2013

Untangling the Relationships Among Growth, Profitability and Survival in New Firms

Reprint No. 2013:34

Author(s): Frédéric Delmar, Alexander McKelvie and Karl Wennberg Year: 2013 Title: Technovation Volume (No.): 33 (8—9) Pages: 276–291
Online article (restrictions may apply)


The performance of new firms is important for economic development but research has produced limited knowledge about the key relationships among growth, profitability, and survival for new firms. Based on evolutionary theory, we develop a model about how new firms resolve uncertainty about their ability to prosper in a market by monitoring changes in profitability. Our model predicts selection pressures to weed out underperforming firms and learning in order to allow survivors to improve performance and grow. We test our theory using a unique panel of knowledge-intensive new firms in Sweden. We find strong support for the notion that profitability enhances both survival and growth, and growth helps profitability but has a negative effect on survival. Implications are discussed.


Reference:
Delmar, Frédéric, Alexander McKelvie and Karl Wennberg (2013), "Untangling the Relationships Among Growth, Profitability and Survival in New Firms". Technovation 33(8—9), 276–291.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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