This article examines variations in performance between fast-growth – the so-called gazelle – firms. Specifically, we investigate how the level of growth affects future profitability and how this relationship is moderated by firm strategy. Hypotheses are developed regarding the moderated growth–profitability relationship and are tested using longitudinal data from a sample of 964 Danish gazelle firms. We find a positive relationship between growth and profitability among gazelle firms. This relationship is moderated, however, by market strategy; it is stronger for firms pursuing a broad market strategy rather than a niche strategy. This study contributes to the current literature by providing a more nuanced view of the growth–profitability relationship and investigating the potential for the future performance of gazelle firms.
AcsZJMuellerP (2008) Employment effects of business dynamics: Mice, gazelles and elephants. Small Business Economics30(1): 85–100.
2.
AcsZJParsonsWTracyS (2008) High Impact Firms: Gazelles Re-visited. Washington, DC: Small Business Administration.
3.
AldrichHEAusterER (1986) Even dwarfs started small: Liabilities of age and size and their strategic implications. In: StawBMCummingsLL (eds) Research in Organizational Behavior, vol. 8. Greenwich, CT: JAI Press, pp.165–198.
4.
AmburgeyTLKellyDBarnettWP (1993) Resetting the clock: The dynamics of organizational change and failure. Administrative Science Quarterly38(1): 51–73.
Anyadike-DanesMHartMDuJ (2014) Firm dynamics and job creation in the United Kingdom: 1998–2013. International Small Business Journal. DOI: 10.1177/0266242614552334.
7.
AudretschDBKlompLSantarelliE. (2004) Gibrat’s law: Are the services different?Review of Industrial Organization24(3): 301–324.
8.
AupperleKECarrollABHatfieldJD (1985) An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal28(2): 446–463.
9.
BakerTNelsonRE (2005) Creating something from nothing: Resource construction through entrepreneurial bricolage. Administrative Science Quarterly50(3): 329–366.
10.
BalkundiPHarrisonDA (2006) Ties, leaders, and time in teams: Strong inference about network viability and performance. The Academy of Management Journal49(1): 49–68.
11.
BamiatziVCKirchmaierT (2014) Strategies for superior performance under adverse conditions: A focus on small and medium-sized high-growth firms. International Small Business Journal32(3): 259–284.
12.
BarneyJB (1991) Firm resources and sustained competitive advantage. Journal of Management17(1): 99–120.
13.
BarneyJBWrightMKetchenDJJr (2001) The resource-based view of the firm: Ten years after 1991. Journal of Management27(6): 625–641.
14.
BaronRA (2003) Human resource management and entrepreneurship: Some reciprocal benefits of closer links. Human Resource Management Review13(2): 253–256.
15.
BarringerBRJonesFFNeubaumDO (2005) A quantitative content analysis of the characteristics of rapid-growth firms and their founders. Journal of Business Venturing20(5): 663–687.
16.
BarthH (2003) Fit among competitive strategy, administrative mechanisms, and performance: A comparative study of small firms in mature and new industries. Journal of Small Business Management41(2): 133–147.
17.
BesankoDDranoveDShanleyM. (2013) Economics of Strategy (6th edn). New York: John Wiley & Sons.
18.
BirchDL (1979) The Job Generation Process. Cambridge, MA: MIT Program on Neighborhood and Regional Change, Massachusetts Institute of Technology.
19.
BirchDL (1981) Who creates jobs?The Public Interest65(Fall): 3–14.
20.
Boersen Business News, Gazelle 2014 (n.d.) Available at: www.boersen.dk/gazelle (accessed 14 December 2014).
BrännbackMCarsrudARenkoM. (2009) Growth and profitability in small privately held biotech firms: Preliminary findings. New Biotechnology25(5): 369–376.
23.
BrushCGCeruDJBlackburnR (2009) Pathways to entrepreneurial growth: The influence of management, marketing, and money. Business Horizons52(5): 481–491.
24.
CaponNFarleyJUHoenigS (1990) Determinants of financial performance: A meta-analysis. Management Science36(10): 1143–1159.
25.
CardonMSStevensCE (2004) Managing human resources in small organizations: What do we know?Human Resource Management Review14(3): 295–323.
26.
ChandlerGNJansenE (1992) The founder’s self-assessed competence and venture performance. Journal of Business Venturing7(3): 223–236.
27.
ChoH-JPucikV (2005) Relationship between innovation, quality, growth, profitability and market value. Strategic Management Journal26(6): 555–575.
28.
ChurchillNCLewisVL (1983) The five stages of business growth. Harvard Business Review61(3): 30–50.
29.
CoadA (2007) Testing the principle of ‘growth of the fitter’: The relationship between profits and firm growth. Structural Change and Economic Dynamics18(3): 370–386.
30.
CoadA (2009) The Growth of Firms: A Survey of Theories and Empirical Evidence. New Perspectives of the Modern Corporation. Cheltenham and Northampton, MA: Edward Elgar.
31.
ColombelliAKrafftJQuatraroF (2014) High-growth firms and technological knowledge: Do gazelles follow exploration or exploitation strategies?Industrial and Corporate Change23(1): 261–291.
32.
CoxLWCampSMEnsleyMD (2002) Does it pay to grow? The impact of growth on profitability and wealth creation. In: The Babson College/Kauffman Foundation Entrepreneurship Research Conference, Boulder, CO, 5–8 June 2002.
33.
DavidssonPAchtenhagenLNaldiL (2010) Small firm growth. In: Foundations and Trends in Entrepreneurship6(2): 69–166.
34.
DavidssonPWiklundJ (2000) Conceptual and empirical challenges in the study of firm growth. In: SextonDLandstromH (eds) The Blackwell Handbook of Entrepreneurship. Oxford: Blackwell Publishers Ltd., pp.26–44.
35.
DavidssonPDelmarFWiklundJ (2006) Entrepreneurship as growth, growth as entrepreneurship. In: DavidssonPDelmarFWiklundJ (eds) Entrepreneurship and the Growth of Firms. Cheltenham: Edward Elgar, pp.21–38.
36.
DavidssonPKirchhoffB. (2002) Empirical analysis of business growth factors using Swedish data. Journal of Small Business Management40(4): 332–349.
37.
DavidssonPSteffensPFitzsimmonsJ (2009) Growing profitable or growing from profits: Putting the horse in front of the cart?Journal of Business Venturing24(4): 388–406.
38.
DelmarF (1997) Measuring growth: Methodological considerations and empirical results. In: DonckelsRMiettinenA (eds) Entrepreneurship and SME Research: On Its Way to the Next Millennium. Aldershot: Ashgate, pp.199–216.
39.
Deloitte.com (n.d.) Technology Fast 500™, Home of the world’s fastest growing technology companies. Available at: www.deloitte.com/fast500 (accessed 15 December 2014).
40.
De WitBMeyerR (2010) Strategy – Process, Content, Context: An International Perspective (4th edn). London: Thomson.
41.
DewNReadSSarasvathySD. (2009) Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices. Journal of Business Venturing24(4): 287–309.
42.
DurandRCoeurderoyR (2001) Age, order of entry, strategic orientation, and organizational performance. Journal of Business Venturing16(5): 471–494.
43.
EisenmannTR (2006) Internet companies’ growth strategies: Determinants of investment intensity and long-term performance. Strategic Management Journal27(12): 1183–1204.
44.
FischerEReuberRHababouM. (1997) The role of socially constructed temporal perspectives in the emergence of rapid growth firms. Entrepreneurship Theory and Practice22(2): 13–30.
45.
GalbraithJR (2012) The future of organizational design. Journal of Organisational Design1(1): 3–6.
46.
GarnseyEStamEHeffernanP (2006) New firm growth: Exploring processes and paths. Industry and Innovation13(1): 1–20.
47.
GartnerWBCarterNMHillsGE (2003) The language of opportunity. In: SteyaertCHjorthD (eds) New Movements in Entrepreneurship. Cheltenham: Edward Elgar, pp.103–124.
48.
GibbAADaviesLG (1990) In pursuit of frameworks for the development of growth models of the small business. International Small Business Journal9(1): 15–31.
49.
GibratR (1931) Les inéqalités économique. Paris: Recueil Sirey.
50.
GilbertBAMcDougallPPAudretschDB (2006) New venture growth: A review and extension. Journal of Management32(6): 926–950.
51.
GrantRM (2013) Contemporary Strategy Analysis (8th edn). New York: John Wiley & Sons.
52.
GreeneW (2008) The econometric approach to efficiency analysis. In: FriedHLovellKSchmidtS (eds) The Measurement of Productive Efficiency and Productivity Growth. Oxford: Oxford University Press, pp.92–250.
53.
GreinerLE (1972) Evolution and revolution as organizations grow. Harvard Business Review50(4): 37–46.
54.
GreveHR (1999) The effect of core change on performance: Inertia and regression toward the mean. Administrative Science Quarterly44(3): 590–614.
55.
GuptaV (1981) Minimum efficient scale as a determinant of concentration. The Manchester School of Economic and Social Studies49(2): 153–164.
56.
HairJFBlackWCBabinBJ. (2010) Multivariate Data Analysis: A Global Perspective (7th edn). Upper Saddle River, NJ: Pearson.
57.
HambrickDCCrozierLM (1985) Stumblers and stars in the management of rapid growth. Journal of Business Venturing1(1): 31–45.
58.
HannanMTFreemanJ (1977) The population ecology of organizations. American Journal of Sociology82(5): 929–964.
59.
HeckmanJJ (1976) The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models. Annals of Economic and Social Measurement5(4): 475–492.
60.
HeckmanJJ (1979) Sample selection bias as a specification error. Econometrica47(1): 153–161.
61.
HenemanHGBerkleyRA (1999) Applicant attraction practices and outcomes among small businesses. Journal of Small Business Management37(1): 53–74.
62.
HenemanRLTanskyJW (2002) Human resource management models for entrepreneurial opportunity: Existing knowledge and new directions. In: KatzJWelbourneTM (eds) Managing People in Entrepreneurial Organizations, vol. 5. Amsterdam: JAI Press, pp.55–82.
63.
HenreksonMJohanssonD (2010) Gazelles as job creators – A survey and interpretation of the evidence. Small Business Economics35(2): 227–244.
64.
JänkäläSSilvolaH (2012) Lagging effects of the use of activity-based costing on the financial performance of small firms. Journal of Small Business Management50(3): 498–523.
65.
KatzMLShapiroC (1985) Network externalities, competition, and compatibility. The American Economic Review75(3): 424–440.
66.
KazanjianRK (1988) Relation of dominant problems to stages of growth in technology-based new ventures. Academy of Management Journal1(2): 257–279.
67.
LechnerCGudmundssonSV (2012) Entrepreneurial orientation, firm strategy and small firm performance. International Small Business Journal32(1): 36–60.
68.
LiebermanMBMontgomeryDB (1988) First mover advantages. Strategic Management Journal9(S1): 41–58.
69.
LoveJHRoperS (2014) SME innovation, exporting and growth: A review of existing evidence. International Small Business Journal. DOI: 10.1177/0266242614550190.
70.
ManevIMManolovaTSHarkinsJA. (2014) Are pure or hybrid strategies right for new ventures in transition economies?International Small Business Journal. Epub ahead of print 6 October 2014. DOI: 10.1177/0266242614550322.
71.
MansfieldEYoheG (2003) Microeconomics: Theory and Applications (11th edn). New York: W.W. Norton.
72.
MarkmanGDGartnerWB (2002) Is extraordinary growth profitable? A study of Inc. 500 high-growth companies. Entrepreneurship Theory and Practice27(1): 65–75.
73.
MataJMachadoJAF (1996) Firm start-up size: A conditional quantile approach. European Economic Review40(6): 1305–1323.
74.
NelsonRRWinterSG (1982) Organisational Capabilities and Behaviour in an Evolutionary Theory of Economic Change. Cambridge, MA: The Belknap Press of Harvard University Press.
75.
NewbertSL (2007) Empirical research on the resource-based view of the firm: An assessment and suggestions for future research. Strategic Management Journal28(2): 121–146.
76.
O’CassASokP (2014) The role of intellectual resources, product innovation capability, reputational resources and marketing capability combinations in firm growth. International Small Business Journal32(8): 996–1018.
77.
ParkerCStoreyDJvan WitteloostuijnA (2010) What happens to gazelles? The importance of dynamic management strategy. Small Business Economics35(2): 203–226.
78.
ParnellJA (2013) Uncertainty, generic strategy, strategic clarity, and performance of retail SMEs in Peru, Argentina, and the United States. Journal of Small Business Management51(2): 215–234.
79.
PengMW (2004) Outside directors and firm performance during institutional transition. Strategic Management Journal25(5): 453–471.
80.
PenroseE (1959 [1995]) The Theory of the Growth of the Firm. Oxford: Basil Blackwell.
81.
PeterafMA (1993) The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal14(3): 179–191.
82.
PiroloLPresuttiM (2010) The impact of social capital on the start-ups’ performance growth. Journal of Small Business Management48(2): 197–227.
83.
PorterME (1980) Competitive Strategy. New York: The Free Press.
84.
PorterME (1985) Competitive Advantage. New York: The Free Press.
85.
RamezaniCASoenenLJungA (2002) Growth, corporate profitability, and value creation. Financial Analysts Journal62(6): 56–67.
86.
RitalaP (2012) Coopetition strategy – When is it successful? Empirical evidence on innovation and market performance. British Journal of Management23(3): 307–324.
87.
RoperS (1999) Modelling small business growth and profitability. Small Business Economics13(3): 235–252.
88.
RussoMVFoutsPA (1997) A resource-based perspective on corporate environmental performance and profitability. The Academy of Management Journal40(3): 534–559.
89.
SarasvathySD (2001) Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review26(2): 243–264.
90.
ScottSWDavisGF (2007) Organizations and Organizing: Rational, Natural and Open System Perspectives. Upper Saddle River, NJ: Pearson Education.
91.
SextonDLPricerRWNenideB (2000) Measuring performance in high-growth firms. In: The Babson College/Kauffman Foundation Entrepreneurship Research Conference. Wellesley, MA, 7–10 June 2000. Babson College, MA.
92.
ShepherdDWiklundJ (2009) Are we comparing apples with apples or apples with oranges? Appropriateness of knowledge accumulation across growth studies. Entrepreneurship Theory and Practice33(1): 105–123.
93.
StataCorp (2011) User Manual for STATA Version 11. College Station, TX: Stat Corp.
94.
SteffensPDavidssonPFitzsimmonsJ (2009) Performance configurations over time: Implications for growth and profit oriented strategies. Entrepreneurship Theory and Practice33(1): 125–148.
95.
SternCWStalkGJr (eds) (1998) Perspectives on Strategy from the Boston Consulting Group. New York: John Wiley & Sons.
96.
StevensonHHJarilloJC (1990) A paradigm of entrepreneurship: Entrepreneurial management. Strategic Management Journal11(8): 17–27.
97.
StoreyDJ (1994) Understanding the Small Business Sector. London: Routledge.
98.
StrotmannH (2007) Entrepreneurial survival. Small Business Economics28(1): 87–104.
99.
SuarezFFLanzollaG (2007) The role of environmental dynamics in building a first mover advantage theory. The Academy of Management Review32(2): 377–392.
100.
SydowJSchreyöggGKochJ (2009) Organizational path dependence: Opening the black box. Academy of Management Review34(4): 689–709.
101.
TangZHullC (2012) An investigation of entrepreneurial orientation, perceived environmental hostility, and strategy application among Chinese SMEs. Journal of Small Business Management50(1): 132–158.
102.
TeeceDJ (2012) The dynamics of industrial capitalism: Perspectives on Alfred Chandler’s Scale and Scope. In: LazonickWTeeceDJ (eds) Management Innovation: Essays in the Spirit of Alfred D. Chandler, Jr. Oxford: Oxford University Press, pp.30–67.
103.
Van de VenAHGancoMHiningsCR (2013) Returning to the frontier of contingency theory of organizational and institutional designs. The Academy of Management Annals7(1): 393–440.
104.
Van HoekRI (2001) The rediscovery of postponement a literature review and directions for research. Journal of Operations Management19(2): 161–184.
105.
WatsonJ (2007) Modelling the relationship between networking and firm performance. Journal of Business Venturing22(6): 852–874.
106.
WennbergKHolmquistC (2008) Problemistic search and international entrepreneurship. European Management Journal26(6): 441–454.
107.
WernerfeltB (2013) Small forces and large firms: Foundations of the RBV. Strategic Management Journal34(6): 635–643.
108.
WolffJAPettTL (2006) Small-firm performance: Modeling the role of product and process improvements. Journal of Small Business Management44(2): 268–284.
109.
WoodwardJ (1958) Management and Technology. London: HMSO.
110.
WrightMStiglianiI (2013) Entrepreneurship and growth. International Small Business Journal31(3): 3–22.
111.
YangBBurnsNDBackhouseCJ (2004a) Management of uncertainty through postponement. International Journal of Production Research42(6): 1049–1064.
112.
YangBBurnsNDBackhouseCJ (2004b) Postponement: A review and an integrated framework. International Journal of Operations & Production Management24(5): 468–487.
