The growth-profitability relationship : strategic orientations as moderator

Principal Topic: In this study we investigate how strategic orientation moderates the impact of growth on profitability for a sample of Danish high growth (Gazelle) firms. ---------- Firm growth has been an essential part of both management research and entrepreneurship research for decades (e.g. Penrose 1959, Birch 1987, Storey 1994). From a societal point of view, firm growth has been perceived as economic generator and job creator. In entrepreneurship research, growth has been an important part of the field (Davidsson, Delmar and Wiklund 2006), and many have used growth as a measure of success. In strategic management, growth has been seen as an approach to achieve competitive advantages and a way of becoming increasing profitable (e.g. Russo and Fouts 1997, Cho and Pucic 2005). However, although firm growth used to be perceived as a natural pathway to profitability recently more skepticism has emerged due to both new theoretical development and new empirical insights. Empirically, studies show inconsistent and inconclusive empirical evidence regarding the impact of growth on profitability. Our review reveals that some studies find a substantial positive relationship, some find a weak positive relationship, some find no relationship and further some find a negative relationship. Overall, two dominant yet divergent theoretical positions can be identified. The first position, mainly focusing on the environmental fit, argues that firms are likely to become more profitable if they enter a market quickly and on a larger scale due to first mover advantages and economic of scale. The second position, mainly focusing the internal fit, argues that growth may lead to a range of internal challenges and difficulties, including rapid change in structure, reward systems, decision making, communication and management style. The inconsistent empirical results together with two divergent theoretical positions call for further investigations into the circumstances by which growth generate profitability and into the circumstances by which growth do not generate profitability. In this project, we investigate how strategic orientations influence the impact of growth on profitability by asking the following research question: How is the impact of growth on profitability moderated by strategic orientation? Based on a literature review of how growth impacts profitability in areas such as entrepreneurship, strategic management and strategic entrepreneurship we develop three hypotheses regarding the growth-profitability relationship and strategic orientation as a potential moderator. ---------- Methodology/Key Propositions: The three hypotheses are tested on data collected in 2008. All firms in Denmark, including all listed and non-listed (VAT-registered) firms who experienced a 100 % growth and had a positive sales or gross profit over a four years period (2004-2007) were surveyed. In total 2,475 fulfilled the requirements. Among those 1,107 firms returned usable questionnaires satisfactory giving us a response rate on 45 %. The financial data together with data on number of employees were obtained from D&B (previously Dun & Bradstreet). The remaining data were obtained through the survey. Hierarchical regression models with ROA (return on assets) as the dependent variable were used to test the hypotheses. In the first model control variables including region, industry, firm age, CEO age, CEO gender, CEO education and number of employees were entered. In the second model, growth measured as growth in employees was entered. Then strategic orientation (differentiation, cost leadership, focus differentiation and focus cost leadership) and then interaction effects of strategic orientation and growth were entered in the model. ---------- Results and Implications: The results show a positive impact of firm growth on profitability and further that this impact is moderated by strategic orientation. Specifically, it was found that growth has a larger impact on profitability when firms do not pursue a focus strategy including both focus differentiation and focus cost leadership. Our preliminary interpretation of the results suggests that the value of growth depends on the circumstances and more specifically 'how much is left to fight for'. It seems like those firms who target towards a narrow segment are less likely to gain value of growth. The remaining market shares to fight for to these firms are not large enough to compensate for the cost of growing. Based on our findings, it therefore seems like growth has a more positive relationship with profitability for those who approach a broad market segment. Furthermore we argue that firms pursuing af Focus strategy will have more specialized assets that decreases the possibilities of further profitable expansion. For firms, CEOs, board of directors etc., the study shows that high growth is not necessarily something worth aiming for. It is a trade-off between the cost of growing and the value of growing. For many firms, there might be better ways of generating profitability in the long run. It depends on the strategic orientation of the firm. For advisors and consultants, the conditional value of growth implies that in-depth knowledge on their clients' situation is necessary before any advice can be given. And finally, for policy makers, it means they have to be careful when initiating new policies to promote firm growth. They need to take into consideration firm strategy and industry conditions.

Negotiating teacher identities : dialogic reflections on classroom interaction in a transnational context

This study investigates the development of teacher identity in a transnational context through an analysis of the voices of sixteen preservice teachers from Hong Kong who engage in interaction with primary students in an Australian classroom. The context for this research is the school-based experience undertaken by these preservice English as a second language teachers as part of their short language immersion (SLIM) program in Brisbane, Australia. Such SLIM programs are a genre of study abroad programs which have been gaining in popularity within teacher education in Australia, attended by preservice and inservice teachers from China, Hong Kong, Korea, and other Asian countries. This research is conducted at a time when the imperative to globalise higher education provision is a strategic factor in the educational policies of both Australia and Hong Kong. In Australia, international educational services now constitute the country’s third largest export with more than 400,000 students coming to Australia to study annually. In order to maintain Australia’s current global position as the third most popular Englishspeaking study destination, the government is now focusing on sustainability and the quality of the study experience being offered to international students (Bradley Review, 2008). In Hong Kong, the government sponsors both preservice and inservice English as a second language (ESL) teachers to undertake SLIM programs in Australia and other English-speaking countries, as part of their policy of promoting high levels of English proficiency in Hong Kong classrooms. Transnational teacher education is an important issue to which this study contributes insights into the affordances and constraints of a school-based experience in the transnational context. Second language teacher education has been defined as interventions designed to develop participants’ professional knowledge. In this study, it is argued that participation in a different community of practice helps to foreground tacit theories of second language pedagogy, making them visible and open to review. Questions of pedagogy are also seen as questions of teacher identity, constituting the way that one is in the classroom. I take up a sociocultural and poststructural framework, drawing on the work of James Gee and Mikhail Bakhtin, to theorise the construction of teacher identity as emerging through dialogic relations and socially situated discursive practices. From this perspective, this study investigates whether these teachers engage with different ways of representing themselves through appropriating, adapting or rejecting Discourses prevailing in the Australian classroom. Research suggests that reflecting on dilemmas encountered as lived experiences can extend professional understandings. In this study, the participants engage in a process of dialogic reflection on their intercultural classroom interactions, examining with their peers and their lecturer/researcher selected moments of dissonance that they have faced in the unfamiliar context of an Australian primary classroom. It is argued that the recursive and multivoiced nature of this process of reflection on practice allows participants opportunities to negotiate new understandings of second language teacher identity. Dialogic learning, based on the theories of Bakhtin and Vygotsky, provides the theoretic framing not only for the process of reflection instantiated in this study, but also features in the analysis of the participants’ second language classroom practices. The research design uses a combined discourse analytic and ethnographic approach as a logic-of-inquiry to explore the dialogic relationships which these second language teachers negotiate with their students and their peers in the transnational context. In this way, through discourse analysis of their classroom talk and reflective dialogues, assisted by the analytic tools of speech genres and discourse formats, I explore the participants’ ways of doing and being second language teachers. Thus, this analysis traces the process of ideological becoming of these beginner teachers as shifts in their understandings of teacher and student identities. This study also demonstrates the potential for a nontraditional stimulated recall interview to provide dialogic scaffolding for beginner teachers to reflect productively on their practice.