (1992). Do Innovating Firms Outperform Nonâ€Innovators? Business Strategy Review, 3(2), 79-90. https://doi.org/10.1111/j.1467-8616.1992.tb00030.x DOI: https://doi.org/10.1111/j.1467-8616.1992.tb00030.x
- Hall, B. H. (2007). Measuring the returns to R&D: The depreciation problem. National Bureau of Economic Research. https://doi.org/10.3386/w13473 DOI: https://doi.org/10.3386/w13473
- Hall, B. H., & Mairesse, J. (1995). Exploring the relationship between R&D and productivity in French manufacturing firms. Journal of Econometrics, 65(1), 263-293. https://doi.org/10.1016/0304-4076(94)01604-X DOI: https://doi.org/10.1016/0304-4076(94)01604-X
- HBR. (2011). HBR's 10 Must Reads on Strategy (Including Featured Article" What Is Strategy?" by Michael E. Porter). New York, NY: Harvard Business Press.
- Joliffe, I., & Morgan, B. (1992). Principal component analysis and exploratory factor analysis. Statistical Methods in Medical Research, 1(1), 69-95. https://doi.org/10.1177/096228029200100105 DOI: https://doi.org/10.1177/096228029200100105
- Juan V. Garcia-Manjon, M. E. R.-M., & Romero-Merino, M. E. (2011). Research, development, and firm growth. Empirical evidence from European Top R&D spending firms. Research Policy, 41(6), 1084-1092. https://doi.org/10.1016/j.respol.2012.03.017 DOI: https://doi.org/10.1016/j.respol.2012.03.017
- LOPES, A., Kissimoto, K. O., Salerno, M. S., Laurindo, F. J., & Carvalho, M. C. (2012). Innovation management: a literature review about the evolution and the different innovation models. Paper presented at the International Conference on Industrial Engineering and Operations Management.
- Madani, S. (2017). Economic evaluation of investment for oceanographic research by using cost benefit analysis (A case study of Iranian National Institute for Oceanography). International Journal of Business and Economic Affairs, 2(2), 85-90. https://doi.org/10.24088/IJBEA-2017-22001 DOI: https://doi.org/10.24088/IJBEA-2017-22001
- McKelvie, A., & Wiklund, J. (2010). Advancing firm growth research: A focus on growth mode instead of growth rate. Entrepreneurship Theory and Practice, 34(2), 261-288. https://doi.org/10.1111/j.1540-6520.2010.00375.x DOI: https://doi.org/10.1111/j.1540-6520.2010.00375.x
- Niesing, C. M., Merwe, S. W. D., & Potgieter, D. M. (2016). The impact of income-generating projects on stimulating the development of entrepreneurial activities in communities: The holding hands case. International Journal of Business and Economic Affairs, 1(1), 36-46. https://doi.org/10.24088/IJBEA-2016-11006 DOI: https://doi.org/10.24088/IJBEA-2016-11006
- Nonaka, I., & Toyama, R. (2003). The knowledge-creating theory revisited: knowledge creation as a synthesizing process. Knowledge Management Research & Practice, 1(1), 2-10. https://doi.org/10.1057/palgrave.kmrp.8500001 DOI: https://doi.org/10.1057/palgrave.kmrp.8500001
- Shepherd, D., & Wiklund, J. (2009). Are we comparing apples with apples or apples with oranges? Appropriateness of knowledge accumulation across growth studies. Entrepreneurship theory and practice, 33(1), 105-123. https://doi.org/10.1111/j.1540-6520.2008.00282.x DOI: https://doi.org/10.1111/j.1540-6520.2008.00282.x
- Shin, S. J., & Seo, W. (2017). Identifying new technology areas based on firm’s internal capabilities. Journal of Administrative and Business Studies, 3(3), 114-121. https://doi.org/10.20474/jabs-3.3.1 DOI: https://doi.org/10.20474/jabs-3.3.1
- Sundar, C. S., & Al Harthi, F. N. S. (2015). Impact of capital structure on firm's profitability with reference to companies listed on MSM (Muscat Securities Market). International Journal of Business and Administrative Studies, 1(1), 23- 28. https://doi.org/10.20469/ijbas.10004 DOI: https://doi.org/10.20469/ijbas.10004
- Teece, D. J. (2009). Dynamic capabilities and strategic management: organizing for innovation and growth. Oxford University Press, USA.
References
Arrow, K. J. (1962). The economic implications of learning by doing. The Review of Economic Studies, 29(3), 155-173. https://doi.org/10.2307/2295952 DOI: https://doi.org/10.2307/2295952
Barreto, I. (2010). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36(1), 256-280. https://doi.org/10.1177/0149206309350776 DOI: https://doi.org/10.1177/0149206309350776
Blundell, R., Griffith, R., & Van Reenen, J. (1999). Market share, market value and innovation in a panel of British manufacturing firms. The Review of Economic Studies, 66(3), 529-554. https://doi.org/10.1111/1467-937X.00097 DOI: https://doi.org/10.1111/1467-937X.00097
Boonvut, S. (2017). The Quality Financial Statements of Small and Medium Enterprises Business (SME's) in View of the Tax Auditor. International Journal of Business and Economic Affairs, 2(6), 335-340. https://doi.org/10.24088/IJBEA-2017-26002 DOI: https://doi.org/10.24088/IJBEA-2017-26002
Cebeci, I. (2016). Istanbul's position as a financial centre: An empirical analysis. International Journal of Business and Economic Affairs, 1(1), 1-5. https://doi.org/10.24088/IJBEA-2016-11001 DOI: https://doi.org/10.24088/IJBEA-2016-11001
Chauvin, K. W., & Hirschey, M. (1993). Advertising, R&D expenditures and the market value of the firm. Financial management, 128-140. https://doi.org/10.2307/3665583 DOI: https://doi.org/10.2307/3665583
Coad, A., & Rao, R. (2010). Firm growth and R&D expenditure. Economics of Innovation and New Technology, 19(2), 127-145. https://doi.org/10.1080/10438590802472531 DOI: https://doi.org/10.1080/10438590802472531
Del Monte, A., & Papagni, E. (2003). R&D and the growth of firms: Empirical analysis of a panel of Italian firms. Research Policy, 32(6), 1003-1014. https://doi.org/10.1016/S0048-7333(02)00107-5 DOI: https://doi.org/10.1016/S0048-7333(02)00107-5
Eveleens, C. (2010). Innovation management; a literature review of innovation process models and their implications. Science, 800: 900.
Geroski, P., & Machin, S. (1992). Do Innovating Firms Outperform Nonâ€Innovators? Business Strategy Review, 3(2), 79-90. https://doi.org/10.1111/j.1467-8616.1992.tb00030.x DOI: https://doi.org/10.1111/j.1467-8616.1992.tb00030.x
Hall, B. H. (2007). Measuring the returns to R&D: The depreciation problem. National Bureau of Economic Research. https://doi.org/10.3386/w13473 DOI: https://doi.org/10.3386/w13473
Hall, B. H., & Mairesse, J. (1995). Exploring the relationship between R&D and productivity in French manufacturing firms. Journal of Econometrics, 65(1), 263-293. https://doi.org/10.1016/0304-4076(94)01604-X DOI: https://doi.org/10.1016/0304-4076(94)01604-X
HBR. (2011). HBR's 10 Must Reads on Strategy (Including Featured Article" What Is Strategy?" by Michael E. Porter). New York, NY: Harvard Business Press.
Joliffe, I., & Morgan, B. (1992). Principal component analysis and exploratory factor analysis. Statistical Methods in Medical Research, 1(1), 69-95. https://doi.org/10.1177/096228029200100105 DOI: https://doi.org/10.1177/096228029200100105
Juan V. Garcia-Manjon, M. E. R.-M., & Romero-Merino, M. E. (2011). Research, development, and firm growth. Empirical evidence from European Top R&D spending firms. Research Policy, 41(6), 1084-1092. https://doi.org/10.1016/j.respol.2012.03.017 DOI: https://doi.org/10.1016/j.respol.2012.03.017
LOPES, A., Kissimoto, K. O., Salerno, M. S., Laurindo, F. J., & Carvalho, M. C. (2012). Innovation management: a literature review about the evolution and the different innovation models. Paper presented at the International Conference on Industrial Engineering and Operations Management.
Madani, S. (2017). Economic evaluation of investment for oceanographic research by using cost benefit analysis (A case study of Iranian National Institute for Oceanography). International Journal of Business and Economic Affairs, 2(2), 85-90. https://doi.org/10.24088/IJBEA-2017-22001 DOI: https://doi.org/10.24088/IJBEA-2017-22001
McKelvie, A., & Wiklund, J. (2010). Advancing firm growth research: A focus on growth mode instead of growth rate. Entrepreneurship Theory and Practice, 34(2), 261-288. https://doi.org/10.1111/j.1540-6520.2010.00375.x DOI: https://doi.org/10.1111/j.1540-6520.2010.00375.x
Niesing, C. M., Merwe, S. W. D., & Potgieter, D. M. (2016). The impact of income-generating projects on stimulating the development of entrepreneurial activities in communities: The holding hands case. International Journal of Business and Economic Affairs, 1(1), 36-46. https://doi.org/10.24088/IJBEA-2016-11006 DOI: https://doi.org/10.24088/IJBEA-2016-11006
Nonaka, I., & Toyama, R. (2003). The knowledge-creating theory revisited: knowledge creation as a synthesizing process. Knowledge Management Research & Practice, 1(1), 2-10. https://doi.org/10.1057/palgrave.kmrp.8500001 DOI: https://doi.org/10.1057/palgrave.kmrp.8500001
Shepherd, D., & Wiklund, J. (2009). Are we comparing apples with apples or apples with oranges? Appropriateness of knowledge accumulation across growth studies. Entrepreneurship theory and practice, 33(1), 105-123. https://doi.org/10.1111/j.1540-6520.2008.00282.x DOI: https://doi.org/10.1111/j.1540-6520.2008.00282.x
Shin, S. J., & Seo, W. (2017). Identifying new technology areas based on firm’s internal capabilities. Journal of Administrative and Business Studies, 3(3), 114-121. https://doi.org/10.20474/jabs-3.3.1 DOI: https://doi.org/10.20474/jabs-3.3.1
Sundar, C. S., & Al Harthi, F. N. S. (2015). Impact of capital structure on firm's profitability with reference to companies listed on MSM (Muscat Securities Market). International Journal of Business and Administrative Studies, 1(1), 23- 28. https://doi.org/10.20469/ijbas.10004 DOI: https://doi.org/10.20469/ijbas.10004
Teece, D. J. (2009). Dynamic capabilities and strategic management: organizing for innovation and growth. Oxford University Press, USA.