The influence of dynamic capabilities on startup growth

Abstract

The purpose of this study is to analyze the relationship between dynamic service innovation capabilities (DSICs) and startup growth in an emerging country.,This paper used a theoretical DSIC model to process data on 137 Brazilian startups, using a stepwise regression.,Service startup growth is related to the capability of enterprises to understand market signals, learn from customers and design a scalable, repetitive and profitable business model.,Despite the innovative nature of startups, this paper found that technological and networking capacities are not a determinant of growth.,Managers should commit themselves to improve their competence in terms of understanding market signals, even when they already have a consolidated business model, products and service offerings. The findings also function as a warning about the dangers of an excessive focus on technological capabilities.,Innovative startups, which achieve high growth create a disproportionate number of new jobs. Hence, by indicating the dynamic capabilities that are more conducive to firm growth, this paper contributes to society and the economy at large.,The findings challenge the myth of technological capacity and networking skills as the main sources of startup growth. This paper shows that founders and managers of service startups who want to achieve rapid growth should concentrate more effort on other skills. Marketing competence and building scalable business models – abilities that are common to successful traditional firms – are more relevant for short-term growth than technological innovation.