Theories of Growth of Small Enterprises Various theoretical models have been developed which describe the growth of small One class of theoretical models focus on the learning either active or and the other models refer to the stochastic and deterministic In the passive learning model 1982 cited in Liedholm a firm enters a market without knowing its own potential Only after entry does the firm start to learn about the distribution of its own profitability based on information from realized By continually updating such the firm decides to or to This learning model states that firms and managers of firms learn about their efficiency once they are established in the Firms expand their activities when managers observe that their estimation of managerial efficiency has understated actual levels of As firm the estimation of efficiency becomes more decreasing the probability that the output will widely differ from one year to The implication of this theoretical model is that smaller and younger firms should have higher and more viable growth rates Cunningham and Maloney 2001 and Goedhuys In the active learning model and Pakes 1990 cited in Goedhuys a firm explores its economic environment actively and invests to enhance its growth under
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