This chapter closes the book with a brief summary of the book’s purpose, and a brief statement of the theoretical and empirical definitions of scale-ups. While we argue that our book is timely, we also acknowledge the limitations of our book, chief among which is the data limitation of missing values affecting our empirical analysis.

8.1 Concluding Remarks

There is growing interest in scale-ups and high-growth firms from various stakeholders: entrepreneurs, academics, policymakers, investors, and the business press. However, growing research efforts in this area have led to a potentially confusing variety of definitions of scale-ups. This book to the opportunity for a detailed discussion of the concept of scale-up. It began by discussing the literature on high-growth firms (HGFs), noting that this research area has benefitted from having a standardized definition of a High-Growth Firm (Eurostat-OECD, 2007). Within the set of HGFs, scale-ups are HGFs that are at a specific stage in their life course, leading us to discuss scaling as a stage of growth. We present eight propositions about scale-ups in Chapter 4, before presenting a theoretical definition (Chapter 5) and also translating this into an empirical definition (Chapter 6) that allows researchers to identify scale-ups using the (potentially restrictive) set of variables available in standard datasets.

Scale-ups are a subset of high-growth firms that launch into rapid growth after having achieved product-market fit. Scaling-up is a stage in a stylized life-course model of firm evolution. Scaling-up changes the proportions of a firm (e.g. in terms of raising fixed costs and reducing marginal costs). Scaling-up connects favorable supply-side conditions (such as low marginal costs of production) to favorable demand conditions (such as increasing returns due to network externalities). Scaling-up is often observed alongside a burst of marketing effort to accompany what is essentially a pent-up supply-side push towards a hungry market. In our empirical definition, scale-ups are identified using a dummy variable takes the value of 1 if a firm satisfies the requirements of a scale-up. There are two steps in identifying scale-ups. In the first step, we select the set of High Growth Firms (HGFs), where growth is measured in terms of employment. In the second step, we select the subset of scale-ups from among the set of HGFs by referring to seven conditions that are particularly relevant for the style of growth associated with scaling up (referring to variables such as marketing expenditure, young age, and high gross margins).

Our book seems timely. At present, policymakers are interested in gathering representative data on the number of scale-ups in regions and countries (e.g. OECD, 2021), although there is a confusing range of (sometimes conflicting) definitions in the literature. A number of recent special issues in journals have focused on scale-ups, although we feel that they have not resolved the confusion surrounding how to define a scale-up. It is worth repeating that scaling up is not just firm growth: it is more nuanced. This book draws on theory and case discussions, with the goal of providing general rules for empirical researchers to identify scale-ups in their datasets. We hope to have contributed to a step forward in understanding, such that firm growth and scaling up are no longer considered as synonyms.

Some recommendations emerge from our work. Researchers should not talk about scale-ups if they have in mind HGFs. Previous analysis has defined scale-ups in terms of HGFs, ignoring the differences between these two. Regarding economic policy, it would be a pity if policy interventions targeted towards scale-ups end up being gobbled up by HGFs. A practical recommendation for scale-up research recognizes that scale-ups have a nuanced definition and lack the definitional clarity of HGFs, although they can be considered to be a subset of HGFs. Therefore, studies that report the number of scale-ups should also (for comparison and for context) report the number of HGFs.

Future work could involve a deeper treatment of marginal costs of production as firms scale. Scale-ups are argued to have low marginal costs to allow for scaling. However, marginal costs are highly volatile and vary greatly over time, even for firms that have smoothly-increasing demand conditions (Coad et al., 2021).

As with all studies, ours is not without limitations. A major impediment was that our data analysis was affected by missing values. This was a problem even in our relatively rich Swedish data, hence a fortiori the problem of missing values can be expected to arise for other researchers working on databases from other countries. Hence, data limitations may restrict the ingenuity of researchers in identifying the peculiar characteristics of scale-ups. Data limitations may also prevent subsequent researchers from applying our definition to their data in full, although we hope at least that our definition can be applied in near-complete form. Another limitation, as ever, is that our reliance upon Swedish panel data might be affected by the unique Swedish cultural and regulatory contexts, and furthermore a reliance on financial statement-based measures rather than other variables that might be more salient from a theoretical angle. Further, we have not yet delved deeper into the comparative heterogeneity of scale-ups to understand their variety at a more detailed level, such as whether the scaling took place by entering foreign markets, by expanding into other local or domestic markets, or other market-based mechanisms through which scale-ups ‘take a proven concept and deliver it to a wider audience’ (Hellmann and Kavadias, 2016; Piaskowska et al., 2021).

Despite the limitations discussed above, we believe that our empirical work is a potentially valuable foray into pinpointing the distinctiveness of scale-up firms. To that end, we believe that our empirical definition and findings offer preliminary but useful avenues for future work that help bring to the fore a unique and operationalizable definition that furthers the study of scale-ups in the future. Our analysis relies upon access to rich data, beyond what many may be able to access, and where the variety of scale-ups precludes there from pinpointing one ‘pure form’. Yet, we also recognize that this attempt is insufficient in leading to a standardized scale-up definition for all to emulate (standardization which was arguably achieved in the case of Eurostat-OECD (2007)'s widely-adopted HGF definition).

Overall, in this study, we identify some core differences between scale-ups and HGFs. By providing an objective definition of scale-ups that is based on accessible firm-level data, we hope that the scholarly community can continue its pursuit of identifying, dissecting and theorizing about the emerging yet fabled category of firms known as scale-ups.