291Policy Instruments for High-Growth Enterprises

Therefore, the policymaker needs to have a deeper understanding of the motivations and causal relationships underlying entrepreneurial ecosystems than is visible at a superficial level from self-reported preferences from entrepreneurs.

4.2

Identify the Decision Points

Growth is not a smooth linear expansion but takes place in leaps and jumps, in line with theoretical intuitions that firms are composed of lumpy discrete resources that cannot be combined in perfectly matching multiples (Penrose, 1959). As a result, firms occasionally reach critical trigger points (Brown & Mawson, 2013) at which they may face a decision to either invest in broad-based expansion, or to shrink back to stay within existing capacity limits (Coad et al., 2021). These trigger points include discontinuities in the growth path such as the hiring of the first employee (which corresponds to a doubling of size), crossing critical size thresholds (e.g., regarding Employment Protection Legislation obligations), setting up a second production plant, launching a second product, taking first steps into export markets, and so on. Identifying the trigger points in firms’ growth paths could lead to policy initiatives that effectively nudge firms onto a high-growth trajectory. In this spirit,