1. Introduction
Organizational life-cycle models suggest that the development of any business organization tends to follow predictable patterns [
1,
2]. One of the key assumptions underlying life-cycle models is that there are regularities of organizational development process, which can be segmented into discrete stages from birth to death like every living organism [
3,
4,
5]. It also refers to the expected sequences of advancements experienced by an organization, as opposed to a randomized occurrence of events. Another assumption is that organizational structures in one stage are not same as those in other stages. Thus, each stage of growth would have different sets of challenges under different operating contexts.
Firms face different sets of internal and external environmental variables as they move from one to another stage of growth. External variables include shifts in demand, in technology or in competitive circumstances, while internal variables describe the conditions of a firm’s resources, capabilities, and internal organizational system. Changes in the external and internal mix of problems for companies provide different sets of strategic challenges [
6,
7,
8,
9,
10,
11,
12,
13]. As a result, organizations encounter some degree of difficulties in managing a transition process between stages of growth. When the transition from one to the next growth stage has not been made successfully, firms tend to experience organizational “growing pains” [
14,
15,
16,
17,
18]. Growing pains are problems that occur as a result of inadequate organizational development in relation to business size and the complexity of external environments at a given stage of growth. These growing pains are described as symptoms of organizational distress and indications of the need to change, if the organization wants to continue to operate successfully [
14,
19,
20]. In other words, organizational growing pains are signals about the necessity for strategic organizational development to ensure sustainable growth of business organizations.
So far, a variety of literature on organizational analysis and design has investigated changing characteristics of organizations in different stages. However, a historical bias in literature on organizational life-cycles and growth stages has been the tendency to generate studies that focus on the static characteristics of growth stages. As for the previous studies on the concepts of growth stages of firms, a large number of studies [
5,
21,
22,
23,
24,
25,
26,
27,
28,
29,
30,
31,
32,
33,
34,
35,
36,
37] propose life-cycle models of organizations in order to account for the growth patterns of firms. Different authors have emphasized somewhat unique sets of organizational characteristics and life-cycles models. Those studies commonly suggest that a firm’s growth can be segmented into discrete stages as follows: birth, growth, maturity, revival, and decline. Based on this approach, they have tried to examine different characteristics of each stage of growth. However, those studies assuming that a firm’s growth as a set of discrete stages are considering that the firm’s growth is an uninterrupted process lacking considerations on the transition process (i.e., transition failures) between growth stages, which hinders in-depth descriptions on the dynamic growth trajectories of firms.
Recently, however, several studies have tried to examine this transition process between growth stages by incorporating the concept of organizational growing pains [
14,
15,
16,
38,
39,
40,
41,
42,
43,
44,
45,
46]. For example, Flamholtz and Randle [
15] address that a dis-equilibrium state of the organizational development in which an organization’s internal infrastructure is not consistent with its size resulting in different types of transition pains. Based on this approach, several studies have investigated different types of organizational growing pains, and underlying causes of growing pains [
14,
15,
39,
43,
44,
45]. However, those studies largely focus on the internal structure of the business organization (i.e., organizational structures and processes that influence worker behavior and motivations), and its relationships with the firm’s growth stage. There have been few studies that put an emphasis on aligning business organizations with their rapidly changing and complex environments through strategic management to deal with growing pains. As there has been a lack of consideration of external environmental variables such as shifts in demand, in technology or in competitive circumstances, these studies have been limited in providing implications on the formulation of strategies to deal with a successful transition process between growth stages. In order to tackle down underlying determinants of the growing pains of firms, there should be in-depth discussion on changes in the external and internal mix of problems faced by firms and their relationship with growth challenges.
Furthermore, previous studies that investigate a firm’s growth stages and organizational growing pains are rather fragmented, and largely limited to theory-building. Accordingly, there have been few attempts to investigate the growth patterns of firms including growth stages, and growing pains of firms, by applying theories to specific countries or industries. Few attempts have been made to account for growth trajectories/patterns of firms in quantitative manners to validate these various frameworks. To inform practical leaders and managers of companies on how to deal with growing pains for the sustainable growth of business organizations, it is also essential to test theories and apply concepts in order to analyze practice. Unfortunately, however, very few research studies have examined the underlying causes for organizational growing pains, and those that investigated this topic have not focused on real cases, being limited in their practical implications for both organizational and management development research.
Considering these limitations of previous studies, this study aims to propose a holistic framework to account for growth trajectories of firms in terms of the transition process between growth stages and growing pains encountered by firms. The academic institution behind this approach is that a firm’s sustainable growth over the long term involves a dynamic process incorporating periods of growing pains, and a successful transition process, which is not described as a series of distinctive discrete stages [
47]. In developing a conceptual framework, this study extends the definition of organizational growing pains beyond the previous literature. We define organizational growing pains as “transition failures resulting from inadequate organizational development in relation to business size and complexity of the external environment at a given stage of growth”. Based on this extended definition of organizational growing pains, we investigate the underlying causes of organizational growing pains encountered by Korean firms, and the key developmental areas of organizational development required to deal with growing pains. As a result, we highlight the importance of the formulation of business strategies to align a firm’s internal infrastructure with their rapidly changing and complex environments in dealing with organizational growing pains.
To be specific, we synthesize two approaches in developing a conceptual framework to account for linkages between determinants of a firm’s growing pains and the formulation of business strategies in terms of key areas of organizational development. The first approach is to identify quantitatively and explore stages of growing pains encountered by Korean firms from the 1990s to 2010s using the statistical analysis of 1788 companies in Korea from 17 industries between 1990 and 2013. Based on quantitative findings drawn from the statistical analysis, we formalize the proposed conceptual framework to account for a business organization’s life-cycle in terms of organizational growing pains and key developmental areas with the consideration of the industry-specific and institutional conditions of Korea. The second approach is to examine case examples to highlight the importance of firm’s strategies in dealing with organizational problems appropriately in order to overcome growing pains. Through the case studies, we will explore the underlying causes of the growing pains encountered by Korean firms from the 1990s to 2010s, focusing on external and internal factors, and highlight the importance of the business management strategies to overcome growing pains. From the case studies, we stress the importance of strategic management to overcome growing pains during the growth paths of firms. Based on the qualitative findings drawn from the case studies, we expect to offer evidence to complement and enhance the accountability of our proposed framework.
Different sets of internal and external environmental variables governing the business organizations result in different types of challenges and transition failures that firms are likely to meet as they proceed to the next stages of growth. From this perspective, we argue that the sustainable growth of firms involves successful transitions between growth stages through managing different types of organizational growing pains and maintaining sustainable competitive positions. In other words, this suggests shifts in the strategic orientation of the firms as the firms grow. Therefore, it is important for managers and founders of companies to understand the different aspects of the transitions over the life-cycle of business organizations in order to secure the sustainable growth of firms. Our study is significant, in that it is devoted to an analysis where theories are put into practice by suggesting a new conceptual framework based on a synthesis of qualitative and quantitative findings. Ultimately, this study expects to provide comprehensive insights for managers to understand the underlying causes of growing pains and to proactively determine effective measures to continue to grow organizations successfully.
The rest of the paper is structured as follows:
Section 2 provides descriptions of the statistical data analysis and our proposed framework;
Section 3 presents case studies for companies to provide extensive explanations on the role of strategies to deal with growing pains; and lastly, the summary and concluding remarks are provided in
Section 4.
3. Qualitative Methods and Findings
As discussed above, we have identified stages of growing pains faced by Korean firms from 1990s to 2010s in terms of their organizational sizes as follows: 20, 100, 300, and 500 million USD. Based on the findings drawn from the quantitative analysis, we have proposed a firm’s growth model focusing on the transition between growth stages and organizational growing pains. In addition, we have constructed a conceptual framework on stages of growth, different types of growing pains, and key developmental areas for firms to overcome each stage of growing pains, focusing on Korean firms. In the following subsections, we will examine case examples to highlight the importance of a firm’s strategies in dealing with organizational problems appropriately to overcome growing pains. Our proposed conceptual framework drawn from the quantitative findings as presented in
Figure 6 and
Table 1 can be utilized as a theoretical foundation for the case studies.
Accordingly, the main purposes of the qualitative studies presented below is to complement findings drawn from quantitative analysis, to validate our proposed conceptual framework, and to enhance the reliability and accountability of our framework. In addition, through the case studies, we will explore underlying causes of the growing pains encountered by Korean firms from the 1990s to 2010s, focusing on external (i.e., shifts in demand, in technology or competitive circumstances) and internal factors (i.e., internal infrastructure of the business organizations), and highlight the importance of business management strategies to overcome growing pains. From the case studies, we stress the importance of strategic management to overcome growing pains during the growth paths of firms. This approach is in line with other studies’ approaches. For example, contingency theory is characterized by a specific approach to the strategic fit of organizations. This approach provides insights into how organizations adapt to changing situations by modifying their internal resources and strategic choices to fit unforeseen events [
84,
85,
86]. On the one hand, institutional theory proposes that firms in different contexts (i.e., operating in different institutional conditions) react differently to similar challenges [
87,
88]. This perspective highlights the interactions between firms’ strategic decisions and institutional factors (e.g., regulatory conditions, interventions of the governments), which provide a theoretical foundation for linking the adaptation of firms to the macro institutional and competitive environments. On the other hand, selection studies have examined how contextual factors relate to specific aspects of the internal management systems of organizations [
89].
To be specific, we will examine the growth paths of Firm 1_A (in
Figure 2), Firm 2_A (in
Figure 3), Firm 3_A, 3_B (in
Figure 4), Firms 4_A, and 4_B (in
Figure 5) (Because of the confidential information of the firms, we do not mention the firms’ names directly presented in
Section 3) in order to offer extensive explanations for the significance of a firm’s strategies to deal with each stage of growing pains. A wide range of documents and reference materials are used for the case studies, including annual company reports, interviews with managers or founders, and companies’ web pages to extract additional information on the firms’ histories and the growth paths they took.
3.1. Case Study: Firms Overcoming Growing Pains with 20 Million USD Revenue
The development of management systems could be one of the most important and pressing tasks for organizations when the growth rates of organizational sizes outstrip the rates at which the enterprises’ management systems are well established. If the required infrastructure and related internal control systems are not in place, the organization will not operate well, resulting in various organizational problems. Firm 1_A’s course of growth is a good example to explain the importance of the infrastructure of management systems as a sound platform for future growth that allows a company to operate efficiently on a day-to-day basis.
Firm 1_A was established in 1997 as a manufacturer of digital electric meters. It experienced a transition from a high-growth path to a low-growth path by the time it reached approximately 20 million USD of revenues during 2008 to 2011. This was a time of slowdown in overall economic growth caused by the global financial crisis, thereby depressing the housing construction sector. Under these situations, the projects and businesses under the Firm 1_A could not speed up. At the same time, its growing pains were brought about, at least in part, by underdeveloped operational and internal control systems required for the organization’s continued growth.
One of key factors to help the Firm 1_A overcome its growing pains was the development of operational and management systems. While Firm 1_A had already developed core competencies in technological capabilities as an important driver of product development outcomes with a large number of patents, entrepreneurs were unable to cope with the managerial problems that arose as the organization grew. (During the mid-2000s, the number of defective products and product breakdowns increased as the production volume of Firm 1_A expanded.) In such situations, the infrastructure of the management system that let the company operate efficiently and effectively was essential to ensure sustained growth. However, during the rapid expansion in its organizational size during the early 2000s, Firm 1_A was not interested in developing formalized operational systems (e.g., quality-management systems), but placed emphasis on securing marketing channels and the acquisition of resources required to diversify product lines.
Despite rapid expansion in sales revenues, it underdeveloped its quality-control infrastructure to consistently meet customer requirements and enhance their satisfaction. In this situation, Firm 1_A appointed a general director of quality management dedicated to enterprise-wide quality management tasks in 2009. It also introduced a total quality-management system in 2009 to improve its ability to deliver high-quality products and services to customers. Furthermore, Firm 1_A has made the transition from entrepreneurship to professionally managed organization. By hiring professional managers during the late 2000s, it began to develop the formalized management systems required to facilitate its future growth.
Furthermore, during 2008 to 2011 Firm 1_A faced a rise in production costs caused by the skyrocketing currency exchange rate. It sourced intermediate parts and components from China’s original equipment manufacturers (OEMs), and assembled final manufactured goods in domestic manufacturing facilities. (At that time, the head office located in Korea carried out high value-added functions, such as research, design, and marketing.) Under this functional distribution, the global financial crisis caused Firm 1_A to face rising material costs and production costs. Accordingly, it underwent a stage of stagnation with fluctuations in revenues during the late 2000s. A foreign exchange risk-management system was an essential component for Firm 1_A which imports the majority of intermediate goods from abroad, so as to flexibly deal with the economic crisis. However, Firm 1_A had not developed such a system at that time.
As Firm 1_A experienced significant problems when it reached approximately 20 million USD of revenues in the late 2000s, it started to make improvements in business functions and corporate governance. To cope with future conditions of uncertainty, it suspended subcontracts with China’s OEMs, and started production of intermediate parts and components domestically in 2009. As a result of these efforts, it now supplies intermediate goods from its own manufacturing facilities. It considered that managing exchange rate risk exposure was also important for reducing the firm’s vulnerabilities to major exchange rate movements. As a result, it assigned a chief finance officer for tasks, including financing, accounting, and foreign exchange risk management, in order to enhance its financial system in 2009. Following those strategic choices including the implementation of new organizational methods, and the development and establishment of operational management systems, it could overcome growing pains successfully in 2012. The example of the Firm 1_A’s growth path highlights the importance of organizational innovations in the management system as a sound platform for overcoming the first stage of growing pains.
3.2. Case Study: Firms Overcoming Growing Pains with 100 Million USD Revenue
The example of Firm 2_A’s transition process from the state of growing pains toward a rapid growth phase sheds light on growth strategies to create new opportunities for future growth after the consolidation stage of organizations. Firm 2_A was established in 1956 as a manufacturer of electrical equipment, including high-energy storage capacitors, and electromagnetic filters. Firm 2_A experienced its growing pains by the time it reached approximately 100 million USD of sales revenues during the mid-2000s. Its growing pains are attributable to various factors, such as sluggish demand for electrical equipment products from downstream industries due to the depressed IT industry, and increased competition from other countries’ manufacturers, resulting in lower profit margins and a state of stagnation.
A critical challenge posed to Firm 2_A was the threat of latecomers with cost advantages, especially those with much lower labor costs. During the early 2000s, latecomers made large-scale investments in new production facilities to gain comparative advantages in production costs over their competitors. Another problem faced by Firm 2_A during the mid-2000s were the significant breakthroughs made by Japanese firms in the development of new and more efficient materials and methods for cost-efficient manufacturing processes. While latecomers including Chinese manufacturers expanded their market shares in the general-purpose electric equipment markets with huge investments for production facilities, Japanese companies attempted to gain competitive advantages in superior-quality and highly customized products. At that time, the core business of Firm 2_A (i.e., general-purpose electric equipment) reached limits in terms of available market share. In such situations, increased competition driven by Chinese and Japanese manufacturers decreased Firm 2_A’s profit margins and eroded its market share over time. As a result, Firm 2_A experienced growing pains when it reached an organizational size of 100 million USD in sales revenues.
Nevertheless, it successfully dealt with growing pains through the development and introduction of new products for new markets with enhanced research and development (R&D) activities. In particular, Firm 2_A felt the importance of the development of highly customized products to fulfil specific customer requirements as a niche market strategy. (With the advent of high value-added IT devices during that period, an increased demand for higher capacity, superior quality, and highly customized capacitors is expected.) Accordingly, it attempted to overcome its growing pains by diversifying its product lines from general-purpose electrical components to highly customized equipment and products. In order to develop core capabilities to diversify product lines, Firm 2_A attempted to maintain its R&D intensity (measured by the ratio of R&D expenditure to sales revenues) at about 1.5%. Having maintained its R&D spending despite its growing pains during the mid-2000s, Firm 2_A could establish technological capabilities specializing in highly customized products.
In addition, Firm 2_A reorganized its in-house R&D structure from a single unit into three departments in 2006—new product development, research planning, and new project development units—to enhance the efficiency of R&D activities. Furthermore, it sold several businesses, and reorganized business units aiming at a transition toward high value-added products. Moreover, it sought to strengthen technological exchanges and transfers through the formation of a consortium with government-funded research institutes and other companies, thereby establishing organizational infrastructure associated with the development and mass production of high value-added products. As a result of these efforts, it succeeded in developing core fundamental technologies applied to high-capacity, high-reliability capacitors and component modules. The number of Firm 2_A’s patent applications that are issued and granted has also shown a rapid increase from 2004. In 2004, the total number of patents that were issued and granted was only 3, but it increased to 16 in 2011, 30 in 2012, and 21 in 2013.
Likewise, Firm 2_A made concentrated efforts to gain competitive advantages with regard to product differentiation through R&D activities. It attempted to maximize the value creation from high value-added products based on its technological capabilities through reorganizing business units to integrate R&D with other relevant complementary assets. As a result, Firm 2_A overcame its growing pains at the stage of 100 million USD in sales revenues, and made a successful transition to a high growth phase in the late 2000s.
3.3. Case Study: Firms Overcoming Growing Pains with 300 Million USD Revenue
Founded in 1945, Firm 3_A provides special wire products, including wire rope and pre-stressed concrete steel wire, and now is positioned as a leading manufacturer in Korea. Firm 3_A is found to have undergone growing pains during the mid-2000s. With the Korean financial crisis during the period between 1997 and 1998, market conditions in the construction and car-making industries had continued to worsen until the early 2000s, resulting in a critical crisis in the iron and steel industry. In addition, other factors, such as decline in global demand for steel products and increased global competition from steel makers in South-East Asia with low manufacturing costs, deepened the iron and steel industry crisis until the early 2000s. Under these severe conditions, Firm 3_A’s market share decreased, and it experienced growing pains when it reached an organizational size of 300 million USD.
One of the key strategies for Firm 3_A to overcome its growing pains was customer-oriented marketing strategies focused on overseas markets, in parallel with consistent R&D investments in developing new products. Facing the financial crisis in Korea, Firm 3_A made active investments in R&D activities and built additional experimental and research centers in 1998 so as to enhance collaboration with various steelmakers and public research institutes (i.e., universities, and government-funded research institutes). Based on this form of research networking and collaboration, it sought to increase shared learning, new research opportunities, and technology transfers, as well as to promote flexibility to adapt to a wide spectrum of challenges in product differentiation. Along with these efforts focusing on the development of new products for the existing market, Firm 3_A actively extended its manufacturing sites abroad to gain access to new markets, and search for opportunities to operate businesses in new markets.
Since the late 1990s, developing countries, especially those in the South-East Asian region, have been the fastest-growing market in the world for steel products due to their rapid rates of industrialization. In response to the rapid growth of new potential markets, Firm 3_A actively set up manufacturing facilities and service centers in those areas from the early 2000s. By 2014, Firm 3_A had established four factories in Malaysia, six in China, three in the United States, two in Vietnam, two in Indonesia, and one in Hungary. Based on these production facilities abroad, it focused on customer-oriented services, including maintenance (e.g., product updates and technical support), repairs, and other types of services (e.g., product customization and training). Firm 3_A highlighted the increasing importance of customer-oriented services as the company’s strategic development strategy. As a result, Firm 3_A could customize its product lines to fit the context of customers in new markets and retain its differentiated brand image in the global market. Following these strategic choices, Firm 3_A could overcome its growing pains, and successfully make the transition toward the next stage of growth, showing a rebound in growth rates of sales revenues after the mid-2000s.
Firm 3_B’s course of growth is another good example to explain the importance of the exploration process for new markets to overcome organizational problems. Firm 3_B was established in 1968 as a specialized manufacturer of knitting garments. From HP filtering analysis, it is found that Firm 3_B experienced a transition from a high-growth path to a low-growth path by the time it had reached approximately 300 million USD of revenues during the mid-2000s. The Korean financial crisis during the period between 1997 and 1998 depressed domestic market conditions, resulting in decreased clothing consumption. This trend continued until the mid-2000s, and Firm 3_B faced its growing pains during that period.
Under such conditions, Firm 3_B attempted to explore new markets for existing products abroad, based on its established overseas subsidiaries and interconnected subcontracting factories. From the early stages of the organization, it did not build its production facilities in Korea, but manufactured the entire range of its products by outsourcing from overseas subsidiaries and subcontracting factories located in South America and South-East Asia to gain cost advantages over competitors. With already well-established global production networks, Firm 3_B implemented aggressive marketing strategies targeting the overseas market rather than the domestic market. As a company in the wholesale and retail trade industry, which is sensitive to changing consumption trends, Firm 3_B attempted to regain sustainable competitive advantage by expanding its market share in new markets abroad. Well-established production facilities distributed across the world played an important role as a bridgehead for Firm 3_B to enter the overseas market. As a result, it could overcome growing pains and successfully make the transition toward the next stage of growth after the mid-2000s.
3.4. Case Study: Firms Overcoming Growing Pains with 500 Million USD Revenue
Firm 4_A was founded in 1969 as a manufacturer of petrochemical products. Until the late 1990s, it grew rapidly through the expansion of businesses with vertical integration and portfolio diversification. It steadily continued to invest in production facilities during the 1990s, and increased production outputs from linear alkylbenzene (LAB) and normal paraffin (NP) plants. As a result, it could flexibly respond to increasing world demand for industrial petrochemical products at that time, showing high growth of sales revenues. However, it had undergone the stage of stagnation since the early of 2000s, and experienced growing pains when it reached approximately 500 million USD of sales revenues during the mid of 2000s. To overcome its growing pains, it had tried to deal with a wide range of issues involved with its stage of organizational decline and revitalization.
One of the most important factors in dealing with growing pains was to re-conceptualize its target market and update its product lines. Since the late of 1990s, there had been an increased competition in the markets of LAB and NP, due to new entrants from China and Middle Eastern countries. In such a situation, Firm 4_A had successfully developed tertiary dodecyl mercaptan (TDM) in 1997, and it was the third company in the world to succeed in developing the TDM. The TDM production process by nature recycles waste generated in the LAB production process, and uses it as raw material. In this way, Firm 4_A had tried to expand its businesses by starting manufacturing a new product (TDM) related to its existing business activities. Under this form of related diversification, Firm 4_A had made easier the consumption of its products by producing complementary goods, and enhanced the efficiencies in the production process. Production of TDM became a new revenue-generating source for Firm 4_A, with the increased demand coming from the synthetic resin and synthetic rubber markets. As a result, Firm 4_A overcame its growing pains, and made a successful transition towards a high growth phase in the late of 2000s.
Firm 4_B’s course of growth is contrasted with that of Firm 4_A. Founded in 1964, Firm 4_B manufactures intermediate raw materials and basic chemical products used for various industrial fields. Firm 4_B had produced urea and ammonia using naphtha as a raw material, but it lagged behind Middle Eastern companies which produced urea and ammonia with natural gas, and Chinese companies which produced them using coal with cost-competitiveness. As a result, Firm 4_B had been in a deficit since 2003, and suspended its production of urea and ammonia from 2011. Instead, it established a joint venture company with a Japanese ceramic manufacturer in 2011 to enter the secondary battery material market. It also established another joint venture company with a solar panel manufacturer in the U.S. to gain access to new opportunities in the solar polysilicon market. However, those businesses went into liquidation in 2015. As a result, it is still trapped in its growing pains with challenges of revitalization. Firm 4_B tried to overcome growing pains through a horizontal expansion, seeking to diversify its product lines, and gain access to new markets with high-growth potential.
However, it is pointed out that Firm 4_B had implemented excessive diversification strategies with unclear long-term strategic goals for revitalization, resulting in increased bureaucratic costs. Through the establishment of joint ventures, Firm 4_B had attempted to revise its strategic goal of producing high value-added chemical products, and to forcibly advance into new markets, following other global companies. The revitalization process with the lack of a long-term strategic direction caused significant challenges for Firm 4_B in ensuring organizational developments aligned with its future goals. Lacking alignment between organizational systems and strategic goals, the new businesses of Firm 4_B created additional bureaucratic costs, and hindered the revitalization process of the company. In reality, it can be noted that there were frequent conflicts between managers and engineers from foreign companies over sharing ideas, knowledge, and corporate cultures, due to differences in organizational cultures.
It is important for companies in the stage of decline which pursue the process of revitalization to develop and revise their organizational infrastructure in order to support new businesses. In this revitalization process, several different but related issues must be addressed. In other words, the organization needs to ensure whether it has appropriate resources, operational systems, management systems, and corporate governance, aligned with clear long-term strategic goals to support the revitalization process. Firm 4_A had a deeper understanding of how to fit and coordinate diversification activities with an existing organizational infrastructure. On the other hand, Firm 4_B failed to integrate the new businesses into its existing portfolio of business and revise its organizational infrastructure aligned with its future goals. Those examples shed light on the importance of the alignment between organizational infrastructure development and strategic goals in order to exit the decline stage and seek a revitalization process.
4. Conclusions
Firms go through distinct stages of growth, and face different sets of internal and external environmental variables as they move from one stage to another [
90]. The sustainable growth of firms involves successful transitions between growth stages through managing organizational growing pains and maintaining sustainable competitive positions [
91]. Different sets of variables governing the organizations in each stage cause growth challenges, and tend to hinder a successful transition process between growth stages. In this study, we define organizational growing pains as problems that occur as a result of inadequate organizational development in relation to business size and external environments at a given stage of growth. The sustainable growth of firms can be fraught with those growing pains. Therefore, it is important for managers and founders of companies to understand the different aspects of the transitions over the life-cycle of business organizations in order to secure the sustainable growth of firms. In this context, the objectives of this paper are to propose a conceptual framework to account for a business organization’s life-cycle in terms of organizational growing pains and key developmental areas by synthesizing qualitative and quantitative findings. To achieve this objective, we have formalized the proposed conceptual framework through analyzing key findings drawn from statistical analyses, and collecting evidence from case studies to enhance the accountability of our proposed framework. Through the case studies, we have collected observations of organizational behavior to generalize about the determinants of organizational growing pains and key developmental areas for organizations in the various stages of organizational growth.
Based on the case studies, we examine case examples to highlight the importance of a firm’s strategies in dealing with organizational problems appropriately in order to overcome growing pains. Our proposed conceptual framework drawn from the quantitative findings lays down theoretical foundations for case studies. Our findings on the stages of growing pains and key organizational development areas for Korean firms from the 1990s to 2010s can be summarized as follows: (1) Growth stage with 1st stage of growing pains (20 million USD in organizational size): systemization of management system; (2) Maturity stage with 2nd stage of growing pains (100 million USD): development of new products with enhanced R&D capabilities and complementary assets; (3) Maturity stage with 3rd stage of growing pains (300 million USD): exploration of new markets for expanding business opportunities; and (4) Decline stage with 4th stage of growing pains (500 million USD): revitalization process on a wide range of organizational development areas. The life-cycle literature suggests that organizations evolve in a consistent and predictable manner, suggesting that organizational structures and strategies evolve as firms move through their life-cycles and growth stages. From this perspective, the managers of companies must learn how to manage growth and deal with their growing pains for the inevitable transitions from one to another stage of growth. It is also required for managers to understand the significance of the concept of organizational life-cycle and explore the underlying causes of growing pains that hinder a successful transition toward the next phase of growth, and key organizational development areas to overcome organizational growing pains [
92].
Accordingly, our findings suggest that there are different types of transition during the growth trajectories of firms that must be made at different stages of growth in order for business organizations to continue to flourish and grow successfully. If those types of transitions between growth stages are not made effectively, firms will experience growing pains, which have a significant impact on organizational effectiveness, efficiency, and success [
14]. Different aspects of the transitions and growing pains that must be made over the entire life-cycles of firms help us identify the underlying factors that cause transition failures between growth stages [
90,
93]. Understanding the underlying determinants of growing pains and key developmental areas required for the successful transitions promote long-term success and ultimately result in sustainable corporate growth. Based on these understandings, leaders and managers of business organizations should proactively know about how to design organizations with appropriate business strategies in order to adapt to different sets of internal and external changes in accordance with growth stages. Their capabilities associated with management and organizational development with timely decision-making in different situations can contribute to the progress of organizations, and create value and competitive advantage over competitors.
In this context, this study has academic merit in presenting a conceptual framework for understanding the growth patterns and stages of business organizations in terms of organizational growing pains. It presents a holistic framework beyond a synthesis of different models such as, organizational development models and organizational life-cycle models. Accordingly, we expect our proposed conceptual framework and organizational growth model to provide comprehensive insights for examining the linkage between organizational growing pains and formulation of business management strategies at different stages (or, positions) of business organizations by considering the governing internal and external conditions. The limitation of this study lies in the fact that the analysis is limited to the contextual conditions of Korea. As noted by institutional theory, context-specific and institutional conditions can shape different strategic choices of firms. Therefore, further research may require the enhancement of generalizability beyond the context of this study.