Growth, Diversification and Business Group Formation in Entrepreneurial Firms

Recent empirical research has demonstrated that the growth process of entrepreneurial firms is frequently achieved through the formation of business groups: i.e. a set of companies run by the same entrepreneur (or entrepreneurial team). The literature has put forward the hypothesis that this is the result of a growth process by diversification of the original activity. The main aim of the article is that of verifying this hypothesis using a sample of high growth entrepreneurial firms. The analysis demonstrates that the running of a group of companies by the same entrepreneur is not only induced by the geographical extension of their operation and by diversification but also by the differentiation policy aimed at serving different market segments within the same sector. This seems to contrast with the diversification policy and organizational setting of large, managerial firms. More theoretical and empirical research is needed in order to understand the causes and consequences of diversification and business group formation in entrepreneurial firms.