Where Growth Strategy Matters: Evidence from a Global Startup Field Study

Is growth strategy only for large bureaucratic corporations, or is such internally consistent planning also useful for innovative startups? This question is much debated. While some suggest that strategic planning can create fit across a company's activities—thus boosting performance—others consider it a distraction from experimentation. To reconcile these views, this paper argues that the development and value of growth strategy depend on the startup's institutional context. Developing a growth strategy that can, for example, anticipate when new hires might destroy the company's culture or its ability to enter new markets might be more important where it is more difficult to find the money and talent to replace bad hires. Testing this argument requires assessing how growth strategy and its relationship with performance vary across institutional contexts. To measure this strategy, I interviewed executives of 253 scaling software ventures from 34 countries and scored the internal consistency of their market and organizational plans, making this the first study to systematically measure the strategic planning of a globally representative sample of scaling startups. Consistent with the idea that institutional context shapes the development and value of growth strategy for startups, the study shows that growth strategy and its relationship with subsequent performance vary widely across geographies. US firms have a 0.3 standard deviation higher growth strategy score than other firms. Yet, having a growth strategy predicts performance more for non-US firms, for which a one standard deviation increase in the growth strategy score is associated with an increase in valuation by over a third and an increase in the probability of a successful exit by over four percentage points. Additional analyses suggest that mistakes are more costly in non-US contexts because of financial, talent, and cultural differences, making growth strategy more important for anticipating sources of failure. Yet it is often through prior mistakes that entrepreneurs build knowledge to develop a growth strategy in the first place. Together, this research suggests that in institutional contexts where mistakes are more costly, growth strategy matters more, but is also harder to develop.