Drivers of firm growth : a case study in Belgian chemical industry

Details

Supervisors

Gailly, Benoît ; Figueira, José Rui

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

This thesis's theme had its origin based on a managerial problem concerning the chemical industry in Belgium, and regards a sales growth analysis focused on seven well known Belgian chemical firms and over the period 2002-13. In order to perform such analysis, a comparative analysis is done between the Belgian chemical firms and two benchmarks; namely, BASF and The Dow Chemical Company. In this comparative analysis, two groups are defined: one that grew significantly more over the period 2002-13 (benchmarks); another one with lower and even negative growth rates (rest of the firms). In this context, the main objective of this thesis is to explain the reasons behind such growth differences. In order to do this, this thesis employs a methodology mainly supported in the firm growth literature. Given this, a literature review is done in order to identify a list of factors that can affect growth (i.e., growth drivers). After, such list of growth drivers is filtered in order to select the most relevant growth drivers for the case study of this thesis. This selection is done taking into account a perspective of an expert of the chemical industry. Four main growth drivers are selected. Based on such growth drivers, note that growth differences between benchmarks and rest of the firms are caused not only by growth drivers that impacted growth, but also that distinguish benchmarks from the rest of the firms. Thus, two sub-objectives are defined: i) identify the growth drivers that had an impact on firms' growth; ii) identify the growth drivers that distinguish benchmarks from the rest of the firms. For the first sub-objective, this thesis employs a statistical approach based on panel data models, commonly used in the firm growth literature to test growth drivers' impact on growth. For the second sub-objective, this thesis performs a simple comparative analysis of the growth drivers' metrics between benchmarks and rest of the firms. In the end of the growth analysis, it is argued that most part of growth differences between benchmarks and rest of the firms are a consequence of benchmarks' (rest of the firms') higher (lower) profitability levels, better (worst) sales performance in Europe and higher (lower) acquisition levels. Concerning innovation, despite no statistical evidence of its impact on growth, the author also suggests that this issue should be high on managements' agenda due to significant differences between benchmarks and rest of the firms. Finally, in terms of contributions, this thesis presents three interesting points. First, a plausible answer concerning growth differences between benchmarks and rest of the firms is stated. Second, this thesis shows a possible application of the firm growth literature towards a specific managerial problem. In third place, to the best knowledge of the author, a new potential growth driver is identified: dividends.