Resources influencing the growth of a firm at different stages: A qualitative study of Vietnamese SMEs in the IT Sector

Sammanfattning: This research aims to identify the key resources influencing the growth of IT-based SMEs in Vietnam in 5 different growth stages which were developed by Churchill and Lewis (1983); and we also demonstrated the process how such key resources are created, acquired, accumulated and exploited for the growth accordingly. We interviewed 4 founding members of 4 companies to collect the primary data and used some internet sources for secondary data. Our findings show that: (1) Based on specific internal conditions, objectives of specific growth stages, market size, and backup plan for unexpected events, companies have different approaches to acquire, accumulate and exploit their key resources to achieve growth through different stages. (a) In existence stage, with the goal of realizing a viable business, companies rely mainly on 3 most important key resources: human resources (especially the founders' relevant skills and experiences), a minimum viable product and sales-related resources (sales, marketing techniques, networks for acquiring early customers). The founders may choose to start their startup by either personal money and family support or external investment (coming from founders’ personal network of angel investors, accelerators, and so on). (b) In the survival stage, with the goal of achieving financial break-even status, companies tend to work out a sustainable sales-related resources (e.g. sales and marketing techniques, brand and reputation) and afterwards significantly increase their human resources to boost the sales of the products; the financial resources to fund for the new staffing may come from either internal revenues or external investment (brought in by the network of founders and previous investors, if any). (c) In the success stage, with the goal of accumulating financial resources and others for rapid growth, given that they already have a relatively effective sustainable sales-related resources (sales and marketing techniques, procedures, brand and reputation), companies tend to boost the sales by spend money on recruiting new employees, and/or seek for sales/marketing partnership. Companies starting with an initial niche market product (rather small market size) tend to reach the revenue limit during this stage, and have to explore other new markets by developing new product lines. (d) In the take-off stage, with the goal of transforming to become a big business through rapid growth, companies tend to significantly spend financial resources to recruit more employees, improve the management procedures to train the employees better and start to decentralize decision making to managers. Especially, companies starting with an initial niche market product (relative small market size) tend to already have successfully launched and gained quite substantial customer base from their new product line. Some companies may raise external capital to fund the rapid growth in this stage. (e) In the resource maturity stage, companies with major improvement in management procedures (to optimize resources and cut down on expenses) and a backup of sufficient financial resources may sustain their business in the highly competitive market and unexpected crisis (pandemic, financial crisis, etc.) to bounce back to growth in the long term. (2) Companies who mainly rely on their own financial resources resulted from the sales of their products and other internally generated key resources tend to go through more growth stages or achieve more sustainable growth in the long term; (3) If companies have incompetent management procedures, especially the financial management and the founders do not carefully select the right investors to join the management board, their dependence of the external investment may cause negative impact for the company in the long run due to the pressure for fast growth, founders’ demotivation from diluted shares and voting rights, internal conflicts which eventually led to the financial crisis or founder exit from the company; (4) Companies starting with an initial niche market product (relatively small market size) tend to have the longer duration of the success stage because they have to find the ways to pivot their business to a larger market by expanding their product lines. If they cannot find the way to expand their niche market product line to another niche market or a mass market product, they run the risk of decline when the market becomes more competitive. Companies starting with an initial mass market product (relative large market size) tend to experience shorter survival and success stage, given that they developed an initial product applying outstanding, differentiated business model in combination with sustainable effective resources for sales from existence stage. This study presents some managerial implications for SMEs in general and IT-based SMEs to identify key resources and corresponding strategies to acquire, accumulate and exploit those resources to achieve sustainable growth.