Questioning the Growth Dogma: A Replication Study

Firm growth is overwhelmingly presented as positive. Policy-makers strongly support it, educators recommend it, and academics commonly use it as a measure of success. While it is demonstrated that high-growth firms contribute disproportionately to job creation and economic growth and that firm growth can be associated with superior outcomes, some scholars strongly caution against the growth-at-all-costs paradigm. Amongst them, Davidsson et al. (2009) notably showed that profitability first rather than growth first is a preferable strategy for achieving high overall performance. We replicate and extend this seminal study to a sample covering close to 40% of all EU small and medium firms. We confirm their results and show that they hold over a longer time span and even exhibit a path dependency-type effect to the initial strategy (growth-oriented or profit-focused). We also show that their results are robust to the use of alternative methodologies. These results have important implications for the theory and practice that we discuss.