The choice of growth method: strategies and resources

Purpose The purpose of this paper is to investigate the effect of a firm's growth strategy (specialization and diversification) and its specific resources, such as intangible assets and previous experience in the choice of growth method (organic or external). Design-methodology-approach The paper analyses 859 external growth arrangements and 1,057 cases of organic growth. A binomial logistic regression is used to test the hypotheses. Findings Results show that firms prefer to grow internally when their growth strategy is specialization, but prefer external growth methods – such as mergers, acquisitions and alliances – when their growth strategy is diversification and they have previous experience in these methods. Research limitations-implications This study applies only to the European case and could be extended to Latin American companies for a comparative analysis. Practical implications This paper may help managers to identify important factors and issues to be considered when deciding upon a growth method. The European experience can be useful for Latin American companies following a similar growth strategy. Originality-value The results confirm a large part of the prior literature, but also go a stage further by including in the same study all the growth options available to a firm and providing empirical evidence of each one's preference according to the different situations analysed.