Is Extraordinary Growth Profitable? A Study of Inc. 500 High–Growth Companies

Authors: Markman G.D.; Gartner W.B.

Source: Entrepreneurship Theory and Practice, Volume 27, Number 1, September 2002 , pp. 65-75(11)

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Abstract:

This research note tests whether extraordinary high growth (e.g., sales growth rates of 500 percent to 31,000 percent over five years) is correlated to firm profitability. Using longitudinal data from three separate cohorts of Inc. 500 firms (from 1992 to 1996; 1993 to 1997; and 1994 to 1998), firm growth was operationalized in terms of sales and number of employees. Controlling for industry sector and ranking on the Inc. 500 lists, analyses found that extraordinary high growth—in terms of sales and number of employees—was not related to firm profitability. Firm age, however, was significantly, and inversely, related to profitability; younger firms experience slightly higher profitability rates. Implications for management and future study of extraordinary high–growth firms are discussed.

Language: English

Document Type: Research article

DOI: http://dx.doi.org/10.1111/1540-8520.t01-2-00004

Publication date: 2002-09-01