The growth-profitability nexus among Swedish SMEs
International Journal of Managerial Finance
ISSN: 1743-9132
Article publication date: 7 September 2015
Abstract
Purpose
The purpose of this paper is to examine the growth-profitability nexus among small- and medium-sized enterprises (SMEs).
Design/methodology/approach
The data comprise 106,884 observations covering 26,721 Swedish SMEs in six industry sectors over the 2008-2011 period. The data were analysed using several statistical techniques, including two-stage least squares regression, fixed-effects and random regressions, and bootstrapped quantile regression.
Findings
Consistent with the hypotheses derived from the resource-based approach, the results indicate that current profitability significantly and positively affects firm growth. The firm-level control variable size significantly and positively affects firm growth, though firm age significantly and negatively affects growth. Firm industry affiliation also affects firm growth.
Research limitations/implications
Since SME performance is commonly equated with access to knowledge, consultancy services or business training programmes sponsored by governmental organizations can help SMEs improve their management skills and thereby their performance. Moreover, adopting advanced financial management practices can improve the use of financial resources, leading to higher profitability and thereby sustainable growth. This implies that managers should change their strategy from “growth now, profitability later” to “profitable growth now”.
Originality/value
Unlike most previous studies, this study employs several multivariate methods to analyse a comprehensive, cross-sectoral sample comprising non-financial, independent, and active SMEs in several industries. This study focuses explicitly on SMEs, which play a fundamental role in the Swedish economy.
Keywords
Citation
Yazdanfar, D. and Öhman, P. (2015), "The growth-profitability nexus among Swedish SMEs", International Journal of Managerial Finance, Vol. 11 No. 4, pp. 531-547. https://doi.org/10.1108/IJMF-01-2015-0005
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited