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Research Policy
jo u rn a l h om epa ge :w w w . e l s e v i e r . c o m / l o c a t e / r e s p o l
Higher growth through the Blue Ocean Strategy: Implications for economic policy
Jaka Lindiˇc
a, Mojca Bavdaˇz
a,∗, Helena Kovaˇciˇc
baUniversityofLjubljana,FacultyofEconomics,Kardeljevapl.17,SI-1000Ljubljana,Slovenia
bUniversityofLjubljana,FacultyofSocialSciences,Kardeljevapl.5,SI-1000Ljubljana,Slovenia
a r t i c l e i n f o
Articlehistory:
Received18January2011
Receivedinrevisedform20February2012 Accepted24February2012
Available online 20 March 2012
Keywords:
BlueOceanStrategy Growth
Innovation Policymaking
a b s t r a c t
Highergrowthisakeygoalofcompanies,governments,andsocieties.Economicpoliciesoftenattempt toattainthisgoalbytargetingcompaniesofcertainsizesthatoperateinspecificindustriesandfocus onaspecificbusinessactivity.Thisapproachtopolicymakinghasconsiderableshortcomingsandseems tobelessthanfullyeffectiveinincreasingeconomicgrowth.Wesuggestanewapproachtopolicy makingthatstemsdirectlyfromtheentrepreneurialperspective.Thisapproachexaminesasuccessful businessstrategyframework–theBlueOceanStrategy–todiscoverconditionsforhighgrowth.Wetest thepropositionsonempiricaldatafortwocasesofsuccessfulhigh-growthbusiness,namelySlovenian gazellesandAmazon.com.Theresultsrevealagapbetweenthemacrolevelofeconomicpolicymaking toachievehighergrowthandthemicrolevelofbusinessgrowth.Thefindingscallforachangeinthe focusofeconomicpoliciesonspecificsizecompanies,industries,andbusinessactivitiestointraindus- trycooperation,collaborationbetweencompaniesofdifferentsizes,valueinnovation,andcreationof uncontestedmarkets.
© 2012 Elsevier B.V. All rights reserved.
1. Introduction
Today,mostgovernmentsrecognizethatentrepreneurialactiv- ity and innovation areimportant elements ofeconomic policy.
The idea of a positive relationship between innovation and entrepreneurship on the one hand and economic growth on the other hand has endured in economic thought ever since Schumpeter(1942)popularized“creativedestruction”asaresult of entrepreneurialactivitythat createsnewproductsand busi- nessmodelsandgenerateslong-termeconomicgrowth.Theideaof stimulatingeconomicgrowthbysupportingentrepreneurialactiv- ityhasestablisheddeepgovernmentalcommitmenttoprovidea highlevelofsupporttosmallandmedium-sizedenterprises(SMEs) andnewstart-ups.
However,governments aregenerally illequippedtoprovide detailedeconomicdirection(Porter,1990).Areasonforthiscould bealackoffeedbackontheresultsofpolicyinterventions,asonlya fewstudieshaveinvestigatedwhetherthepolicymeasuresintro- ducedindeedhavethedesiredeffectonentrepreneurialactivity (Patzelt and Sheperd, 2009).Anotherreason is thestructure of today’sbusinesscontext,which ischanging quicklyandpushes companiesofallsizesandindifferentindustriestobeinnovative
∗Correspondingauthor.Tel.:+38615892630;fax:+38615892698.
E-mailaddresses:[email protected](J.Lindiˇc),[email protected] (M.Bavdaˇz),[email protected](H.Kovaˇciˇc).
andtoconstantlyreviewtheirprocessesandpracticestosurvive inthemarket.
Overthepastfewyears,thefinancialcrisishasforcedpolicy makerstorethinkthepathtoeconomicrecovery.Jobcreationhas remainedaprimarypolicyconcern.Thismeansthateconomicpoli- ciesmostlytargetcompaniesofaspecificsize,inparticularSMEs andnewcompanies.Thispolicydirectionseemssomewhatreason- ablebecauseitprovidesaquicksolutiontoincreaseemployment, re-establishesactiveparticipationinthelabormarket,andreduces negativesocialeffectsofjobloss.However,thecreationoflow- added-valuejobsworksonlyintheshortrun,asitmoreorless postponesanyproblemstoalatertime.Astrongfocusonemploy- ment growthseemstoimplythat existinggovernment policies maybelessthan fullyeffectiveinincreasingeconomic growth.
Evidenceforthisalsocomesfromananalysisofsourcesofeco- nomicgrowthintheEuropeanUnionsincethemid-1990sanda comparisontotheUnitedStates(Timmeretal.,2011).Toexplore thisroomforimprovement,ourstudycomparesexistingpolicy- makinginitiativeswiththecharacteristicsofhighbusinessgrowth, anditintroducesanewapproachtopolicymaking.Weinvestigate thevalueofanentrepreneurialperspectiveonopportunitiesinthe businessenvironmentforthefoundationofeconomicpolicy.
Thearticlebeginswithabriefoverviewofthesourcesofeco- nomicgrowththathavebeentargetedbyinstrumentsofeconomic policies.Itcontinueswithshortcomingsofcurrentpolicy-making approachesandproposesanewapproachbasedonabusinessstrat- egycalledthe“BlueOceanStrategy”(BOS).TheBOSisasuccessful exampleofexecutingchangeasacrucialsourceofhighbusiness 0048-7333/$–seefrontmatter© 2012 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2012.02.010
growth(TushmanandO’Reilly,1997),incontrasttoconventional strategymodelsthatareexplicitlyorimplicitlybasedonstabil- ity rather thanchange. Thepropositions derived from theBOS frameworkarethenanalyzedviatwocases,Sloveniangazellesand Amazon.com.Thesesuccessfulcasesofhighbusinessgrowthserve asbenchmarkstodeterminehowcongruenttheircharacteristics arewithBOScharacteristics.Inthefinalsectionofthearticle,we discussourfindingstoseehowpolicymakerscanlearnfromthe BOSframework,wereportthelimitationsofourstudy,and we presentdirectionsforfutureresearch.Ourrecommendationsare primarilyintendedforpolicymakers.CompaniescanusetheBOS directly,asitisaframeworkcreatedforthem,buttheycanalso benefitfromunderstandingtheimplicationsofitsuseforpolicy makers.
2. Theoryofeconomicgrowthandshortcomingsofcurrent policy-makingapproaches
Economicgrowthisapriorityofthemostrecentpolicyinterven- tions.Therehavebeennumerousshiftsinhoweconomistsperceive themainsourceofeconomicgrowth,evolvingfrommanufactur- ing(Smith,1937[1776])toentrepreneurship(Schumpeter,1942) andproductivitygrowth(Krugman,1997).Althoughinprinciple economicgrowthcanbeachievedthroughgrowthoflabororlabor productivity,mostgovernmentscountonproductivityincreases.
Thisisin linewithKrugman’s(1997, p. 11)famous statement:
“Productivityisn’teverything,butinthelongrunitisalmostevery- thing.Acountry’sabilitytoimproveitsstandardoflivingovertime dependsalmostentirelyonitsabilitytoraiseitsoutputperworker.”
Indeed,laborproductivityisthemostwidespreadmeasureofpro- ductivity(OECD,2001).Growthinlaborproductivitycomesfrom threesourcesofgrowth:laborquality,whichreflectsthecompo- sitionoftheworkforce;capital deepening,whichmanifeststhe amountandcompositionofcapitalgoods(e.g.,equipment,struc- tures)availabletotheworkforce;andtotalfactorormultifactor productivity(SteindelandStiroh,2001).Multifactorproductivity capturestheresidualoutputgrowththatcannotbeexplainedby measuredinput growthand is typically attributedto technical progressandresultantefficiencygains.Itismainlydrivenbyinno- vation(Jorgenson,2009),anotherimportantimpetusforgrowth.
Innovationhasalsobeenemphasizedasanimportantcontributor toenablingcompaniestoimproveeconomicperformance(Crespi andZu ˜niga,2010).Tofosterinnovation,governmentshaveestab- lishedintellectualpropertyrightssystemsandhavedirectedtheir policiestowardspecificindustriesandcompaniesofspecificsize.
Intellectualpropertyrightssystemsprovideeconomic incen- tives for innovation activities and stimulate competition and marketdevelopmentbyprotectingentrepreneurialtalent,sogov- ernmentshave incentivizedcompaniestoincreaseresearchand development (R&D) expenditures and the number of patents.
However, these systems have generated various performance resultsandgrowthpotentialsacrossbusinesses,sectors,andcoun- tries,whichcastsdoubtontheireffectiveness(e.g.Andersenand Konzelmann,2008;Furukawa,2007),especiallyinlightofnewphe- nomenasuchasdeliberateintellectualpropertysharing(Pisano, 2006).Still,patentsaretypicallyusedasindicatorsofinnovation intensity(e.g.Guellecand Pilat, 2008).For example, theWorld EconomicForum’smethodologyincludesinnovationasoneofthe pillarsoftheGlobalCompetitivenessIndex,butsixoutofseven indicators in this pillar are closely related to technology, and patentsstillholdaprominentposition.Ofcourse,thisindexhas beenstronglycriticizedonthegroundofweakdefinitions,abiased approach,andmethodologicalissues,anditisrarelyusedinthe academicliterature(Lall,2001).However,theconceptofnational competitivenesshas become a dangerous obsession (Krugman, 1996)andisoftenusedinpolicymakingbecauseitallowsforthe
benchmarkingofcountries.InSlovenia,theindexisfrequentlycited bytheInstituteofMacroeconomicAnalysisandDevelopment,an independentgovernmentofficethatpreparesanalyticalbasesfor strategicdecisionmakingandeconomicanddevelopmentpolicy measures(seeBrloˇznik,2010;KmetZupanˇciˇc,2011).
Other data on innovation have only recently supplemented patent data and R&D expenditures (OECD, 2009), so as not to excludeservice-sectorcompaniesandsmallcompanies.Onetype ofinnovationisabusiness-modelinnovationdefinedasthedis- coveryofafundamentallydifferentbusinessmodelinanexisting business.Thedifferencevis-à-visothertypesof innovation(e.g.
productorserviceinnovations)isthatbusinessmodelinnovators redefineanexistingproductorserviceandhowitisprovidedtothe customer.Abusiness-modelinnovationcanbepatentedattheU.S.
PatentOffice,butitcannotbeprotectedintheEuropeanUnion.
Anotherarenaforpolicyactionconcernsspecificindustrieslike informationtechnology(IT)thatarebelievedtolieatthecoreof productivitygrowth.FortheUnitedStates,Jorgensonetal.(2007) examinedtheroleofITinoutputandproductivitygrowth.They concludedthatthemultifactorproductivityupsurgeof1995–2000 wasgeneratedbyIT-producingindustries,whereasIT-usingindus- tries(manyofthem intheservicessector) came totheforein 2000–2005afterthedot-comcrashof2000.ApositiveimpactofIT onproductivitygrowthwasalsoobservedinotherindustrialized countriesinthe1990s,eventhoughtheirmorerestrictiveregula- toryenvironmentscomparedtothoseoftheUnitedStatesseem tohaveattenuatedit(GustandMarquez,2004).Lately,thefocus haschangedtoincorporate,inadditiontoIT,otheremerginghigh- techfields,suchasbiotechnologyandnanotechnology.Although governments typically emphasize the importance of high-tech industries,companiesofvarioussizesandages,andoperatingin varioussectors,canachievehighgrowth(Smallboneetal.,1995).
Inaddition,wheneverpoliciesaddressspecificindustriesortech- nologies,thusdepartingfromneutrality,itisnecessarytoexercise cautionsoastonotcreatemarketdistortionsandreducecompeti- tion(Aghionetal.,2009).
Policiesarealsosensitivetobusinesssize.Thedebateonthe importance of small companies to theeconomy started in the UnitedStatesafterDavidBirchpublishedareportin1979claim- ingthatsmallcompaniesaccountedforthemajorityofjobgrowth intheUnitedStates(Landström,2005).Sincethemid-1980sitis commonlyheld thatsmallcompaniescancompeteagainstbig- geronesbecausetheyaremoreflexibleandthusbetteradapted forengenderingandadoptinginnovations(PioreandSabel,1984;
Rothwell,1989;SabelandZeitlin,1985).Thisideahasbeeneven furtherdevelopedbysuggestingthattheU.S.economyshouldbe reorientedtoward small,craft-based companies(Robertson and Langlois,1995).
Onlyrecentlyhavepoliticiansrealizedthatsheernumbersdo notmake fora dynamic economy,as bothjoblosses andgains arehighlyconcentratedamongsmallcompanies(Drnovˇsek,2004).
Manyauthorshave showntheexistenceof anegativerelation- ship betweenthegrowth oflabor productivityand jobgrowth in the UnitedStates (e.g. Freeman, 1988) and in the European Union,whereflexibilizationoflabormarketsmayindeedcreate many jobs, albeit at the expense of laborproductivity growth (Kleinknechtetal.,2006).Growthintheself-employmentsector mayalsobeproblematicfromagrowthperspective,asincreased self-employmentratesarenotnecessarilypositivelyrelatedtothe rateofeconomicgrowth(Blanchflower,2000;Jiangetal.,2010).
Theemergenceof fast-growingcompanieshaslargelyaddedto publicpolicydiscussionsontheimportanceofSMEsastheengine roomofgrowthintheeconomy.Fast-growingcompaniesdemon- strateanabilitytoincreaselaborproductivitywhilealsoincreasing employment(Smallboneetal.,1995),thuseffectivelycontributing toeconomicgrowth.
Thisreviewindicatesthatgovernments needtobeawareof thepotentialflawsofintroducedeconomicpolicies,whichisalso partiallyduetoinsufficientqualityandquantityofrelevantdata;
policy making remains under investigated because we do not haveanswerstotheuncertaintiesrelatedtoinputintothepolicy- makingprocessanditsoutcome.Forentrepreneurshippolicy,the problematicassessmentisalsotheresultoftherecentintroduc- tionofinitiatives,whicharestilltooyoungtobefullyevaluated (Cumming,2007).Thereisevenlessliteratureontheroleofempir- icaldatainpolicymaking.Somestudieshaveexaminedtheuseof evidenceinenvironmentalpolicy(HolmesandClark,2008)and healthpolicy(Niessenetal.,2000)toshowthatpolicymakingin theseareasisincreasingly evidencebased.Althoughdataatthe national,regional,andlocallevelsaregatheredperiodicallyand usedascomplexeconometricdatainmacroeconomicmodelsand simulations,economicpoliciesdonotrelyonmacroeconomicdata alone.InexaminingU.S.economicpolicy,JonesandBaumgartner (2005)showedthatCongressdidnottakeintoaccountobjective economicindicators,suchasachangeingrossdomesticproduct (GDP),andmorecloselyfollowed whetherpeopleintheGallup surveyagreedthatmacroeconomicissueswerethemostimpor- tantproblemfacingthenation.Includingpublicopinioninpolicy makingsimplytosatisfythechangingdemandsoftheelectorate isanimportantpitfalloftheexistingpolicy-makingprocess,asis overrelianceonindicatorsthathaveweakmethodologicalsupport (e.g.Bikfalvi,2007).Theseproblematicissuesareinherenttothe policy-makingprocessbecauseofinformationoverload,complex problems,anddatadiscrepancy.Atthesametime,itisdifficult topredicthow a largeeconomic systemwillrespondtopolicy inputs.Still,puttingasidethecomplexnatureoftheanalysis,pol- icymeasurescanhaveadverseoutcomeswithanegativeimpact oneconomicgrowth.
3. Anewapproachtopolicymakingforgrowth
This study proposes a new approach to the design of high-growth economic policies that stems directly from the entrepreneurialperspectiveandisusingevidencetoinformeco- nomic policy. This approach investigates the applicability of a businessstrategy,calledtheBOS,topolicymakingtocreatecondi- tionsforhighgrowth.
The BOS was developed by W. Chan Kim and Renee Mauborgne,professorsofstrategyattheINSEAD(InstitutEuropéen d’AdministrationdesAffaires),intheirstudyof150strategicmoves spanning30industries;theauthorsuseddatastretchingbackmore than100years.Theauthorsanalyzednewbusinesslaunchesin108 companiesanddiscoveredthat86%ofthosenewventureswereline extensionsandamere14%wereaimedtocreatenewmarketsor industries.Althoughthelineextensionsaccountedfor62%oftotal revenues,theydeliveredonly39%oftotalprofits,comparedtothe 61%oftotalprofitsthatthenewmarketsorindustriesaccounted for (Kim and Mauborgne,2004).Theirresearch resultedin the landmarkbookBlueOceanStrategy(KimandMauborgne,2005) andresearcharticlesthat precededit(seeKimand Mauborgne, 1999, 2004). Executive reviews point to the usefulness of this approach as a compelling case for pursuing a business strat- egywitha creative,not combative,approach andas a strategy thatisnotonlyoriginalbutalsopracticalandleadstopowerful results.
TheBOSthusbuildsontheideaofacompany’svaluecreationin uncontestedmarketslabeled“blueoceans”,whereasconventional businessstrategymodelsfocusoncompetinginside anexisting
“redocean”bytryingtobeatthecompetition.Thelattermarkets arecharacterizedbywell-defined,acceptedindustryboundaries andclearlyunderstoodrulesofcompetition.Businessstrategiesare builtoncostleadership,differentiation,orfocus(Porter,1990)to
achieveasustainablecompetitiveadvantageandlong-termsuccess inchosenareasorindustries.Companiesthatfollowatraditional businessstrategyseektobeatthecompetitionwhileexploitingthe existingdemandandmakingvalue–costtrade-offs.Theyconstantly trytocutproductioncostsandincreasemarketingefforts.Because allcompetitorsaredoingthesame,thisapproachusuallyresultsin azero-sumgame.
Inthepresentstudy,weusetheBOScharacteristicstoformu- latefourpropositionsrelevanttoeconomicpoliciesthatfocuson highgrowth.Thefirstpropositionbuildsonthemaindistinguish- ingfeatureoftheBOS,itssearch forblueoceansofcompelling opportunitiesanduncontestedmarketspace.Thekeyideabehind theBOSperspectiveisencompassedbyvalueinnovation,orthe pursuitofsuperiorcustomervalueatalowercost.Thisperspec- tiveleadstoanewdefinitionofatargetcustomerandfocuseson whatthatcustomerneedsandwants.Companiestrytoredefine theindustrybysearchingfornewcustomersandcreatinganew valueproposition for customers insteadof relyingonimitation orincrementalimprovementovercompetitors.Thus,acompany cancreateanuncontestedmarketspace,inwhichthecompany is the first in themarket, which gives it temporarymonopoly power;itcanquicklycreateeconomiesofscaleandexploitpos- itivefeedbackeffects,whichoffersthecompanyanopportunityto growmorequickly.Wecanthereforeexpectthatacompanythat isfirsttomarketenjoysalargermarketshareand hasahigher netvalueaddedperemployee.Companiesfollowingthisstrategy shouldchangetheirtargetcustomersand/orredefinethestrategy toservethembyofferingthebestmixofattributes,amixthatis mostrelevantforthetargetcustomer’sneeds.Allthecompany’s activitiesareundertakeninthepursuitofdifferentiationandlow cost.Todo this,companiesmustchangetheirestablishedbusi- nessmodels.Thismightmeandestroyingmodelsthathavebeen successfulover time and discardingassets that wereoncevery valuable.Thecapacitytoembracebusinessmodelsthatcreatenew valueforcustomersandnewwealthforinvestorsisaconceptthat Christensen(1997)andHamel(2000)explain,whoperceivecom- petitioninthecontemporaryworldasnolongerbeingbetween productsorservicesbutbetweencompetinginnovationregimes.
Inaddition,TushmanandO’Reilly(1997)seetheclearidentifica- tionofopportunitygapsasastartingpointforwinningthrough innovation.Alltheseauthorsfocuslessoncompetitionbetween companiesandproductsandinsteadproposemarketdisruptionas asourceofentrepreneurialprofits. Accordingly,thefirstpropo- sition relatestothe creationof newmarket spaces in which a companyis apioneer andthecompetitionis smallornonexis- tent.
Proposition1. Creatinganewmarketspaceleadstohighergrowth.
Severalstudieshavereportedthat thesuccessfulcreationof a newmarket spaceis presentin industries asdifferentas the plushtoymarket(SheehanandVaidyanathan,2009),moviethe- aters(KimandMauborgne,2004),andthewineindustry(Kimand Mauborgne,2005).Differencesbetweenindustriesarevisibleifwe lookattheeconomiesofscalethathaveprovedstrongincertain industries,suchasironandsteel,automobilemanufacturing,and certainbranchesofchemicals,whereasinmanyothercasessmall companieshavebeenabletoretainstrongpositions(Robertson andLanglois,1995).Thisleadsustothesecondproposition,which buildsontheevidencethatblueoceanscanbefoundatthebound- aries of anyindustry and arenot limited toa specificindustry (e.g.high-techindustrieslikenanotechnology,biotechnology,and energy).
Proposition2. Fastgrowingcompaniescanbefoundinavarietyof industries.
Creating a new market space means being innovative. For decadeswehaveknownthatinnovationsarenotlimitedtojust productsandtechnology.KimandMauborgne(2004)showedthat 10of13blueoceansidentifiedinthreedistinctindustries(automo- biles,computers,andmovietheaters)werecreatedmostlythrough existingtechnologies–only3usedsomenewtechnologies.Just1of the13wasfocusedontechnologypioneering,andtheotherswere focusedonvaluepioneering.InJapan,atechnologypowerhouse, only33%ofallpatentsareactuallybeingused(Hisamitsu,1999).
Researchhasshownthatmorethan95%ofpatentsareunlicensed and97%generatenoroyalties(LandesandPosner,2003).Another studyhasshownthatonlybetween1%and3%ofpatentsgeneratea profitfortheirholders(Myhrvold,2010).Thisbringsustothethird propositionongaininggrowththroughvalueinnovation.
Proposition3. Companiesachievehighgrowththroughvaluepio- neering,notonlythroughtechnologypioneering.
TheBOSideasuggeststhatlargecompaniesarenotatadis- advantagecomparedtoSMEsintermsofflexibilityregardingthe creationofanewmarketspace.KimandMauborgne(2004)showed that incumbents(i.e.,among the largestin their industry)cre- ated9ofthe13blueoceansidentifiedinthreedistinctindustries, start-upscreated3,andanestablishedplayercomingfromanother industryinwhichitwasamongthelargestplayerscreated1.This findingisinlinewithmanyauthorswhobelievethateconomies ofscaleremainoverwhelminglyimportant(Lazonick,1990)and thatahighdegreeofverticalintegrationisdesirable(Floridaand Kenney, 1990). Therefore, we establish the fourth proposition, whichsuggeststhatbothlargeandsmallcompaniescanachieve highgrowthbycreatingnewmarketspace.
Proposition4. Fastgrowthisindependentofcompanysize.
4. Methodology
To empirically assess the potential of the BOS propositions forhigh-growthpolicymaking,weselectedtwocasesthathave enjoyed extreme growth: Slovenian gazelles and Amazon.com.
Although a multiple-case study is generally preferred, analysis ofextremecasescanleadtoparticularlyusefulfindings(Patton, 1987),astheyallowforamoredetailedandpreciseanalysiswith thesameamountofresources(DyerandWilkins,1991).Because thepresentstudyisbasedononlytwocases,itisespeciallyimpor- tantthatthesecasesrepresentanextremetestofaparticulartheory (Scapens,1990;Yin,2003).Insuchanapproach,randomselection isnotnecessaryand isevenundesirable(Eisenhardt,1989).We didnotselectthetwocasesfortheircomparability;onthecon- trary,theSloveniangazelles aremainlyrootedintheSlovenian institutionalenvironment,despitetheirprevalentlyinternational orientation,andtheyoftenoperateinone industry.Incontrast, Amazon.comisaglobalcompanyoperatinginmanydifferentinsti- tutionalenvironments,spanningdifferentindustries,andoffering anopportunitytodiscoverabroadspectrumofinnovations.Nev- ertheless,fastgrowthcharacterizesallthesecompanies,andthey allsharethelabel“gazelles”foratleastacertainperiodoftime.
Growth is the hallmark of a gazelle company. Gazelles are fast-growingcompaniesthatarequalitativelydifferentfromother typesofcompanies,namelymice(smallcompaniescommittedto remainingsmall)andelephants(bigcompanies;Landström,2005).
Birchdefined agazelle as“abusiness establishment whichhas achievedaminimumof20%salesgrowtheachyearovertheinter- val,startingfromabase-yearrevenueofatleast$100,000,”thus doublingitssalesoverthemostrecentfour-yearperiod(Henrekson andJohansson,2009).Inbusinessterms,thismeansthatgazelles areagileenoughtoavoidhostiletakeoversbycompaniesbigger thanthemandfastenoughtogrowrevenue morequicklythan
theyincreasetheircosts,thusbecomingprofitableasquicklyas theybecomesizable.Ameta-analysisoftheempiricalevidenceon gazellesshowedthatgazellescreatealloralargeshareofnewnet jobsandexistinallindustries,althoughtheyseemtobeoverrepre- sentedinservices(nothigh-tech);onaverage,theyareyoungerand smallerthanothercompanies,anditistheiryoungagemorethan theirsmallsizethatisassociatedwithrapidgrowth(Henrekson andJohansson,2009).Previousresearchhasalsoshowncorrela- tionbetweenhighgrowthandinnovativenessofacompany(e.g.
AcsandAudretsch,1990).
ArecentEuropeanpanelalsoagreedthatgazellesarerare,but theyareimportantbecause3–10%ofanynewcohortofcompanies willendupdelivering50–80%oftheaggregateeconomicimpact ofthecohortoveritslifetime(AutioandHölzl,2008).Research onSlovenian gazelles corroboratesthese findings: the top 500 Sloveniangazellesexpandedtheirsales5.6-foldinthe2002–2007 period,andthetop5000fastest-growingcompaniesrepresenting 4.5%ofallincorporatedbusinessesinSloveniacreated60%ofall newjobsinthe2003–2007periodandcontributed28%ofGDP, namelyfourpercentagepointshigherthanthenetcontribution ofbiggercompanies(Pˇseniˇcny,2008).However,AcsandMueller (2008)reportthatgazellesunfoldtheirmajoremploymenteffects aftertheyhavebeeninbusinessforatleastfiveyears;andAcs etal.(2008),concludethathigh-impactcompaniesarerelatively old(anaverageof25years)andrare(2–3%ofallcompanies)and contributetothemajorityofoveralleconomicgrowthintheprivate sector.
4.1. Sloveniangazelles
In Slovenia, businesses that satisfy the criterion of extreme growthareknownasSloveniangazelles.Thisstudydrawsontwo datasourcesonSloveniangazelles:asurveyofthetopSlovenian gazellesandtheGVIN.comdatabase.Thesurveysampleconsisted of 512 Sloveniangazelles selected as candidatesin the annual contestfortheSlovenianGazelle2007.Thecontestusedthefol- lowingstandardcriteria:totalrevenuegrowthrate,revenueprofit growth rate, capital profitability growth rate, assets profitabil- itygrowthrate,andprofit-per-employeegrowthrate.Additional quantitative indicators includedthe index of a company’s sur- vivalprobability andtheDaBeg index(Birch,1987).Qualitative datasuchastheextentofcorporatesocialresponsibilityactivities performedbyacompany,thefuturedevelopmentvisionofacom- pany,andsoon,supplementedthefinancialcriteria.Thesurvey questionnairewaspretestedinthreecognitiveinterviewsusinga combinationofthink-aloudandretrospectiveprobing.Theoverall responseratewas27.9%(calculatedaccordingtothemeasureRR6 setupbytheAmericanAssociationforPublicOpinionResearch).To determineforthepresenceofnonresponsebias,anadditionaltele- phonedatacollectionwasconductedamongnonrespondentsfor threekeysurveyvariables,andsupplementalvariablesonsampled gazellesweregatheredfromtheGVIN.comdatabase.TheGVIN.com databaseisaleadingproviderofelectronicbusinessinformationin Slovenia.WematchedthesurveydatawiththeGVIN.comdataon thebasisofauniquebusinessidentificationnumber.TheGVIN.com dataareineffectbasedonpubliclyavailableadministrativerecords fromtheSlovenianBusinessRegisterthatcontainbasicinformation onbusinesses(e.g.legalform,location,mainactivity)andannual reports(i.e.balancesheetsandincomestatementsthatmustbe publishedinaccordancewiththeCompaniesAct)(Leˇsnjek,2008).
Accordingtotheseanalyses,thesampledgazellesrepresenteda fairlyhomogeneousgroupwithrespecttothevariablesofinterest, althoughnonrespondentstendedtobeslightly(butgenerallynot statisticallysignificantly)lessinclined tointernalentrepreneur- ship(Bavdaˇzetal.,2009).Wethereforeconcludedthatthedata arehighlyrepresentativeofthesampledgazelles.
Table1
Amazon’sfinancialdata.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Sales(mio$) 0.5 15.7 148 610 1640 2762 3122 3933 5264 6921 8490 10710
Annualsalesgrowthrate(%) 2981 839 313 169 68 13 26 34 31 23 26
Grossprofit(mio$) 0.1 3.5 29 134 291 656 799 992 1258 1602 2039 2456
No.ofemployees(in000) 0.16 0.61 2.1 7.6 9.0 7.8 7.5 7.8 9.0 12.0 13.9
Employeegrowth(%) 289 242 262 18 −13 −4 4 15 33 16
4.2. Amazon.com
Amazon.comhasmanagedtotransformitselffromanonline bookstoretooneofthekeydestinationsforonlineshoppinginthe world,ithasenteredthemarketofapplicationsolutionproviders, anditoffersbusinesssolutions(e.g.warehousing,distribution)and Webservices.Furthermore,thecompanyisatypicalrepresentative oftheso-calledneweconomy,butitalsohasmanycharacteristics oftraditionalcompanies.Traditionalfunctionsaccountfor70%of itscoreresources(Niekerk,2000).Therefore,thecaseenablesthe identificationofinnovationsthataretypicalofbothtraditionaland neweconomycompanies.Patton(1987)andStake(1995)suggest pickingacasefromwhichthemostcanbelearned.Theselected casemustalsoenableacomparisonwiththeexistingliterature(Yin, 2003).Here,Amazon.comhasmanagedtodevelopfromastart-up toamongthelargestcompaniesintheworldinslightlymorethana decade(Table1).Thisenablesustoanalyzeinnovationsindifferent phasesofthecompany’slifecycle.Inthepastdecade,Amazon.com hasbeenoneofthemostfrequentlyusedexamplesinbusinessand academicliteratureandhasthusalreadybeenanalyzedfromdiffer- entviewpoints,whichcanhelpimprovethevalidityofthefindings.
Amazon.comisalsoanextremeandcontradictorycaseintermsof predictionsregardingthecompany’sfuture,rangingfrombeingon thecoverofeverymajorbusinesspublicationtoanuglyduckling.
Infact,beforethedot-comcrashthecompanywastypicallyfea- turedasarolemodel,anditschiefexecutiveofficer,JeffreyBezos, wasevenselectedasTime’sPersonoftheYearin1999.Afterthe dot-comcrasheventhemostprominenteconomists(seePorter, 2001)portrayedthecompanyashavingnegativecharacteristics andpredictedthatitsfuturewasbleak.
Thisstudy covers the period fromthe company’s establish- mentin1994totheendof2008.It alsoincludesAmazon.com’s subsidiaries (e.g. IMDB.com, A9.com) as long as they relate to theoperations of the companyas a whole, although we make nodetailed analysisof those companies.Furthermore, we con- siderpartnercompanies(e.g.Drugstore.com,Toys“R”Us)onlyin thecontextoftheircooperationwithAmazon.com.Weusedsev- eraldatasourcesconcerningthecompany:newsreleases,annual reports,theCEO’sletterstoshareholders,blogs,audioandvideo recordingsofkeyemployees,patents,andacademicandbusiness literatureexaminingthecompany.Weincludedallnewsreleases onthecompany’sWebsitefrom1995to2006.Alltogether,703 newsreleasesinEnglishandFrenchwereanalyzed.Weincluded annualreports,letterstoshareholders,blogs,andaudioandvideo recordingstogaininsightintotheinformationthecompanyconsid- eredimportantforitsstakeholders.Inaddition,weusedacademic andbusinessliteraturethatoffersanalternativeandmorecritical viewofthecompany.
4.3. Indicatorsofgrowthincludedintheanalysis
Weuseddatafromthegazelles’annualreportstoderivethe main performanceindicator forSlovenia’s fast-growing compa- nies.Weusedarelativemeasureofnetvalueaddedperemployee tofacilitatecomparisonsacrossvariousbusinesssizes.Aftercon- ductingasensitivityanalysis,weselectedvalueaddedoverother
possibleindicators,particularlysalesandprofit.Profitasanindi- catoroffinancialprofitabilitydoesnotcapturerelevantsizeand growthaspects(Meulemanetal.,2009).Salesisthemostwidely usedindicatorofbusinessgrowthinempiricalanalyses(Delmar etal.,2003),eventhoughsalesfiguresaresensitivetothedegreeof integration,presenceofsalesonacommissionbasis,and soon.
Grossoutputisalsosuggestedasa measureofbusiness output (Majumdar,2007),yetitisalsosensitivetothedegreeofintegration andisthereforenotsuitedforcomparisonsbetweenbusinessesand acrossindustries.
Thevalue-addedindicatorexpressesthevaluethatabusiness newlycreates,whichconceptuallyfitsourpurposeofcapturing thecontributionsofbusinessestovaluegeneration.Italsoenables acomparisonofheterogeneousbusinessesanddifferentindustries.
Ithasadirectlinktotheprincipalindicatorofeconomicgrowth, namelytheGDPgrowthrate.GDPisintendedtobeacomprehen- sivemeasureofthetotalgrossvalueaddedproducedbyallresident institutionalunits(EuropeanCommissionetal.,2009),despitethat ithasattractedcriticism(Hillinger,2003).Forthebusinesssector, GDPcanbecalculatedfromthegrossvalueaddedofbusinesses aftersomeadjustments,suchasanupwardadjustmentbythecap- italizedcostsofdevelopingsoftwareandadownwardadjustment bytheservicechargespaidforfinancialintermediation(UN,2000).
Althoughvalueaddedisnotatypicalperformanceindicatorfor companies,thebusinessworldisfamiliarwiththeconceptthrough taxationsystemsinvolvingvalue-addedtax.Valueaddedcanbe measuredasagrossamountornetofdepreciation.Conceptually,it shouldbemeasurednet,asareductioninthevalueoffixedassets isacostofproductionandthusnotpartofnewlycreatedvalue (EuropeanCommissionetal.,2009).Nevertheless,valueaddedis oftenmeasuredgrossbecauseofpracticaldifficultiesinmeasur- ingdepreciationtoreflectthecostofthefixedcapitalusedupin productioninsteadofreflectingadepreciationscheduleallowedby taxauthorities(UN,2000).Byanalyzingnewsreleases,anattempt wasmadetoidentifythechanges andinnovationsAmazon.com foundtobeimportantenoughtocommunicatetoabroadaudi- ence.Aspatentsareoneofthemoretraditionalformsofprotecting intellectualpropertyrightsfrominnovations,ananalysisofpatents grantedandpendingwasalsoconducted.Altogether92 patents andpatent applicationswereanalyzed;in all,Amazon.com was theassigneeorCEOJeffreyP.Bezoswastheinventor.
5. Dataanalysisandresults
We presenttheresultsof ouranalysisaccordingtothefour propositionsarisingfromtheBOSformulatedinSection3.Wefirst commentontheresultsofasensitivityanalysisonthemainperfor- manceindicator.Wetestedthecorrelationsbetweencompanies’
averagenetvalueaddedperemployee,salesperemployee,and earningsbeforeinterestandtaxes(EBIT)peremployeebyindustry, bothforthegazellesandasanaverageforallSloveniancompanies.
Weperformedthesecalculationsonlyforcompanieswithemploy- ees.Thegazelles’averagenetvalueaddedperemployeevariedby industrythegazelles’averageEBITperemployee(r=0.936)andon averageinthesamedirection,thoughsomewhatlessinharmony withthegazelles’averagesalesperemployee(r=0.530).Similarly,
Table2
Comparisonofperformanceindicators(2007;thousandD).
Averagevaluesper company
Netvalueadded peremployee
Salesper employee
EBITper employee
Gazelles 50.6D 531.8D 28.1D
Allcompanies 25.8D 152.5D 10.6D
allcompanies’averagenetvalueaddedperemployeevariedby industrypracticallythesameasallcompanies’EBITperemployee (r=0.998)andonaverageinthesamedirection,butnotsoconsis- tentlyasallcompanies’salesperemployee(r=0.317).
Wealsocomparedthenetvalueaddedperemployeebetween gazellesandallSloveniancompanies(Table2).Thereisasharpdif- ference:inSlovenia,onaverage,afast-growingcompanyachieved D50.6thousandofnetvalueaddedperemployeein2007,whereas theaverageSloveniancompanyachievedonlyD25.8thousandnet valueaddedperemployee.SalesandEBITperemployeeexhibit evensharperdifferences(D531.8thousandofsalespergazelleand D152.5thousandpercompany;D28.1thousandofEBITpergazelle andD10.6thousandpercompany).
5.1. Proposition1:Creatinganewmarketspaceleadstohigher growth
Creatingnewmarketspacesmeansavoidingcompetitorsand creatingandcapturingnewdemandbybreakingthevalue–cost trade-off,whichprovidesthecompanywithpossibilitiesforhigh growth.Weusedaone-wayanalysisofvariance(ANOVA)onthe survey datafor the gazelles to test for differences in theirnet valueaddedperemployeeamongthreegroupsofgazelles:gazelles withmanycompetitors(M=D54.7thousand),gazelleswithsome competitors(M=D62.9thousand),and gazelles withonemajor competitor(M=D109.2thousand).Theaveragevaluepergazelle showedtheexpecteddirection,butitdidnotdiffersignificantly acrossthethreegroups,F(2,141)=2.43,p=0.09.
The Amazon.com case study also provides support for Proposition1.EventhoughsomeauthorsperceiveAmazon.comas thefirstcompanytohaveenteredthemarket(MellahiandJohnson, 2000),thecompanywasinfacthardlythefirsttoenterthemar- ket,norwasitapioneerwithitsinitialonlinebookstoremodel.
ComputerLiteracy Bookshops,a specialized technicalbookstore companyfromtheSiliconValley,begansellingbooksonlineback in1991,threeyearsbeforeAmazon.comwasestablished.In1992, BookStacksUnlimitedwasestablished.In1994,itopenedabook- storewith500,000book titlesatreducedprices. Thebookstore offeredinformation aboutauthors,userreviews,extensiveelec- tronicbookselection,andevenitsownbookstorenews-radioshow.
WhatdistinguishesAmazon.comfromthesecompaniesisitsintro- ductionofnewinnovativewaystoservethecustomeronline.For example,Amazon.comwasthefirstcompanytousecollaborative- filteringtechnology,thefirsttodevelopaone-clickprogram,and thefirsttoprovidecustomerswithremindersandordertracking throughalerts(Hofetal.,1998).Althoughthecompanydidpatent itsone-click program, almosteverye-commercecompany now usestheinvention(MellahiandJohnson,2000).Thisshowsthatthe companymanagedtodifferentiateitsbusinessmodelnotsomuch invaluepropositionbutinhowitcreateditsvalue.Theinitialbusi- nessmodel,whichincludeddirectsourcing,enabledittoworkat loweroperationalcosts:ratherthanbuildingphysicalstoresand maintainingamultipliedinventoryinallofthem,itdevelopeda centralizeddistributionmodel.Theotherkeydifferencewasinits systemofhigh-qualityrecommendationsoftitlesfromitslongtail.
Thelongtailreferstothestatisticalpropertythatalargeshareofthe productssoldisfoundonthetailofaprobabilitydistribution.Prod- uctsinthetailhavehighermarginsandlowcompetition,asoffline
competitorsdonotofferthembecauseoflimitedstoragespace.
Incontrast,onlinecompetitorswereunabletopushtheproducts fromthelongtailinfrontofpotentialbuyers.Thissuggeststhat beingthefirsttocreatethevaluepropositionfortheblueocean isinsufficientforacompanytogrowfaster;whatisimportantis beingabletoreallyexploitthenewlycreatedmarketspace.
Theseresultspartiallyconfirmthefirstproposition:companies thatexploitanewmarketspacegrowfaster.
5.2. Proposition2:Fast-growingcompaniescanbefoundina varietyofindustries
IndustriesweredefinedatthelevelofNACEdivisions(i.e.two- digitcodes).Specialattentionwasgiventohigh-techindustries thatareoftentargetedbyeconomicpolicies.InSlovenia,high-tech wasinitiallycloselyassociatedwiththesoftwareindustry.In2007, though,only2 ofthe500fastest-growingSloveniancompanies wereinsoftware-relatedindustries.Wealsocomparedthenum- beroffast-growingcompaniesinagivenindustrytothenumber ofallcompaniesinthatindustry.AsFig.1shows,threeindustries exhibitagreaterpercentageoffast-growingcompaniesthanother industries:recycling,airtransport,andmanufactureofbasicmet- als.Noneoftheseindustries istypicallyconsidereda high-tech industry.Allotherindustriesincludelessthan2%ofcompaniesthat qualifyasgazelles.Atthesametime,morethanathirdofallgazelles (172of512)areinwholesaleandretailindustries,industriesthat areneverconsideredhigh-techindustries.
Moreover,weanalyzedthelongtailofthenetvalueaddedper employeebyindustryandcomparedtheaveragegazelles’netvalue addedperemployeeforagivenindustrywiththeaverageoftherest ofthecompanies.Thecomparisonshowedthatnotallgazellespro- duceabove-averagenetvalueaddedperemployee.AsFig.2shows, in8of37industriesgazellescreatedworkplaceswithalowernet valueadded peremployee thandidremaining companies.Also notableisthatgazellesinindustriesclassifiedas“activitiesaux- iliarytofinancialintermediation”haveanindexof227compared tothoseclassifiedas“financialintermediation”withanindexof50.
Amongindustrieswiththehighestindexarethoserelatedto realestate.Thisresultcanbeattributedtotherealestateboom thatwaspeakingaround2007.Thisindustryisfollowedby“other businessactivities,”withmorethanthreetimesgreaternetvalue addedperemployeeforgazellesthantheaverage.Theresultsalso showthatgazellewholesalecompaniesgeneratednetvalueadded peremployee2.4timesgreaterthantheaveragefortheothers.
Theresultsalsorevealthehighvariabilityofnetvalueaddedper employeeinindustries.Forexample,thecoefficientofvariancefor theindustrycomputerandrelatedactivitieswas6.1,whichplaces itamongthe15%ofindustrieswiththegreatestvariability.
Fast-growingcompaniescanbefoundinanyindustry,asthe developmentof Amazon.com shows. Thecompanystarted as a pure-playonlineshop,actuallystockingfewerthan2000ofthe2.5 milliontitlesitofferedonitsWebsitein1997.Followingits“getbig fast”strategy,itthenmovedintonewmarketsandproductgroups.
Asaresult,35%ofitsordersinvolvedproductsfromproductgroups otherthanbooks.Thisrequiredachangeinthecompany’sbusiness model:amoveawayfromdirectsourcingandthedevelopmentof itsownwarehousingandlogisticscapabilities.Thecompanyalso createdblueoceansbyconstantlydevelopingandoptimizingits ownprocessesandofferingthemasaservice,suchase-commerce technologyservices,customercareservices,technologyforin-store and telephoneordering,Website management, and warehous- ing.Today,itscustomersincludeMarks&Spencer,Target,Bebe, SearsCanada,Netflix,andothers,manyofwhichareAmazon.com’s directcompetitorsinotherindustries.Thecompanyhasconstantly changedandsupplementeditsoriginalbusinessmodeltoenable furthergrowth.Fast-growingcompaniesthusexploit theircore
Fig.1.Shareoffast-growingcompaniesbyindustryinSloveniain2007.Note:Thefigureincludesonlythoseindustriesthatincludegazelles.
competenciestodevelopnewblueoceansregardlessoftheindus- tryinwhichtheyinitiallystartedtheirbusiness.Theseresultsshow thatfastgrowthisnotgeneratedorguaranteedbyspecificindus- tries.
5.3. Proposition3:Companiesachievehighgrowththroughvalue pioneering,notonlythroughtechnologypioneering
Patentsarebelievedtobeasuperiorwaytopromoteintellec- tualdiscoveryandprotectinventionsfromimitators.Inthecaseof Sloveniangazelles,weanalyzedthenumberofpatentsissuedfor eachcompanyanddiscoveredthatonly5.5%ofthesecompanies heldpatents.Thismeansthatcompaniescanachievehighgrowth withoutfocusingonprotectingproductsortechnology.
InSeptember2010,Amazon.comheld115patentsinitsname, whereas in2009 alone IBMgarnered 4914and Microsoft2906 U.S.patents.ThesuccessofAmazon.comindicatesthatthenum- berofpatentsissued isnot apropermeasure oflikely success.
Further,patentsoftenhavelittletodowiththesuccessofinno- vation(Hutter,2010).Forexample,Amazon.comdidnotdiscover bookselling;itredefinedwhattheserviceisallabout,whatthe customergetsoutofit,andhowtheserviceisprovidedtothecus- tomer(Markides,2006).Italsooperatesinthebookretailbusiness inafundamentallydifferentwayfromothers intheindustryor itsso-calledrivals,likeBarnes&Noble.Itsclientsinclude com- panieslikeEliLilly,Pfizer,NASA,AdobeSystems,andNetflix.In February2010MicrosoftandAmazon.com enteredintoacross- licenseagreementthatgiveseachcompanyalicensetoaccessthe other’spatentportfolio.Amazon.comisalsoexpandingbeyondits rootsasanonlineretailerbydevelopinginnovativewaystoserve thecustomeronline.Theemphasisonvalueplacesthecustomer, notthecompetition,atthecenterofstrategicthinkingandpushes
managerstogobeyondincrementalimprovementstototallynew waysofdoingthings.Thecompanyhasmanagedtopositionitself astheleaderintheWebservicesbusinessbecauseofthecontin- uousdevelopmentofthevalueand preferenceofcustomersfor Amazon.comoverlaterentrants.
Thesefindingsthereforeconfirmthepropositionthatthekeyto fastgrowthliesinvalueinnovationnotjustintechnologyinnova- tion.
5.4. Proposition4:Fastgrowthisindependentofcompanysize
First,weexaminedthedefinitionofSMEsincomparisontothat oflargecompanies.Itemergedthatthisdefinitionisnotonlyarbi- trarybutalsodiffersbetweencountriesandevenwithinindividual countrieswhenusedfordifferentpurposes.TheEUmemberstates have theirown definitions of SMEsize, although theEuropean Unionhasstartedtostandardizetheconcept.Itscurrentstatistical definitioncategorizescompanieswithfewerthan10employeesas
“micro”,thosewithfewerthan50employeesas“small,”andthose withfewerthan250employeesas“medium-sized”.IntheUnited Statessmallbusinessesaregenerallyconsideredthosewithfewer than100employees,whereasa medium-sizedbusinessis often regardedasonewithfewerthan500employees.
We then analyzedgazelles and how the threshold between anSMEandlargebusinessaffectstheaveragegazelle’snetvalue added per employee. As reported in Fig. 3 we found that the average gazelle’s net value added per employee drops quickly withasmallnumberofemployees.Itishalvedwhenthethreshold movesfrom“soleproprietorship”to20employeespergazelle.We furtherdiscoveredthatitremainspracticallyunchangedwhenwe increasedthenumberofemployeespergazelletomorethan20 people.IfthethresholdbetweenanSMEandalargecompanyis
350 300 250 200 150 100 50 0 Financial intermediation, except insurance and pension funding Sale, maintenance & repair of motor vehicles, retail sale motor fuel Other service activities Other business activities Renting machinery, equipment w/o operator, personal & household goods Retail trade, except of motor vehicles, repair personal & household goods Wholesale trade & commission trade, except of motor vehicles & cycles Mfg of food products and beverages Mfg of basic metals Recreational, cultural and sporting activities Mfg of wood & wood, cork, straw & plaiting materials products Recycling Computer and related activities Mfg of pulp, paper and paper products Other mining and quarrying Supporting and auxiliary transport activities, travel agencies Real estate activities Construction Mfg of machinery and equipment not elsewhere classified Air transport Mfg of electrical machinery and apparatus nec Mfg of textiles Water transport Mfg of fabricated metal products, except machinery & equipment Mfg of rubber and plastic products Mfg of furniture, manufacturing not elsewhere classified Hotels and restaurants Activities auxiliary to financial intermediation Mfg of motor vehicles, trailers and semi-trailers Mfg of other non-metallic mineral products Mfg of chemicals and chemical products Mfg medical, precision & optical instruments, watches & clocks Land transport, transport via pipelines Mfg of radio, television & communication equipment & apparatus Publishing, printing and reproduction of recorded media Post and telecommunications Sewage and refuse disposal, sanitation and similar activities
14,000
Fig.2. IndexofnetvalueaddedperemployeebyindustryinSloveniain2007.
Fig.3.ImpactofthethresholdbetweenanSMEandalargecompany.
setat20people,thereare64.3%ofSMEsamonggazelles,butthey generateonly24.6%ofthetotalvalueaddedthatgazellesgenerate.
Moreover,wecomparedthestructureofallcompaniestothe structureofgazelles(Table3).Microcompaniesareunderrepre- sentedamonggazelles,whereassmall,medium-sized,and large companiesareoverrepresented.
Jeff Bezos founded Amazon.com in 1994, and with only a few,albeitcarefullyselected,employeesthecompanygenerated US$15.7millioninsalesin1996,initsfirstfullfiscalyearinbusi- ness.Asithadenteredthebookstorebusiness,itwascompeting againstmuchlargercompetitorssuchasBarnes&NobleandBor- ders.AlthoughBorderswasperceivedasatechnologyinnovatorat thetime,itwasunsuccessfulonlineandwaslaterformedapart- nershipwithAmazon.com.Amazon.comtookoverallofBorders’s Internetactivities,andBordersreceivedapercentageofthesales butlosttheopportunitytocollectdataandmaintaindirectcontact withitscustomers.
Amazon.com was also successful in maintaining its leading positioninthepure-playonlinebusiness.Overstock.comtriedto competewithAmazon.comusingAmazon’sinitialbusinessmodel,
Table3
Gazellescomparedtoallcompaniesbysize.
Numberofemployees Allcompanies Gazelles Shareofgazellesamongallcompanies
1–9 85.5% 34.7% 0.4%
10–49 11.3% 50.1% 4.6%
50–249 2.6% 13.2% 5.2%
250+ 0.6% 2.0% 3.6%
Total 100.0% 100.0% 1.0%
whichhad someimportantadvantages overAmazon’s modified one, suchas lower inventorylevels. In 2001 theCEO of Over- stock.com,PatrickByrne,statedthatOverstock.comnotonlywould moveaheadofAmazon.combut alsowould beabletotakethe companyoverinafewyears’time(Owen,2002).In2009Over- stock.comhadreachedonly3%ofAmazon’sannualsalesand0.7%
ofitsoperatingincome.
On theother hand,thecompany supplemented itsbusiness modelwhenitwasalreadyoneoftheworld’slargestcompaniesand enterednewbusinesses.AsitenteredtheWebservicesbusiness,it wascompetingagainsttheworld’slargestcompanieslikeMicrosoft andIBM.Iftwoormorecompaniesrecognizetheopportunityto createanewadvantage,thecompanythatcancreatetheadvantage morequicklywillwin(MellahiandJohnson,2000).Sothecompany wassuccessfullycompetingasasmallcompanyagainstlargecom- paniesandasalargecompanyagainstlargecompaniesandsmaller challengers.
Theresultsofouranalysissupportthepropositionthatallcom- panies,notjustSMEs,generatefastgrowth.
6. Discussionandconclusions
This article has sought to challenge some well-established premisesofeconomicpolicies,namelywhatcompaniesarethetar- getsofsuchpoliciesandwhatisbeingsupportedandstimulated toachievehighgrowth.Tobemorespecific,isitappropriatefor currenteconomicpoliciestofocusonSMEsandstart-ups,high- techindustry,andpatents?Ourresearchbasedoncompaniesthat excelledingrowthsuggeststhatsuchpoliciesmightnotleadto desiredoutcomes.Adifferentperspectiveonhowtoachievehigh growthcomesfromthebusinessworlditself;itisbasedonthevalu- ablecontributionofaspecificbusinessstrategy,theBOS,totoday’s business.Ourresearchthustestedfourpropositionsarisingfrom theBOSframework.
Thefirstproposition,thatcompaniescreatingblueoceansgrow faster,receivedonlypartialsupport.Rather,ourresearchsuggests thatthekeytohighgrowthisnottocreateanewmarketbuttobe thefirsttodevelopandexploitthatmarket.Thisismostevident inthecaseofAmazon.com,whichwasnotthefirstinthemarket butwasthefirsttotrulydevelopandexploitit;ComputerLiteracy BookshopsandBookStacksUnlimitedhadasignificantadvantage inthemarketplacebutcouldnotfightoffAmazon.com.Thesearch forunexploitedblueoceansthereforeappearstoopenupthesame opportunitiesforacompanyascreatingblueoceansfromscratch.
Second,ourresultsgreatlychallengethepremisethatindustry stronglyinfluencesgrowth.Fast-growingcompaniesarefoundina varietyofindustries.Slovenianfast-growingcompaniesareplayers inseveralindustriesthatarenotrelatedtohightechnology;they createanimportantpartoftotalvalueaddedandachievethiswith ahighnetvalueaddedperemployee.CongruentwiththeBOS,com- paniesworkingatthebordersofindustriesseemtoachievehigher addedvalueperemployee.Theresultsalsoshowedthatcompanies cansuccessfullyfocusontheircompetenciestoentercompletely newmarketsand notlimit themselvestotheindustrytheyare in.Thisimpliesthatpolicymakersshouldreconsidertechnology clustersinfavorofintraindustrycooperatingcompanies.Amore
diversifiedenvironmentincreasestheprobabilityofsuccessfully combiningcorecompetenciesindifferentconfigurationsbyoffer- ingagreaternumberandvarietyofunsolvedchallenges,aswell asamuchwiderpoolofexpertknowledgeandotherresourcesto createnewmarkets.
Third,ourfindingssuggestthatvalueinnovationisasimportant astechnologyinnovation.Bythis,wedonotsuggestthatpolicy makersshouldmoveawayfromatechnologyfocusandsubstitute itwithavaluefocus.Amazon.combuiltitsvalueinnovationson continuousimprovementstotechnologicalsolutions,butwefound thatAmazon.comhasmanagedtopositionitselfastheleaderinthe Webservicesbusinessbydevelopingnewinnovativewaystoserve thecustomer.We alsofoundthattechnologywasnot themain factorthatinfluencedthegrowthrateofgazelleswhencomparedto theremainingcompanies.Thisfindingsuggeststhatvaluecreation deservesahigherpositionontheprioritylistofpolicyinitiatives andthatcompaniescanachievehighgrowthregardlessofwhether theypatenttheirproductsandtechnology.
Fourth,thefocusofeconomicpoliciesshouldmovefromSMEs tocooperationbetweendifferent-sizedcompanies.“Smalliscute”
isanattractivestrategy,butitisnotnecessarilyaneffectiveone.
Althoughourresultsshowedthattherearedifferencesinthenet valueadded peremployeebetweensmallcompaniesand other fast-growingcompanies,thethresholdgreatlyinfluencesthosedif- ferences.Intermsofimpactonthetotalvalueadded,oneshould locatethethresholdsomewherebetweenthesizethatistypically usedformicroandsmallcompanies,notbetweenmiddleandlarge companiesaswemightexpect.Butwhenweconsiderputtingthe thresholdforasmallcompanybetween10and20employees,the impactofsodefinedsmallcompaniesontheoverallgrowthrateis muchlessthanistypicallybelieved.Theshareofgeneratedvalue addeddropsrapidlyasthenumberofemployeesisreduced.These companiesarealsounderrepresentedincomparisonwithallcom- panies,whichimpliesthat,althoughthereisaspecialemphasis onthem,theyarestillless effectiveinterms ofbecoming fast- growingcompanies.Intermsofvalueaddedperemployee,itseems worthwhiletofocusonmicroandsmallcompanies,butitdoesnot seemsufficient,astheydonotgenerateenoughaddedvalue.Typ- icalargumentsinfavorofSME-supportingpoliciesarethatSMEs generatethehighestgrowthandthemostnewjobs,theyareapre- requisitefordevelopinglargercompanies,theyaremoreflexible andthereforecanrepositionfaster,andtheyhavelowersunkcosts andthuscanachievehighergrowth.Nevertheless,largecompa- niesalsohaveimportantadvantages,suchasapoolofresources, capital, and market position.We therefore suggest focusing on effortsthatcombinethecharacteristicsofsmallcompanieswith thecompetenciesandresourcesoflargecompanies.Openinnova- tiontheory(Chesbroughetal.,2006)offersapproachesthatcould beharnessedtocreate anewgenerationof policiesthatenable cooperationbetweencompaniesofdifferentsizes.
Aswithanyresearch,thesefindingsmustbeinterpretedtak- ingintoaccountthestudy’sscopeandlimitations.Onelimitation istheuseofquantitativedataonlyforSloveniancompanies,as theSlovenianeconomyissmallandyoung,withrelativelysmaller companies. Moreover,focusing the analysison one yearmight introducesomebias.Forexample,thedataarefromthetimeofthe
