Performance Implications of Startups’ Growth Speed: A Moderating Role of National Innovation Systems

This study investigates the relationship between speed of startups’ growth and their performance, and the moderating role of national innovation systems (NISs) on the relationship. Drawing on diffusion of innovation, startup growth, and NIS literature, we develop a theoretical framework on (1) how the rapid growth of startups creates relative advantages in diffusing their innovation and (2) how the extent of the advantages from rapid growth changes across NISs. We maintain that startups’ rapid growth provides visibility and legitimacy to facilitate diffusion of their innovation, resulting in higher likelihood of startups’ success. We further maintain that the speed of growth and the nature of NISs are functionally equivalent in diffusing startups’ innovation and, thus, are in a substitutional relationship when influencing startups’ performance. Results of the empirical analysis with 6,154 startups operating in 21 countries corroborate our theoretical predictions that there is a positive association between speed of startup growth and performance; and that favorable NISs substitute the role of rapid growth in enhancing startups’ performance.