This study aims to empirically examine the applicability of the life cycle model of firm performance to growth and profitability among Swedish small- and medium-sized enterprises (SMEs).
Using analysis of variance, multiple analysis of variance and three-stage least square modelling, this study analyses a longitudinal data set covering 26,721 Swedish SMEs in six industries from 2008 to 2011.
The empirical results indicate a clear life cycle performance pattern among the sampled SMEs, and that a six-stage life cycle model is applicable in predicting the performance pattern in terms of growth and profitability. On average, younger SMEs tend to display better performance in terms of growth and profitability than do their older and larger counterparts; moreover, larger SMEs tend to achieve better performance than do smaller ones.
The findings help SME managers understand how their decision-making style, strategy and structure can be related to various life cycle stages. Such an understanding may help them improve firm performance over time. Policymakers may find the results useful in coordinating SME support in line with various life cycle stages.
To the authors’ knowledge, this study is one of only a few using two performance variables to test the applicability of the life cycle model in a longitudinal and cross-industrial sample.
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