Long Range Planning 54 (2021) 102101

Contents lists available at ScienceDirect

Long Range Planning

journal homepage: www.elsevier.com/locate/lrp

Scale-up modes: Profiling activity configurations in

scaling strategies
Dorota Piaskowska a, *, Esther Tippmann b, Sinéad Monaghan c
a
University College Dublin, Michael Smurfit Graduate Business School, Blackrock, co. Dublin, Ireland
b
National University of Ireland Galway, J.E. Cairnes School of Business and Economics, Upper Newcastle, Galway, Ireland
c
Trinity College Dublin, The University of Dublin, Trinity Business School, College Green, Dublin 2, Ireland

A R T I C L E I N F O A B S T R A C T

Keywords: Scale-ups, or scaling firms, provide an important contribution to the economy. However, there is
Scaling little understanding of the characteristics of their scaling strategies, compared to the high-growth
High-growth firms strategies of start-ups and mature firms. To address this, we build on the Penrosean view of firm
Entrepreneurship
growth and the literature on high-growth firms to identify the critical growth-enabling activities
Scale-ups
Growth strategies
of scaling firms with digital business models: financing, innovation, digitization, and acquisitions.
Digital Using cluster analysis of a sample of 184 Unicorn and emerging Unicorn scale-ups with digital
Digitization business models, we identify four distinct activity configurations, or scale-up modes: network
growers, focused scalers, organic innovators, and constricted scalers. We discuss the theoretical
implications for the literature on scaling firms, Penrose’s theory of firm growth in the digitization
era, and firm growth research more generally.

Introduction

Given their innovative offering, their role in improving national competitiveness, their positive impact on employment and wealth
creation, as well as their social agenda, scale-up firms have begun attracting significant interest from scholars, practitioners, and policy
makers (Autio, 2016; European Commission, 2016; Scale up Europe, 2016). In particular, research has sought to understand the
contextual factors, such as institutional and industry characteristics, amenable for scale-up growth (Duruflé et al., 2018), and how
scaling firms disrupt markets, manage their growth, and become large, well-established players (e.g., DeSantola and Gulati, 2017;
Monaghan and Tippmann, 2018; Sullivan, 2016). In light of these nascent research and practitioner insights, we propose to define
scale-ups as high-growth firms at an intermediate stage of organizational development (situated between the start-up and mature firm
stage in the organizational life cycle), which pursue strategies that prioritize the attainment of economies of scale. Having passed their
initial exploratory stage, settled on an offering and a viable business model (which is often digital), scale-ups are ready to grow rapidly
(DeSantola and Gulati, 2017; Duruflé et al., 2018). However, we know little about the growth strategies of scale-up firms, including the
ones with digital business models.
To explore the growth strategies of scale-up firms, we build on the observation that the strategies and patterns in firm growth are
diverse (Achtenhagen et al., 2017; Gilbert et al., 2006; McKelvie and Wiklund, 2010) and vary across the stages of the organizational
life cycle (Gilbert et al., 2006; Sirmon et al., 2011). Scaling strategies warrant dedicated theoretical and empirical attention, because

* Corresponding author.
E-mail addresses: [email protected], [email protected] (D. Piaskowska), [email protected] (E. Tippmann),
[email protected] (S. Monaghan).

https://doi.org/10.1016/j.lrp.2021.102101
Received 12 March 2020; Received in revised form 23 November 2020; Accepted 23 March 2021
Available online 31 March 2021
0024-6301/© 2021 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
D. Piaskowska et al. Long Range Planning 54 (2021) 102101

they are unique compared to the growth strategies of start-ups (or new ventures; Clarysse et al., 2011; Gilbert et al., 2006), or mature
firms such as small-to-medium sized enterprises (Chetty and Campbell-Hunt, 2003) and large corporations (Vermeulen and Barkema,
2002). One distinguishing feature concerns the rapidness of growth, with the highest pace of growth typically evident in the scaling
stage of the organizational life cycle (Coad, 2018). In fact, many scaling firms exhibit hyper growth rates exceeding 40% annually
(World Economic Forum, 2016), which is substantially above the 20% rate that normally denotes high growth (OECD, 2007).
Another distinct feature of scaling strategies is that, compared to high growth in mature firms, which typically deal with path
dependencies and rigidities while attempting to grow (Sirmon et al., 2011), scaling firms need to deal with a sense of turmoil, chaos,
and great inefficiencies while growing. This is because the internal organization of scaling firms is neither well developed nor
cost-optimized (DeSantola and Gulati, 2017; Sullivan, 2016), and there are limits for an organization to learn from prior experience if
resource development is compressed in time (Dierickx and Cool, 1989).
Scaling strategies are also distinct because of their focus on capacity boosting to exploit the viable business model at scale (Autio,
2016; Reuber et al., 2021; Sullivan, 2016; Zhao et al., 2020), where substantial economies of scale can be accrued, especially when the
firm has a digital business model (Coviello, 2020; Tippmann et al., 2018). Capacity boosting requires an increasing commitment to
bundling resources into formalized activities. This contrasts with the resource flexibility required for experimentation during the
start-up phase (Clarysse et al., 2011; Sirmon et al., 2011).
To develop detailed insights on scaling strategies, we focus on growth modes (or scale-up modes, given our investigation of scale-up
firms) rather than antecedents of growth rates. The rationale for looking at growth modes is that they offer insights into the patterns of
resource bundling, which better informs different approaches to growth (Clarysse et al., 2011; McKelvie and Wiklund, 2010). This
leads us to ask: are there any distinct scale-up modes which firms choose when scaling, and if so, what are they?
We build on the Penrosean view of firm growth (Penrose, 1995) and insights from the literature on the growth of entrepreneurial
firms. This allows us to highlight four critical growth-enabling activities for scaling firms with digital business models: financing,
innovation, digitization, and acquisition activities. We argue that to drive high growth, scale-ups make selective choices related to
these activities, and these choices facilitate particular ways of scaling. This leads to activity configurations that may show resemblance
across scale-up firms with similar strategies, revealing scale-up modes.
To identify the scale-up modes, we employed data structure-discovering techniques and cluster-analyzed a novel, unique dataset of
184 Unicorns and emerging Unicorns1 with digital business models. We focused on such companies because they are a subset of high-
growth firms at an intermediate stage of the organizational life cycle, that have already made substantial progress in scaling, and
whose digital business models indicate their potential economies of scale. Thus, this sample allows for a direct exploration of scaling
strategies. We found four distinct, internally consistent company clusters in this dataset. The clusters differed in their growth-related
activities, and we described them as network growers, focused scalers, organic innovators, and constricted scalers. Network growers
tended to prioritize digitization activities. Organic innovators emphasized innovation. Focused scalers developed their offering for a
specific market or industry segment, prioritizing the exploitation of high quality technologies. Constricted scalers were comparatively
constrained in their ability to acquire financial and human resources to fuel their growth-enabling activities, and had the slowest
growth rates among the four scale-up modes we identified in our sample.
This paper makes three contributions. First, we contribute to the nascent literature on scaling by unpacking the high-growth
strategies of a novel sample of scale-up firms with digital business models. Remaining sensitive to the unique challenges of scaling
as a distinct phase of the organizational life cycle (Demir et al., 2017), and cognizant of the need to commit to resource bundles
(Sirmon et al., 2011), we propose four key growth-enabling activities and demonstrate how they coalesce into four distinct scale-up
modes. Second, we consider Penrose’s (1995) theory of firm growth in the digitization era. We suggest that digitization activities not
only spur growth, but also may ease the limits of firm growth, or the so-called “Penrose effect,” which arises due to the costs and
challenges of managing and integrating new personnel and activities into the firm (cf. Coad, 2007; Geroski, 2005). Third, in adopting a
novel approach to identifying growth modes, we add to the literature on firm growth in general (e.g., Achtenhagen et al., 2017; Gilbert
et al., 2006; McKelvie and Wiklund, 2010). Specifically, our approach, focused on activity configurations, offers a more nuanced
identification of growth modes compared to the “basic” differentiation between organic, inorganic, and hybrid growth modes, which -
due to the focus on governance of growth - often disguises some critical details of how firms configure their activities to grow (Lockett
et al., 2011; McKelvie and Wiklund, 2010). While still parsimonious, our approach moves the critical growth-enabling activities to the
center stage.

Theory

The specifics of high-growth strategies in scale-ups

Scale-up firms are at an intermediate stage of organizational development and have a high-growth strategy aimed at attaining
economies of scale. High growth is present if a firm grows above a particular rate during a certain time period (Coad et al., 2014; Demir
et al., 2017). While an annualized growth of at least 20% (in sales or employment) over a three-year period is a commonly used
threshold (OECD, 2007), many scaling firms show hyper growth rates exceeding 40% annually (World Economic Forum, 2016). As

1
Unicorns are technology scale-up firms that grow rapidly and are valued at more than US$ 1 billion (Autio, 2016; Lee, 2013). Emerging Unicorns
are identified on the basis of an algorithm that combines a company’s financial health, the amount of traction it has, and the strength of its market
(CB Insights, 2019). For the purpose of our research, we focused on firms with valuations of at least US$ 500 million.

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D. Piaskowska et al. Long Range Planning 54 (2021) 102101

generic growth indicators, such rates are agnostic to the differences between scaling versus growing at different stages of firm
development along its life cycle.2 However, these are important aspects of scale-ups and therefore of their high-growth strategies.
In terms of scaling versus growing, scaling specifically involves the objective to attain economies of scale (Coviello, 2020; Reuber
et al., 2021), for example, by at least reaching the minimum efficient scale of the industry. Reaching the minimum efficient scale often
motivates small firms to grow fast (Lotti et al., 2003; Sutton, 1991). This is not necessarily the case for all high-growth strategies, either
because scale-related efficiencies are not significant in the particular industry (Daunfeldt and Elert, 2013) or because the high-growth
firm has already reached a minimum efficient scale. However, we expect that the objective of attaining economies of scale influences
the choice of growth activities of scaling firms in particular.
In relation to the stage of firm development, scaling occurs at a particular level of maturity in the organizational life cycle (Miller
and Friesen, 1984). To capture the diversity of growth strategies across firms, which has been identified as an important area for future
research on firm growth (Gilbert et al., 2006; McKelvie and Wiklund, 2010), it is critical to consider the stage of firm development. The
high-growth strategies of firms at different stages of development present different internal challenges and require firms to adopt
different activities to grow effectively (Carnes et al., 2017; Sirmon et al., 2011).
Building on prior literature, Table 1 compares the high-growth strategies of start-up, scaling, and mature firms, along the di­
mensions of goals, mechanisms, challenges, organization context, and the bundling of resources to support growth. In terms of start-
ups, it is a fragile state in the firm life cycle as the failure rate is high. As such, the main goal is to establish viability (Gilbert et al., 2006;
Miller and Friesen, 1984). To this end, start-ups undergo a high degree of experimentation to develop their offering and establish a
viable business model (Cosenz and Noto, 2018; Priem et al., 2018). To enable this experimentation, it is important to overcome
resource constraints: the entrepreneur is challenged to identify, accumulate, and acquire resources (Gilbert et al., 2006; Sirmon et al.,
2011). Some start-ups may grow rapidly if they gain early traction because they have progressed towards identifying a viable offering
and business model. Nevertheless, it is still a nascent stage of firm development where the organization is small and flat, with low
formalization and high flexibility. Typically, resource allocations to support growth are experimental: start-ups refrain from irre­
versibly committing resources in case their activities need to re-orient, or pivot, to achieve a better fit between their evolving offering
and target market (McDonald and Gao, 2019; Sirmon et al., 2011).
Scaling firms grow rapidly to develop the firm to a competitive size. Often showing hyper growth, the rate of growth exceeds that of
any other stage of the organizational life cycle (Coad, 2018). Such high-paced growth is driven by first or early mover advantages that
push scale-ups to establish size quickly and secure a viable and sustainable competitive position. Such hyper growth is particularly
evident among firms with digital business models where entry barriers are low (Banalieva and Dhanaraj, 2019) and an emerging
competitor can outpace a scale-up with ‘sluggish’ growth. However, during the scaling phase, the firm undergoes a radical internal
development (Tippmann et al., 2018). While it is critical to build capacity quickly to provide for a rapid increase in sales and
employment (Autio, 2016; Sullivan, 2016), firms are challenged to effectively manage at an increasing size (DeSantola and Gulati,
2017; Sirmon et al., 2011), deal with internal turmoil and a sense of chaos (Gulati and DeSantola, 2016), and capture emerging op­
portunities to fuel growth and provide for further economies of scale (Reuber et al., 2021).
Compared to scale-ups, high-growth mature firms show relatively slower growth rates. Challenged to maintain and renew their
competitiveness, they seek to sustain innovation and generate new sources of advantage, while also emphasizing efficiency and the
exploitation of current sources of advantage (March, 1991). While resources are abundant, for mature firms the main challenge for
attaining high growth is to develop dynamic capabilities to recognize and capture new opportunities, which involves a reconfiguration
of the internal resources and activities (e.g., Teece, 2007). This reconfiguration may be difficult due to rigid organizational structures
(Carnes et al., 2017) and the need to fight bureaucracy (Sirmon et al., 2011). Moreover, path dependencies in resource and activity
development, as well as inertia, constrain organizational growth (e.g., Leonard-Barton, 1992).
Most of the extant theoretical and empirical insights on high-growth strategies are in the context of start-ups (e.g., Clarysse et al.,
2011; Gilbert et al., 2006) and mature firms (e.g., Chetty and Campbell-Hunt, 2003; Vermeulen and Barkema, 2002). While prior
studies looked at young high-growth firms (e.g., Carnes et al., 2017), they did not differentiate between start-ups and scale-ups and
have not yet sufficiently examined the growth strategies of scale-ups. Given the specific characteristics and challenges of scaling,
compared to the characteristics and challenges of rapid growth in start-ups or mature firms, it is important to develop such theoretical
arguments.

Scale-up modes

Growth modes are typically described as organic (leveraging the firm’s own resources and activities), inorganic (acquiring another
firm), or hybrid (Lockett et al., 2011; Penrose, 1995). Moving beyond this classification allows one to consider in more detail the
specific characteristics of how firms grow (Achtenhagen et al., 2017; McKelvie and Wiklund, 2010). To do so, we suggest exploring
critical growth-enabling activities of scaling firms and whether and how these activities are bundled into distinct scale-up modes. By
growth-enabling activities we mean those activities that are particularly conducive to attaining rapid growth. By scale-up mode, we
mean an identifiable pattern in the bundling of those activities that is similar across scaling firms.
We build on the Penrosean theory of firm growth (Penrose, 1995), a dominant theoretical approach to understanding firm growth

2
For example, “high-growth firms” or “Gazelles” (Birch and Medoff, 1994) are firm classifications that center on the rate of firm growth over a
specified time period and are agnostic to the stage in the organizational life cycle. We, therefore, submit that scale-ups comprise a specific subset of
high-growth firms.

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Table 1
Comparison of high growth at different firm development stages.
Start-up firm Scaling firm Mature firm

Goal •Establish viability and gain legitimacy •Develop firm to a competitive size •Maintain and renew
competitiveness
Mechanism •Experiment to develop offering and •Build capacity for scale with accelerated life cycles •Maintain and improve
business model and first or early mover advantage efficiency
•Sustain innovation
Challenges of high •Resource constraints •Effectively manage at larger size and complexity, •Balance exploration with
growth while capturing opportunities exploitation
•Radical internal turmoil/chaos •Develop dynamic capabilities
Organization context •Small and flat organizational •Develop organizational structure •Complex and rigid
structures organizational structures
•Low formalization •Increasing formalization •High formalization
•High flexibility and agility
Resource bundling to •Experimental resource allocation in •Bundling of resources to capture emerging •Reconfigure internal
support growth flexible resource bundles opportunities and economies of scale resources and activities

(Nason and Wiklund, 2018), because it emphasizes the use of resources for “productive services” that deliver growth.3 To illustrate,
Penrose (1995: 67) explains: “a firm must possess resources from which it can obtain the productive services appropriate to the
amounts and types of product it intends to produce. Some of the services will be obtained from resources already under the control of
the firm in the form of fixed plant and equipment, more or less permanent personnel, and inventories of materials and goods in process;
others will be obtained from resources the firm acquires in the market as occasion demands.” In the context of scaling firms, productive
services are growth-enabling activities. Given the resource scarcity of scaling firms as they progress from the start-up phase, resource
acquisition and development is critical.
As scale-up firms seek productive services, they bundle their resources in a deliberate, no longer experimental, way. In doing so,
scale-ups commit to a particular resource configuration (Maritan and Peteraf, 2011) that enables growth-delivering activities (Clarysse
et al., 2011; Sirmon et al., 2011). Accessing and generating the resources to build such activities is costly. Therefore, scale-ups make
concerted decisions on how best to allocate their resources. It is important to promote those resource uses that develop a
growth-enabling activity either by enhancing it directly or by fostering a growth-unlocking interaction amongst resources and
activities.
Considering the need to deliberately allocate and bundle resources while developing growth-enabling activities, resource versa­
tility is particularly important. This is because versatile resources can be put to various uses and combined with other ones in novel
ways (Nason and Wiklund, 2018; Penrose, 1995). Penrose (1995) suggests that this enables firms to redeploy resources for more
productive uses and to unlock productive opportunities from a set of options (the so-called “productive opportunity set; ” see also Kim
and Bettis, 2014; Lockett et al., 2011). Resource versatility also supports opportunity capture, which is critical to fuel scale-up growth
(Gulati and DeSantola, 2016; Reuber et al., 2021). In this context, the “adjustment cost,” i.e., the cost of managing the growth process
in terms of the time and effort required to integrate new personnel and activities into the firm (Geroski, 2005; Lockett et al., 2011;
Penrose, 1995), may set limits to the rate of growth. This is sometimes called the “Penrose effect” (e.g., Coad, 2007; Geroski, 2005).
In sum, scale-up firms configure their resources such that the resources render productive services to fuel scaling. These productive
services relate to some specific growth-enabling activities. While some resources are versatile and may be used to enable various
activities, the adjustment costs limit the extent to which versatile resources can be reallocated to other activities (Sirmon et al., 2011).
Over time, as scale-up firms nurture their growth-enabling activities, a particular pattern in these activities will crystalize. Some firms
may show similarity in their scaling strategies (Clarysse et al., 2011), coalescing around a particular activity configuration. We refer to
such common patterns in the bundling of growth-enabling activities as scale-up modes.

The high-growth activities of scale-ups

Prior research on young, high-growth firms suggests that essential resources include capital, technologies, reputation, digital
infrastructure, knowledge, and networks (e.g., Demir et al., 2017). We therefore consider financing, innovation, and digitization
activities as critical growth-enabling activities for scaling. Moreover, while these activities are mostly developed organically, scale-up
firms may also acquire other firms to grow quickly, making acquisition activity another core growth-enabling activity.
Due to the ubiquity of digital entrepreneurship (Nambisan, 2017), we develop our arguments in the context of scale-up firms with
digital business models. For scale-ups with digital business models, it is likely that digitization enabled the creation of an innovative
business model (Zhao et al., 2020). A firm’s business model includes their value proposition, an offering (product and/or services) that
some customers value over existing solutions, and an activity system, in the form of resources and processes that create and deliver this
value (Amit and Zott, 2015). Each of these elements – the value proposition and activity system - can be digitized to some degree. In the

3
A meta-analysis of the firm growth literature reveals that the Penrosean theory of the firm is particularly suitable for explaining growth
compared to the resource-based view (esp. Barney, 1991) of the firm because resource versatility is an important resource characteristic in the
context of growth, vis-à-vis competitive advantage as in the resource-based view (Nason and Wiklund, 2018).

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case of a digital business model, the value proposition and activity system both include a defined digital element; however, physical
elements in the value proposition (e.g., physical products) and activity system (e.g., warehouses for platform based retailers) may
remain.
We now elaborate on why each of the abovementioned activities is critical for scaling of firms with digital business models.

Financing activity

Financing activity refers to attracting and accessing capital. It is important for firm growth in general (Nason and Wiklund, 2018)
and for scaling in particular (Duruflé et al., 2018). In scale-ups, a lot of investment is needed to build capacity quickly, and capital is
essential to access or generate other resources to build the activities needed to scale a business (Barbero et al., 2011). Capital is a
particularly versatile resource as it can be put to a wide range of uses (Cooper et al., 1994; Kim and Bettis, 2014), thereby boosting the
ability of scale-up firms to develop other growth-enabling activities.
While there is a wide spectrum of financing choices available to fast-growing firms, insights on entrepreneurial finance and its
relationship with growth are only nascent (Fraser et al., 2015). In general, equity rather than debt financing is prevalent among scaling
firms due to the high levels of uncertainty involved in their businesses (Meglio et al., 2017; Wright and Robbie, 1998). When un­
certainty is high, financing is typically provided by venture capitalists, who manage their risk exposure across a portfolio of in­
vestments (Kerr and Nanda, 2011).
Scale-up firms need to consider their financing and make choices about the amount of funding to raise and how frequently (Isenberg
and Lawton, 2014). Given the capital intensive nature of high growth, scale-up firms often repeatedly engage in raising funding. They
also need to decide on the most appropriate investment partners. Financing activity may enable scale-up firms to access external
capabilities in the form of their investors’ expertise. For example, firms that raised venture capital often benefit from access to
knowledge of their investors, their strategic advice, coaching, and venturing capabilities (Meglio et al., 2017). This is particularly
critical for scaling firms as they can access tacit knowledge to fast track their learning (Monaghan and Tippmann, 2018). Moreover,
venture capital funding serves as a key signal of potential growth (Pollock et al., 2010), and firms benefit from the status and prestige of
the venture capitalists to boost their legitimacy (Davila et al., 2003; Fernhaber and McDougall-Covin, 2009). In combination, these
arguments indicate that financing activity allows scale-up firms to obtain a critical versatile resource, thus promoting a particular
growth-enabling activity.

Innovation activity

While the availability of financial resources allows scale-up firms to fund their growth, a key question arises regarding how to
allocate this versatile resource among other growth-enabling activities. One such crucial type of activity for high-growth firms is
innovation (Coad and Rao, 2008). Innovation here refers to the internal development or improvement of a firm’s technological
products or processes. Technological innovation, if highly novel, may lead to patent applications (Gilbert et al., 2006). Given that most
digital artefacts can be easily replicated, the proprietary technological knowledge of a scale-up, often at the core of its business model,
offers an opportunity to grow by exploiting its innovation at scale (Baden-Fuller and Haefliger, 2013). More generally, innovation can
differentiate a firm from its competitors and may lead to an internal, organic growth (Siegel et al., 1993). While scale-up firms have
passed their initial exploratory stage and have settled on their core technology, their pursuit of high growth requires them to
continuously engage in innovation activities (Colombelli et al., 2014). Often accumulative by building on prior knowledge, innovation
activities facilitate a strong technological position in the long term (Clarysse et al., 2011) and are particularly important in dynamic,
hypercompetitive markets (Coad and Rao, 2008).

Digitization activity

Scale-up firms, including those with a digital business model, can invest in developing and utilizing digital technologies throughout
their business model to enable rapid growth, referred to here as digitization activity. Building on Penrose (1995), it can be argued that
firms with digital products and processes face lower adjustment costs during growth and can integrate new activities into the firm more
readily than non-digital firms. This is because digital products and processes are highly scalable, meaning that scale-up firms that boost
this capacity early and substantially, can easily add users or customers at a marginal cost. Additionally, digital products and processes
are malleable and can be easily tweaked, extended, and replicated (Nambisan et al., 2019). In the logic of Penrose (1995), this indicates
some level of resource versatility. Financial resources are very versatile; however, once committed to growth-enabling activities, they
are used up. In contrast, the investment in digitization activities fosters a business model that can accommodate a rapidly-increasing
volume of users or customers. Digitization activities may explain why many scaling firms today exhibit such extraordinary growth
rates, compared to the industrial firms studied by Penrose (1995): we submit that investing in digitization activities can position
scaling firms to “push out” the “Penrose effect” that limits the rate of growth.
Despite this initial business model conditioning during the pre-scaling phase, continued digitization effort is needed during scaling.
Scaling requires that firms optimize and formalize their processes. To this end, digitization may allow scale-up firms to improve the
efficiency of their processes or even replace some of the manual and human-capital intensive tasks in the activity system of the business
model with digitally-enabled alternatives. Digitization activities may also stimulate modifications to the value proposition. For
example, scale-up firms may focus on exponentially growing their customer base by developing relationships with them through
digital channels (Van Alstyne and Parker, 2017) without a commensurate increase in the number of employees for a “human-capital

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light” growth. In particular, if scaling firms have platform business models with positive network effects, the value of their offering will
increase with the volume of users and user interactions (Katz and Shapiro, 1994). Digital platforms, therefore, rely on building
extensive user networks to grow their business (Eisenmann et al., 2006; Huang et al., 2017).
Irrespective of whether the scale-up firm utilizes a pipeline or a platform digital business model,4 they often use the Internet as their
principal sales and communication channel (Eisenmann, 2006) and participate in digitally-enabled social interactions with customers
(Amit and Han, 2017), for instance via social media, such as Facebook and Twitter. These activities enable a direct connection to
external communities and stakeholder groups (Fischer and Reuber, 2011; McIntyre and Srinivasan, 2017), to quickly build brand
awareness and consumer relationships (Ngai et al., 2015), as well as to reduce transaction costs and increase geographic reach, for
example to grow rapidly in international markets (Monaghan et al., 2020). For all those reasons, we argue that digitization activities
are critical for scale-up firms.

Acquisition activity

Penrose (1995) contends that firms can use and draw on external resources to expand their productive opportunity set. In some
situations, acquisitive growth has merit because it is speedier compared to organic growth, particularly in terms of building market
share and early dominance (Delmar et al., 2003; McKelvie and Wiklund, 2010). Also, each of the organic growth-enabling activities
that we have already introduced has some drawbacks. Despite its importance for scaling, innovation activity, for example, tends to be
time-consuming and fraught with setbacks (Hu et al., 2017), and many technological elements of a digital business model are imitable.
Digitization activity may encounter challenges, for example, if potential users or customers are locked-in on another platform
(Eisenmann et al., 2006) or if a scale-up fails to reach a critical mass required for its business model to ignite (Evans and Schmalensee,
2016).
In terms of the merits of acquisitions, it has been found that acquisitive growth facilitates further innovation and organic growth
(Lockett et al., 2011) by bringing new knowledge and technologies that help firms to overcome their lack of expertise (Vermeulen and
Barkema, 2001). In particular, international acquisitions may be used not only for the firm to enter new markets and grow across
geographies, but also to acquire knowledge and new value-creating skills that can then be recombined and put to new uses as the firm
continues to scale (Naldi and Davidsson, 2014). For scale-up firms seeking to leverage digitization activities in international markets,
acquiring a local firm with well-developed networks may be valuable, in particular if network effects are location-bound and do not
stretch across country markets (Stallkamp and Schotter, 2021).
Beyond propelling high growth through the access to new resources and capabilities as well as new markets, a particularly
important aspect of acquisitive activity for firms is that it can signal their legitimacy within their markets (Achtenhagen et al., 2017;
Clarysse et al., 2011). In addition, as acquisitions are complex and often fail to deliver on the envisaged benefits, an acquisition ability
is important for scale-up firms. Such an ability can be developed through repetitive engagement in acquisitions (Barkema and Schijven,
2008). For all these reasons, we consider acquisitive activity to be important to the growth efforts of scale-up firms.
In sum, financing, innovation, digitization, and acquisition activities are the key growth-enabling activities for scale-up firms. Yet,
developing these activities is costly to the scale-up firm. Facing these costs, firms need to make choices on how best to allocate their
resources, and promote certain resource uses over others to enable the desired growth. This highlights the importance of resource
orchestration and configuration (e.g., Amit and Han, 2017; Carnes et al., 2017; Sirmon et al., 2011). Thus, we propose that scaling
firms choose resource configurations with varying levels of activity in financing, innovation, digitization, and acquisitions, which
facilitate a certain growth, or scale-up, mode. A key question arises: is there evidence of distinct scale-up modes, or is each firm’s
chosen configuration of growth-enabling activities unique? In what follows, we explore this question empirically and identify four
distinct scale-up modes, as explained next.

Methods

Sample

To explore whether there are any identifiable patterns in growth-enabling activity configurations of scale-up firms, we began by
identifying a suitable sample of firms. In terms of sampling criteria, we followed convention by including firms that were up to 10 years
of age at the time of data collection and had raised series A venture capital funding (Autio, 2016; Duruflé et al., 2018). This ensured
that the firms had moved beyond the start-up stage in their organizational life cycle. Ascertaining that firms are in a period of high
growth is challenging (e.g., Demir et al., 2017) as most scale-up firms are privately owned with limited publicly available information
on precise employee or revenue numbers for a number of consecutive years. As such, we needed another proxy for high growth and
chose firm valuation. A firm’s valuation signals growth potential as estimated by independent, external observers. This estimated
potential also reflects the firm’s past growth trajectory, thus providing an indicator of ongoing growth. To be conservative in the
assessment of whether a firm was scaling, we chose firms that had a valuation of at least US$500 million at the time of data collection.
Sampling at the top end of the young firm valuation spectrum gave us confidence that our sampled firms were growing rapidly.
To compile our sample, we started with the lists of Unicorns and emerging Unicorns identified by CB Insights, TechCrunch, and The

4
A pipeline business model is one in which the value-adding activities flow from inputs through production to the consumer. A platform business
model is one in which value is created by enabling and facilitating interactions among two or more user groups (Van Alstyne et al., 2016).

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D. Piaskowska et al. Long Range Planning 54 (2021) 102101

Wall Street Journal in 2016.5 We cross-checked this list with PitchBook, our main source of data, and included privately-held, venture-
capital backed firms with a digital business model, founded post-2005, and with a valuation of at least $500 million, for which
company, financing, investor, employee, and digitization activity information was available from PitchBook. We sampled firms with a
digital business model as this meant that economies of scale were attainable due to relatively low marginal costs of serving additional
customers. This process generated a cross-section of 278 companies.
We supplemented this data with acquisition data from CrunchBase and patent data from the United States Patent and Trademark
Office. Where possible, additional information was integrated from company websites, Bloomberg, and news searches in Lexis Nexis.
We then excluded three firms which were extremely large in terms of valuation or employment. These were: Uber (valuation of US
$68bn at the time of data collection), Airbnb (valuation of US$30bn), and Flipkart (employment of 33,000). After accounting for
missing data, our empirical analyses were based on 184 companies. 79% of the firms were headquartered in North America, 10% in
Asia, and 9% in Europe; the average age of the firms was 6.48 years; and they employed on average 641 employees. The firms operated
in a range of industries, including IT, e-commerce, and financial services.
Having collected the data, we proceeded to identify their underlying structure using cluster analysis, described next.

Cluster analysis

Cluster analysis enables classification of objects into groups on the basis of similarities or dissimilarities along a range of chosen
characteristics. It can be used to uncover the structure of the data while taking account of multiple variables, thereby enabling rich
descriptions (Everitt et al., 2011; Hagen et al., 2012). This makes cluster analysis particularly suitable for our research. We applied a
common protocol in cluster analysis, starting with hierarchical agglomeration procedures to determine the optimal number of clusters,
followed by a non-hierarchical procedure to configure the clusters.
To determine the number of clusters, we used the average linkage and the weighted-average linkage techniques. These techniques
identify clusters on the basis of average distances between pairs of objects in separate clusters.6 The average linkage technique is one of
the most robust clustering procedures. The weighted-average linkage technique differs from the average linkage technique in that it
gives each group of observations equal weight irrespective of the number of objects in each group. It is therefore particularly suitable if
cluster sizes are likely to be uneven (Everitt et al., 2011; StataCorp, 2017).
Following each of these clustering procedures, we calculated stopping indices using the Caliński-Harabasz’s and Duda-Hart’s
methods. Three of the four stopping indices indicated that a four-cluster solution would partition our data in the most distinct way (see
Table 2). We then constructed a four-cluster solution using the non-hierarchical k-median technique. We chose the k-median technique
as it is robust towards outliers, unlike the k-means technique (Everitt et al., 2011). The significance of differences across these four
clusters was further confirmed using MANOVA multivariate tests; Wilks’ lambda, Pillai’s trace, Lawley-Hotteling’s trace, and Roy’s
largest root all had highly significant F-statistics (p < 0.0001).

Variables

We identified scale-up mode clusters on the basis of the firms’ digital business model and activities in the areas of financing,
innovation, digitization, and acquisitions.
A firm’s digital business model was coded on the basis of whether it was a two- or a multi-sided platform vs. a pipeline type of firm
(Van Alstyne et al., 2016; Zhao et al., 2020), and in terms of the firm’s predominant offering being either digital or physical. We used
company descriptions from PitchBook, company websites, and news searches to code these two dimensions. We then created four
binary variables to indicate each combination of the two basic business model characteristics (see Table 3). Thus, the binary variables
were equal to one when a firm had one of the four types of business models that emerged (and zero otherwise): platform business model
with a predominantly digital offering, platform business model with a predominantly physical offering, pipeline business model with a
predominantly digital offering, and pipeline business model with a predominantly physical offering.
To capture financing activity, we used the total value of capital raised by the sample firms, in millions of US dollars, as well as the
average value of capital raised per financing round and per year during the scale-up period. The scale-up period refers to the number of
years elapsed between raising series A venture capital funding and data collection. Included were also the total and yearly average
numbers of financing rounds. Collectively, these variables reflect both the scale and the pace or intensity of the sample firms’ financing
activities. In addition, we accounted for investor-related legitimacy effects due to investor visibility or prestige (Fernhaber and
McDougall-Covin, 2009). For this purpose, we used PitchBook’s ranking of leading 2500 investors by investment activity and iden­
tified the highest investor rank, the average rank, and the number of these leading investors in each firm.
Innovation activity was measured as the number of patents granted, number of patent citations, and their averages per year during
the scale-up period, proxying for the extent and pacing of innovation. We used these variables because patent and patent citation

5
While Unicorns do not represent the general nature of entrepreneurship (Aldrich and Ruef, 2018), they are an important manifestation of
high-impact entrepreneurship (Henrekson and Sanandaji, 2020). Our approach of sampling such firms is typical for studies of high-growth firms
(Coad et al., 2014). We note that sampling Unicorns and emerging Unicorns means that our findings are not representative for the entire population
of scale-up firms.
6
Euclidean distance measures are another choice available in cluster analysis. However, clustering techniques using such measures are subject to
reversals, where groupings merged in later stages of the procedure appear closer to each other than groupings merged earlier (Everitt et al., 2011).

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Table 2
Hierarchical cluster analysis results: Number of clusters.
Average linkage clustering Weighted average linkage clustering

Duda-Hart method Caliński-Harabasz method Duda-Hart method Caliński-Harabasz method

Number of clusters Je(2)/Je(1) pseudo T-squared pseudo-F Je(2)/Je(1) pseudo T-squared pseudo-F

2 0.33 371.50 142.86 0.38 291.24 142.86

3 0.31 11.15 402.59 0.43 230.29 33.093
4 0.88 22.52 327.58 0.76 52.07 543.91
5 0.40 258.16 278.25 0.25 14.75 493.41
6 0.43 3.91 526.79 0.87 25.56 482.89
7 0.83 34.79 488.22 0.43 3.91 448.48
8 0.25 6.04 477.55 0.67 80.51 428.72

Note: Bold values show the selected number of clusters and statistics indicating it.

Table 3
Digital business model classification scheme: Examples of types of businesses.
Business model

Platform Pipeline

Predominant offering Digital Matchmakers Software-as-a-Service

Social Networks Cybersecurity services

Physical E-commerce AI-based medical therapies

Augmented-reality product providers 3D printing

counts are effective at capturing the innovative performance of firms (Hagedoorn and Cloodt, 2003). They are positively associated
with R&D expenditures of firms and are indicative of their innovation capabilities (Artz et al., 2010). Patent citations are also a good
indicator of technology quality (Hu et al., 2017).
Digitization activity was captured with two sets of measures. First, we considered the sample firms’ activities associated with
building relationships with customers and other stakeholders using Web-based media. For this purpose, we used the number of unique
website visitors, Facebook likes, and Twitter followers each firm had at the time of data collection. These measures are baseline in­
dicators of firms’ activities in digital channels (Järvinen and Karjaluoto, 2015). As with all other clustering variables, we also used the
averages of the Web-based relationship-building activity variables per year during the scale-up period.
The second set of indicators of digitization activities was selected to approximate the extent to which the sample firms pursued
human-resource light or human-resource heavy scaling. Digitization commoditizes or replaces generic skills, enabling asset-light
growth (Banalieva and Dhanaraj, 2019). To measure this, we used three indicators: the number of employees, the average of this
number per year during the scale-up period, and the ratio of the number of employees to capital raised.
Finally, acquisitive activity was measured as the total number of acquisitions and countries in which acquisitions took place, as well
as their averages per year during the scale-up period. These variables reflected the scale, geographic scope, and pace of the firms’
growth, as well as the broadening of the firms’ knowledge bases afforded through acquisitions (Vermeulen and Barkema, 2001, 2002).
Table 4 presents the mean values of the variables for the full sample as well as for each of the identified clusters, which are discussed
next. Included in Table 4 is also a range of descriptive characteristics of the sample and the clusters. First is the average firm age in
years. We also provided the average age of the sample firms at the time they commenced scaling and the average number of years the
firms had been scaling at the time of data collection. Next is the average firm valuation, based upon the most recent valuations
available at the time of data collection. We included firm valuation as it reflects the firms’ growth trajectories and prospects. We also
included a set of descriptive characteristics related to key personnel, i.e. the company management team (CMT), and boards of the
firms. We were able to collect this data for a subsample of 94 firms and included CMT and board size, the number of founders in
executive roles, the number of founder-executives who left their posts, and the proportions of female CMT members and CMT members
with doctorates. Finally, we included information on headquarter location as scaling approaches may differ across institutional
contexts, for instance due to capital markets, regulations, and resource availability.

Findings

Scale-up firms have multiple options for pursuing their growth ambitions: we identified four distinct scale-up modes among the
sample firms including Unicorns and emerging Unicorns. Having statistically confirmed within-cluster homogeneity as well as het­
erogeneity across clusters, we now profile the four scale-up clusters. Within this, we describe the particular resource and activity
configuration of each scale-up mode in terms of distinct business models and levels of financing, innovation, digitization, and
acquisition activities.

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Table 4
Non-hierarchical cluster solution: Sample and scale-up mode cluster means.
Variables Overall Network Organic Focused Constricted
mean growers innovators scalers scalers

Business model (BM)

Platform BM with a predominantly digital offering 0.37 0.77 0.45 0.48 0.21
Pipeline BM with a predominantly digital offering 0.49 0.23 0.50 0.32 0.61
Platform BM with a predominantly physical offering 0.04 0.00 0.02 0.09 0.04
Pipeline BM with a predominantly physical offering 0.10 0.00 0.02 0.11 0.14
Financing activity
Capital raised, in millions US$ 329.07 511.80 339.31 394.38 262.25
Capital raised, in millions US$, averaged per year of scaling 56.78 79.48 58.55 56.93 52.35
Capital raised, in millions US$, averaged per financing deal 66.13 68.58 69.64 76.87 58.46
Number of financing deals 5.79 6.15 5.98 6.30 5.38
Number of financing deals, averaged per year of scaling 1.13 0.89 1.20 1.17 1.10
Highest investor rank 35.65 17.54 21.48 21.45 52.78
Average investor rank 663.36 591.92 618.18 702.73 676.24
Number of reputable investors 4.97 5.77 6.19 4.86 4.31
Innovation activity
Number of patents 5.04 11.23 6.76 3.32 4.14
Number of patents averaged per year of scaling 0.96 1.29 1.14 0.73 0.95
Number of patent citations 20.58 17.46 14.43 44.48 11.73
Number of patent citations, averaged per year of scaling 3.74 2.10 2.72 8.00 2.29
Digitization activity: Web-based relationship building
Unique website visits, in thousands 2074.7 21498.2 360.36 1919.32 31.58
Unique website visits, in thousands, averaged per year of 353.95 3406.35 78.98 386.70 6.04
scaling
Facebook likes, in thousands 604.50 2626.15 103.66 1573.57 41.14
Facebook likes, in thousands, averaged per year of scaling 110.61 339.72 25.36 318.32 10.16
Twitter followers, in thousands 201.59 1406.11 42.40 355.05 16.59
Twitter followers, in thousands, averaged per year of scaling 32.99 221.32 8.28 58.05 3.42
Digitization activity: Human-capital intensity
Number of employees 641.26 748.38 610.21 809.35 555.18
Number of employees, averaged per year of scaling 130.91 97.59 128.94 152.70 125.95
Number of employees to total capital raised (in millions US$) 2.76 1.97 2.45 3.42 2.71
Acquisitive activity
Number of acquisitions 1.55 4.54 1.12 1.86 1.14
Number of acquisitions, averaged per year of scaling 0.26 0.63 0.20 0.31 0.20
Number of countries 1.39 3.85 1.00 1.66 1.07
Number of countries, averaged per year of scaling 0.23 0.52 0.18 0.28 0.19

Descriptive variables
Firm age 6.48 8.00 6.21 6.57 6.34
Firm valuation, in millions US$ 1676 3283 1778 2167 1125
Age at the start of scaling 1.78 1.77 1.88 1.73 1.76
Number of years in scaling 4.70 6.23 4.33 4.84 4.58
Company management team (CMT) sizea 16.76 19.56 18.65 15.00 16.28
Board sizea 6.50 5.56 7.45 6.24 6.40
Number of founders in executive rolesa 0.89 0.89 0.65 1.16 0.85
Number of founder-executives who left their postsa 0.03 0.00 0.05 0.04 0.03
Percentage of female CMT membersa 0.17 0.15 0.18 0.23 0.12
Percentage of CMT members with doctoratesa 0.05 0.00 0.03 0.03 0.09
Proportion of firms headquartered in North America 0.79 0.85 0.90 0.80 0.72
Proportion of firms headquartered in Asia 0.10 0.00 0.02 0.14 0.13
Proportion of firms headquartered in Europe 0.09 0.15 0.07 0.05 0.11

Number of observations 184 13 42 44 85

a
These characteristics are the mean values for a subsample of 94 scale-up firms for whom we were able to collect the CMT and board data.

Scale-up mode 1: Network Growers

Firms in the first scale-up mode cluster can be described as network growers. They represent 7% (n = 13) of the sample. These scaling
firms have a digital offering and typically a platform business model. Examples include Glassdoor (jobs and workplace review
marketplace), GoFundMe (personal donation platform), and music streamers, SoundCloud and Spotify.
Network growers rely on network effects for their growth. Therefore, they prioritize digitization activities while also showing high
levels of activity in acquisitions, financing, and innovation. The average levels of Web-based relationship-building activity among
network growers are particularly high, at between three to ten times the sample averages across the six variables used. Despite being
among the largest employers in our sample, network growers’ business models are relatively the lightest in terms of human capital.
This is consistent with the emphasis on digitization-enabled growth among these scale-up firms.
Network growers also use acquisitions to scale their business. International acquisitive activity is particularly high in this scale-up

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mode, at 2.8 times the sample average. The intensity of acquisitive activity is associated with these firms’ capacity to raise funds.
Among the four scale-up clusters we identified, network growers have on average the highest levels of financing and attract the most
reputable investors. They also reach the highest valuations.
Noticeable among network growers is the high average number of patents. However, these patents do not translate into a pro­
portionately high number of citations, which indicates that innovation activity is not as critical to scaling as their digitization and
acquisitive activities are. That said, network growers are unique in that most of their growth-enabling activities reach higher levels
than in the rest of the sample. This may also explain the relatively small size of this cluster.
An illustrative example of a network grower is Dropbox.7 Founded in 2007 and valued at US$10 billion in 2014 (its last venture
capital funding round achieved by the time of data collection), Dropbox is a cloud-based file hosting service that offers cloud storage,
file synchronization, and client software to simplify how people work together. Hence, digitization activities have been particularly
important to enable Dropbox’s growth. Since founding, Dropbox has seen a steady user increase, with over 500 million users in 2016,
including many business users. As typical for a network grower, network effects were critical to Dropbox as additional users increased
the value of its sharing services. While an appealing and easy-to-use product was important to Dropbox to drive demand, Web-based
engagements on Facebook and Twitter were also substantial.
Dropbox’s innovative activity involved the constant release of new features, functionalities, and development of applications for
different operating systems on smartphones and tablets. To further fuel its growth, Dropbox completed 23 acquisitions, mostly of start-
ups for technology-seeking motives. As characteristic for network growers, Dropbox’s acquisitive activity had a large international
footprint, evident in acquiring firms in 19 countries. To help fund its aggressive scaling, Dropbox completed six funding rounds,
including two seed funding rounds and one debt financing deal, raising over US$1.1 billion by 2014. Overall, Dropbox exhibited a
considerable level of activity across the financing, innovation, digitization, and acquisition activities.

Scale-up mode 2: Organic Innovators

Firms in the second scale-up mode cluster can be described as organic innovators, as they prioritize innovation in their offering.
There are 42 firms in this cluster, representing 23% of the sample. Indicative of their focus on internal innovation, organic innovators
are granted the second highest average number of patents overall and per year of scaling among the four scale-up modes. These values
are well above the sample mean. While these innovations lead to a large number of new patents, patent citations are lagging. This may
be indicative of the organic innovators’ offering being disruptive or highly specialized. In contrast to network growers, organic in­
novators engage in the fewest acquisitions among the four scale-up modes (1.12 on average). Typically, these acquisitions are
domestic.
Organic innovators’ digitization activities present a mixed picture. Compared to network growers, organic innovators are less
concerned about their Web-based relationships. Their digitization activities in this respect are at a fraction of the sample average.
However, 95% of organic innovators have a digital offering and they scale in a relatively human-capital light way (below the sample
average). This suggests that organic innovators may use alternative channels not captured here, such as specialized apps, to build
relationships with their users.
In terms of financing activity, while the level of funding raised by organic innovators is close to the average value in the sample,
their investors are ranked relatively highly, and they have the highest number of highly reputable investors among the scale-up modes.
This indicates that the innovations of these firms are seen by investors as attractive or having a high potential to enable further growth.
Organic innovators in our sample specialize in digital services. 13 of the 42 scale-ups in this cluster offer financial technology
services. Examples include online lending and investment platforms Affirm, Betterment, and SoFi. Other examples include data
analysis and management platforms, such as Cloudera, and firms such as CloudFlare and Lookout, specializing in cybersecurity.
MongoDB is an illustrative example of an organic innovator. Established in 2007, MongoDB provides an open source database
platform for managing and storing data on a large scale. Operating on a subscription basis where customers can pay for commercial
support or other services, this platform enables developers to use the database for the design and delivery of robust and integrated
applications. The company was valued at US$1.5 billion in 2016.
The growth of MongoDB was largely facilitated by innovation, including ongoing upgrades and extensions to their offering ach­
ieved through new applications, query tools, server integration, and data aggregation. Due to strong technical innovations, the
company received significant funding – a total of US$ 311 million over eight financing deals. As typical for organic innovators in our
sample, the acquisition activity of MongoDB was low, with just one acquisition in 2014 of a venture providing a file storage engine.
MongoDB’s Web-based relationship-building activities were consistent with the sample average.

Scale-up mode 3: Focused scalers

Firms in the third scale-up mode cluster can be described as focused scalers. These firms offer products or services for a narrow
market or industry segment and prioritize the exploitation of high quality technologies. 44 (24%) of the sample firms were in this
cluster. While the majority of focused scalers had a predominantly digital offering, this was below the sample average. Compared to

7
Given that our data collection captures information until 2016, when describing an illustrative example for each scale-up mode, we use 2016 as
a cut-off point to ensure consistency. The information used in the illustrative examples is drawn from the same data sources as described in the
methods section.

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firms pursuing other scale-up modes, focused scalers in our sample are the most likely to have a physical offering.
Looking at their innovation activity, it can be seen that while focused scalers have the fewest patents on average, these patents are
highly cited, indicating the focused nature and quality of their technologies. Focused scalers also acquire at a level above the sample
average.
In terms of digitization activities, focused scalers have the second-highest levels of Web-based relationship building activity among
the four scale-up modes. This suggests that network size and positive network effects are important to their scaling. At the same time,
they rely most heavily on human capital when scaling, compared to firms in other scale-up mode clusters. This may be explained by a
relatively high proportion of firms with a physical offering in this cluster (20%). Physical offering, such as gourmet meal kits (e.g., Blue
Apron) or personally styled fashion (e.g., StitchFix), offered by some of the sample firms pursuing this scale-up mode, may require
human resource deployment for production, warehousing, logistics, and other such activities not required in firms with a digital of­
fering. The relative human-capital intensity of focused scaling may also be associated with the requirements of their innovation
activities.
In terms of financing activity, focused scalers raise their funding in the largest number of rounds as compared to firms which
adopted other scale-up modes. Yet, investors who fund focused scalers have the lowest average rank compared to those investing in
firms in other clusters.
Other examples of focused scalers include 23andMe, who develop and provide personal genetic information analysis technologies;
Avvo, an online legal marketplace; and DraftKings, a fantasy sports platform. Also included in this cluster is Snapchat, the developer of
a photo and video messaging application that stores the sent message for one single viewing, and then deletes the message after the
recipient views it.
An illustrative example of a focused player is Udemy, a global online marketplace for learning founded in 2010 and valued at US$
710 million at the time of data collection. On Udemy, online courses are taught by expert instructors, and every course is available on-
demand and on any device. Udemy targets professional adults who seek to improve their job-related skills with non-college-accredited
courses. In 2016, Udemy had over 20,000 instructors who taught 40,000 courses in more than 80 languages, reaching more than 10
million learners.
As typical for this cluster, Udemy raised a significant amount of venture capital funding (totaling US$ 173 million) in six rounds. A
lot of this funding was required for innovation activities. The scaling of Udemy was underpinned by an online learning technology,
which is continuously improved. Udemy had a track record of launching innovations to improve learner experience, course devel­
opment tools, and reach more users with a new offering - “Udemy for Business.” To grow rapidly, Udemy also depended on creating
awareness among educators and learners. Hence, the Web-based relationship-building activity of Udemy, especially on Facebook and
Twitter, was considerable, though not as high as for an average network grower. The focused nature of Udemy’s business is also
illustrated by their technology-seeking acquisition of Talentbuddy in 2016.

Scale-up mode 4: Constricted scalers

Firms in the final scale-up mode cluster are described as constricted scalers. These firms invest relatively slowly in their growth-
enabling activities compared to firms in other scale-up mode clusters. Constricted scalers represent 46% (n = 85) of the sample.
The majority of them (75%) have a pipeline business model, and there is an above-average proportion of firms with a physical offering
in this cluster (18% compared to 14% for the total sample).
Consistent with the predominant business model in this cluster, digitization in terms of Web-based relationship building has limited
prominence as a growth-enabling activity. At the same time, firms in this cluster scale in a relatively human-capital light way. These
patterns may be due to the relatively low levels of financing activity among constricted scalers. On average, they have raised the lowest
amounts of capital from the fewest investors, in the smallest financing rounds, and the smallest amounts per year of scaling.
The constricted scaling of firms in this cluster can also be seen in their below-average acquisitive and innovation activities. This
may be related to the constraints on the firms’ scaling posed by the limited funding and employment. One explanation for the con­
stricted scaling patterns may be due to the institutional environments from which the firms originate. At 24%, there is a relatively large
proportion of non-US firms in our cluster of constricted scalers. The non-US firms may not have the same access to venture capital and
highly active investors as their US counterparts may. Some non-US firms, in particular Chinese ones, may also focus their Web-based
relationship-building efforts on platforms other than Facebook and Twitter, leading to low observable levels of such activity in this
cluster.
Another possible explanation for their scaling patterns is the level of competition in the firms’ markets. Consider the example of
Oscar, a potentially disruptive health insurance provider in the United States. Given the significant size and maturity of this industry,
competition is particularly intense. In addition to Oscar, constricted scalers also include open-source platforms for Web content
publishing and management, such as Cyanogen, a developer and manager of an open source firmware distribution for Android devices;
Docker, a database platform provider; and ElasticSearch, a distributed search engine. Web content publishing and management is one
of the most mature markets in which the sample firms are active, putting these constricted scalers in competition with such established
players as Adobe, for example.
The patterns of scaling activity amongst firms in this cluster may also relate to a locally constrained nature of a firm’s business, for
instance when the firm provides a platform connecting local, on-the-ground service providers to their customers. This may lead to the
emergence of similar, localized platforms across various locations and constrain the firms’ ability to scale by replication of their
business models across locations (cf. Stallkamp and Schotter, 2021). Two examples of such constricted scalers include online meal
delivery platforms Deliveroo (headquartered in the UK) and Delivery Hero (headquartered in Germany).

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Acquia serves as a good exemplar of a constricted scaler. Founded in 2007, Acquia provides an open-source Web content publishing
and management platform. It serves companies in media, publishing, and other industries as well as government agencies, by
providing developer tools and cloud solutions, and assisting these organizations in evolving their digital strategies. At the time of data
collection, Acquia’s innovative activity was relatively low, with one patent and one citation by 2016. Somewhat higher was Acquia’s
level of acquisitive activity, with three acquisitions. These acquisitions allowed Acquia to enhance their product suite, compound the
localization of their platform, and provide greater customization of services. Being a platform provider, Acquia had a relatively high
level of activity on their website. They appeared to prioritize engagement with their users via Twitter rather than Facebook. Acquia
secured US$ 173.5 million in funding. While this is well below sample average, it is consistent with the company being a constricted
scaler. In addition, Acquia’s relatively slow pacing of the various areas of activity is typical of this scale-up mode cluster.
Taken together, the above evidence illustrates that scale-up firms choose different activity configurations across their financing,
innovation, digitization, and acquisition activities. While our study offers a snapshot view of scale-up activity configurations, extant
research indicates that as scale-up firms make their resource acquisition and allocation choices, and engage in growth-enabling ac­
tivities, distinct resource configurations and patterns emerge (Sirmon et al., 2011). Our findings indicate that such choices and ac­
tivities coalesce into a firm’s scale-up mode, characterizing the firm as a network grower, an organic innovator, a focused scaler, or a
constricted scaler.8 Naturally, it is possible that there exist other scale-up modes, beyond those evident in our sample. We discuss this
possibility and the associated future research opportunities in the next section.

Discussion

The scaling strategy is a core attribute of scale-up firms. Compared to the high-growth strategies of start-up and mature firms,
scaling strategies have unique features. Yet, despite a long-standing interest in the growth of firms, including high-growth strategies
(Coad et al., 2014; Demir et al., 2017; Delmar et al., 2003), empirical and theoretical insights on scaling strategies are scarce. To
address this gap, we departed from prior research which tended to focus on growth rates (e.g., Achtenhagen et al., 2017; Gilbert et al.,
2006; McKelvie and Wiklund, 2010), and undertook to examine whether there existed distinct configurations of growth-enabling
activities, or scale-up modes, among Unicorn and emerging Unicorn firms with digital business models. We argued that financing,
innovation, digitization, and acquisitive activities were key to scaling. On this basis, using cluster analysis, we identified four scale-up
modes in our sample. Our study makes three contributions to theory, relating to the nascent literature on scaling strategies, Penrose’s
(1995) theory of firm growth in the digitization era, and firm growth studies more generally.

Scale-up modes: Scaling strategies of Unicorn and emerging Unicorn firms

We contribute to the growing literature on scaling firms (DeSantola and Gulati, 2017; Duruflé et al., 2018) by unpacking their
strategies in the contemporary context of Unicorn and emerging Unicorn firms with digital business models. While high-growth may be
evident in firms at all stages of the organizational life cycle, including the start-up and maturity stages, we develop arguments that
relate to the specific characteristics of firms in the scaling stage. Such a focused integration of organizational life-cycle based argu­
ments has not yet been done for scaling firms. Summarized in Table 1, we detail the ways in which scaling has unique goals, mech­
anisms, challenges, and organizational context conditions. We note specifically that it is a distinct stage in the development of the
organization, when resource bundling needs to occur to build capacity (Sirmon et al., 2011), and achieve minimum efficient scale and
scale economies quickly. Building on this, we propose four high growth-enabling activities for scale-ups: financing, innovation,
digitization, and acquisitions. It would be interesting for future research to examine the growth-enabling activities for firms in the
other two stages of the organizational life cycle, i.e. start-ups and mature firms.9
We also provide evidence regarding the distinct configurations of these four growth-enabling activities, or scale-up modes, in our
sample of Unicorns and emerging Unicorns. Our analyses reveal variation in priorities given to specific productive services and
highlight the heterogeneity of choices available to scale-up firms. This addresses a need to unpack heterogeneity in growth strategies
among firms (Demir et al., 2017). Specifically, we found that network growers rely on network effects and therefore prioritize digi­
tization and acquisitive activities. Organic innovators prioritize innovation. Focused scalers offer products or services for a narrow
market or industry segment and hence emphasize the exploitation of high quality technologies. Constricted scalers are comparatively
constrained in their ability to acquire financial and human resources to fuel their growth-enabling activities, and have the slowest
growth rates among the four scale-up modes evident in our sample.
Noteworthy here is that we find considerable difference in terms of financing activity across the scale-up modes. While scaling
consumes a lot of financial resources, these resources are also particularly versatile. Versatile resources are critical for rapid growth
(Nason and Wiklund, 2018; Penrose, 1995), hence for scaling (Duruflé et al., 2018). Yet, the Unicorn and emerging Unicorn sample of
scale-up firms we analyzed make different financing choices. Such choices may not only enable a particular mode, but also constrain a
firm in pursuing alternative modes or scaling altogether. From this perspective, it is important for scale-ups to realize the implications
of their resource and activity choices. For example, in scale-ups for whom network effects are a key success factor, such as for digital

8
We would like to thank an anonymous reviewer for pointing out that a reverse causality is possible, in that a scale-up firm may decide on a scale-
up mode and then develop the associated capabilities by investing in the corresponding growth-enabling activities. While this is a possibility we
cannot rule out, resource-based theorizations of firm growth support our interpretation (e.g., Penrose, 1995).
9
We would like to thank an anonymous reviewer for this suggestion.

12
D. Piaskowska et al. Long Range Planning 54 (2021) 102101

platforms, it is important to raise sufficient funds to be able to speedily grow their networks through their own web-based relationships
and acquisitions. This is likely to have implications for the sustainability of the firm and its capacity to disrupt markets (Zhao et al.,
2020).
Moreover, productive services that can be developed or utilized from external resources are important for the high growth of many
firms (Demir et al., 2017; Penrose, 1995). However, prior studies have noted the lack of insights on acquisitive activity of young firms
and high-growth firms (Gilbert et al., 2006; McKelvie and Wiklund, 2010). Addressing this shortcoming, we find that acquisitive
activity is particularly prevalent among network growers in our sample, while firms in other scale-up mode clusters tend to acquire
less. Also, we find that, while there is a level of innovative activity in each scale-up mode, it is the highest among organic innovators.
This again supports the point that how scale-ups choose to allocate their resources – for example, whether to allocate them to ac­
quisitions or internal R&D, or both – is associated with specific scale-up modes.

Penrose’s (1995) theory of firm growth in the digitization era

Penrose’s (1995) theory has been instrumental to resource-based theorizations of firm growth (Nason and Wiklund, 2018).
Considering Penrose’s theory in the digitization era, we develop arguments on the use of digitization activities that were unavailable to
the industrial firms during the post-second world war era that informed her theory. Increasingly, firms rely on digitization activities to
engage with users and other stakeholders, to sustain a viable digital business model and accrue early mover advantages (Amit and Han,
2017; Eisenmann, 2006). We argue that by prioritizing digitization activities scaling firms are able to “push out” the “Penrose effect,”
that is to overcome some of the growth constraints and significantly increase the growth rates. While testing this argument is beyond
the scope of this paper, we find variability in the emphasis on digitization activities across the scale-up modes of our sample firms. We
also find that some scale-up modes facilitate a high growth with a comparatively low human-capital intensity. This offers preliminary
evidence that digitization activities – and their capacity to build a value proposition and activity systems to enable the business model
to accommodate a large volume of users and customers within a short period of time – alleviate a fundamental limit to growth. Penrose
(1995) suggested that a fundamental limit to growth are the productive services of human resources, in particular managerial ones.
There are limits to growth associated with managerial time and attention. There are also limits to the absorption of new employees into
the firm because they need to be onboarded to deliver productive services as the firm continues to grow, and this consumes managerial
resources. In our sample, particularly among network growers, a human-capital light growth is evident, suggesting that such con­
straints can, at least partially, be circumvented by relying on the productive services of digitization activities to deliver growth.

Firm growth: A comparatively nuanced approach to identifying growth modes

Our study also adds to the literature on firm growth more generally (e.g., Achtenhagen et al., 2017; Gilbert et al., 2006; McKelvie
and Wiklund, 2010), as we adopted a comparatively nuanced approach to identifying growth modes. The typical approach is to
examine growth by differentiating between organic, inorganic, and hybrid modes. However, this approach has been critiqued as
neglecting the internal workings of how firms grow (Lockett et al., 2011; McKelvie and Wiklund, 2010). In response, we start by
theoretically identifying growth-enabling activities that are particularly relevant for scaling firms with digital business models. Given
the relative dearth of research on this particular firm stage, there is merit in developing a comprehensive understanding of how these
activities are configured. In doing so, we empirically examine resource and activity configurations to explore whether they constitute
distinct growth modes. While proposing a still parsimonious solution with four growth modes, we respond to the need for untangling
some of the complexity in firm growth, and we do so in a way that reflects how contemporary firms choose to grow (Achtenhagen et al.,
2017; Nason and Wiklund, 2018).

Implications for practice

Scaling is challenging and complex; many promising scale-ups do not grow substantially and may ultimately fail to reach sustained
profitability. Addressing the scarcity of managerial insights for leaders of scaling firms, our findings on different scale-up modes and
their composite activities illuminate the different configurations of growth-enabling activities. While every firm configures its re­
sources and activities in its own, unique way, our findings can be helpful for leaders in prioritizing certain growth-enabling activities
over others and in making better-informed decisions on the necessary trade-offs. For entrepreneurship policy, our findings offer a
foundation for thinking about the support measures that may be needed for scale-ups, as distinct from start-ups or established firms.
Resonating with the need to focus on capacity boosting measures (Autio, 2016), our findings reveal that the importance of
growth-enabling activities varies across scale-up modes. This may help targeting support measures towards the most relevant activities
given a firm’s scale-up mode.

Limitations and future research

As any empirical study, ours is not without limitations. In terms of included firms, data on smaller scale-ups was scarce. While our
empirical analyses indicated that the smaller, less generously resourced firms tend to cluster together, it is possible that in a larger
sample more nuanced scale-up patterns could be uncovered among such firms. With such data, future research may consider how the
choices made by firms at an early scale-up stage affect their future growth, whether there is any path dependence (cf. DeSantola and
Gulati, 2017), and if so, whether there are specific pathways firms tend to choose over time. One way to investigate this empirically

13
D. Piaskowska et al. Long Range Planning 54 (2021) 102101

would be to use transition probability matrices and examine the likelihood of scale-up firms remaining in their scale-up mode clusters
(cf. Lindgren et al., 2020).10 This may further our understanding of scaling strategies and their evolution over time (Carnes et al., 2017;
McKelvie and Wiklund, 2010). Furthermore, there is a potential to explore the international expansion of scaling firms, particularly as
global scaling represents a logic of multinationalization for firms (Reuber et al., 2021).
In this study, we considered four core growth-enabling activities related to financing, innovation, digitization, and acquisitions.
Other relevant activities include alliances and other hybrid growth modes (Achtenhagen et al., 2017; McKelvie and Wiklund, 2010),
the opening of new subsidiaries or offices, as well as the departures of (some of the) founders and the hiring of professional man­
agement for senior leadership positions to develop managerial resources (Gulati and DeSantola, 2016). While we were able to source
some data on such other activities from company websites and news searches, it was clear that some firms choose to publicize their
endeavors more extensively than others, and some choose not to publicize at all, particularly in periods leading up to an initial public
offering. Moreover, firms may be more active on social media channels other than Facebook and Twitter, thus influencing their
digitization activity (Ngai et al., 2015). Future research could consider how and when scaling firms choose to communicate their
activities, and what, if any, relationship this might have with their scale-up modes. Future research could also collect such additional
data that were not available to us, and consider whether activities other than those we studied matter for scale-up modes.
Our findings provide an interesting perspective on investor activity, ownership changes, and the strategic direction of scaling firms
(De Clercq et al., 2006; Pollock et al., 2009). As noted earlier, funding for scaling is generally provided by venture capitalists. Prior
research has shown that the institutional logics of financial investors, such as venture capitalists, can have a significant effect on the
ownership structure and composition of firms (Di Pietro et al., 2021; Pahnke et al., 2015). Additionally, venture capitalists are a source
of expertise and networks that may be of particular use to scale-ups (De Clercq et al., 2006). Given the rank, quality, and portfolio of the
investor, as well as the access to advice and networks the investor may provide (e.g., Fernhaber and McDougall-Covin, 2009; Davila
et al., 2003), we conjecture that investors may have a particularly strong influence on which growth-enabling activities the scale-up
engages in. Furthermore, it would be interesting to consider whether scale-ups strategize when selecting their investors and what role
their reputation and signaling may play, or whether the causality is reversed in that experienced or reputable investors are more likely
to invest in promising businesses. As such, the mechanisms by which venture capital financing allows and drives alternative config­
urations of acquisition, innovation, and digitization activities within each scale-up mode pose interesting questions. Furthermore, it
would be interesting to investigate whether scaling by firms that rely on private equity may be different than scaling by firms funded by
venture capital.
Beyond activity-related factors, exogenous conditions such as those related to institutional environments may influence where
firms locate and how they configure their growth-enabling activities (cf. Duruflé et al., 2018).11 For example, institutional environ­
ments characterized by high levels of corruption and weak property rights protection may reduce firms’ growth aspirations (Estrin
et al., 2013). Conversely, the entrepreneurial ecosystems and their specific scale-up supports related to the access to funding and
mentors, as well as supply of specialized human capital and infrastructure, may propel rapid growth (Autio et al., 2018). Future
research may consider such macro-level antecedents of scale-up modes in a systematic way.
Furthermore, we selected our sample firms on the basis of their high-growth rates, being at an intermediate stage in the organi­
zational life cycle, focused on achieving economies of scale, and having a digital business model. While our sample of Unicorns and
emerging Unicorns includes many firms at the forefront of current technological progress, further research focused on firms outside the
technology sectors, with less digitized business models, and lower firm valuations may lead to the discovery of other scale-up modes.
Finally, while the aim of our study was to uncover distinct scale-up modes, it would be interesting for future research to examine the
outcomes of scaling, for example, long-term growth and performance, and scale-up exit strategies. Modeling of how a scale-up mode
relates to these and other relevant outcomes may offer new insights for management and investors.

Conclusion

Building on the Penrosean view of firm growth and the literature on high-growth firms, we zoomed in on the characteristics of
scaling strategies amongst some of the fastest-growing scale-up firms with digital business models. Given their distinct challenges in
rapid growth, these firms demand dedicated attention. By considering the critical growth-enabling activities of scaling firms - spe­
cifically, financing, innovation, digitization, and acquisition activities - we find that scale-up firms make selective choices to those
activities, which are represented in distinct activity configurations, or scale-up modes. We hope that our exploration of scale-up modes
stimulates further research on scaling strategies.

Funding

This research has been financially supported by University College Dublin, College of Business Seed Funding Scheme (grant no.
R10479).

10
We would like to thank an anonymous reviewer for this suggestion.
11
We would like to thank an anonymous reviewer for highlighting this possibility.

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D. Piaskowska et al. Long Range Planning 54 (2021) 102101

Authors statement

All authors contributed in multiple ways. The order of authors reflects relative contributions.

Acknowledgements

We are grateful to Vincent Mangematin for his comments on an earlier version of this paper. Earlier versions of this paper were also
presented at the Strategic Management Society 2017 conference and the European Academy of Management 2020 conference.

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Dorota Piaskowska is a tenured Assistant Professor in management at University College Dublin, Michael Smurfit Graduate Business School, Ireland. Dorota’s research
focuses on the antecedents and outcomes of corporate development activities, including internationalization, mergers and acquisitions, alliances and joint ventures, and
scaling. Her work has been published in British Journal of Management, European Management Review, Journal of Business Research, Journal of Product Innovation
Management, and Long Range Planning. She served two terms on the Board of European International Business Academy and is a member of editorial (review) boards of
the Journal of World Business and Management International Review.

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D. Piaskowska et al. Long Range Planning 54 (2021) 102101

Esther Tippmann is Professor of Strategy, Leadership and Change at NUI Galway, Ireland. Before joining NUI Galway, she was a faculty member at University College
Dublin and Marie Curie Research Fellow at Grenoble Ecole de Management. Esther’s research focuses on the strategic challenges of internationally operating orga­
nizations. She has worked closely with several scaling firms and multinational corporations in Ireland, France, U.K., and the U.S. on case studies and research projects.
She has been published in the Journal of International Business Studies, Organization Studies, Journal of World Business, Journal of Management Studies, Long Range
Planning, and Global Strategy Journal. She is a Senior Editor for the Journal of World Business and serves on the editorial boards of the Journal of International Business
Studies and Long Range Planning.

Sinéad Monaghan is Associate Professor of International Business at Trinity College Dublin, Ireland. Her research operates at the nexus of international business, in­
ternational entrepreneurship, and economic geography, centering on the process of firm internationalization. Prior to joining Trinity, Sinéad was Assistant Professor of
International Business at Rutgers Business School, visiting scholar in University College Dublin, and a post-doctoral scholar at the University of Limerick. Her research
has been published in the Journal of International Business Studies, British Journal of Management, Journal of Business Research, Thunderbird International Business
Review, International Journal of Manpower, and Industry and Innovation. She sits on the editorial board of Journal of International Business Studies and Journal of
World Business. Sinéad is also Regional Ambassador for IE-Scholar and serves on the Executive Committee of AIB-UKI.

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