Four years on – are the Gazelles still running? A longitudinal study of firm performance after a period of rapid growth

Gazelles, or very rapidly growing firms, are important because they contribute disproportionately to economic growth. There is a concern that some of these firms pursue growth too aggressively resulting in lower subsequent performance. We investigate the relationship between growth and subsequent profitability for gazelle firms, and how this is moderated by firm strategy. Previous empirical research regarding the growth-profitability relationship for firms in general is rather inconclusive, with only one study specifically investigating gazelle firms. Likewise, there are theoretical arguments both for and against growth leading to profitability that equally apply to gazelle firms. Further, while contingency theory might suggest the relationship depends on the firm’s strategy, earlier studies have not investigated this relationship. We address these questions using longitudinal data (seven years) for a sample of 964 Danish Gazelle firms. Our study finds a clear positive relationship between growth and subsequent profitability among gazelle firms. Moreover, this relationship is stronger for firms pursuing a broad market strategy rather than a focus or niche strategy. An important managerial implication is that the growth strategy should be clearly integrated with the general strategic orientation of the firm.