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Life cycle of profitability among Swedish micro firms

Author

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  • Darush Yazdanfar
  • Khalik Salman
  • Leif Arnesson

Abstract

The purpose of this paper is to examine the profitability life cycle among Swedish micro firms. The study sample contains 22,710 micro firms across six industries for which complete financial information is available, giving a total of 68,130 observations. The results of the empirical study indicate that the firm profitability changes systematically over its life cycle stages. The profitability is high in the first life cycle stage, and as firms age and develop, it decreases. The change of firm profitability in different industries over their life cycles follows the general pattern of the total sample. Empirical tests provide support for two additional predictions of the life cycle model: specifically, that firm size influences profitability, and that the industry affiliation has a more pronounced effect on firms' profitability than the variables size and life cycle stage. The results from the statistical tests support the applicability of the life cycle model to explain the profitability development pattern.

Suggested Citation

  • Darush Yazdanfar & Khalik Salman & Leif Arnesson, 2013. "Life cycle of profitability among Swedish micro firms," World Review of Entrepreneurship, Management and Sustainable Development, Inderscience Enterprises Ltd, vol. 9(3), pages 340-351.
    • Handle: RePEc:ids:wremsd:v:9:y:2013:i:3:p:340-351
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    Cited by:

    1. Sharif N. Ahkam & Khairul Alom, 2019. "Liquidity, Level of Working Capital Investment, and Performance in an Emerging Economy," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 18(3), pages 307-328, December.
    2. Fernando Zambrano Farias & María del Carmen Valls Martínez & Pedro Antonio Martín-Cervantes, 2021. "Explanatory Factors of Business Failure: Literature Review and Global Trends," Sustainability, MDPI, vol. 13(18), pages 1-26, September.

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