Much ado about nearly nothing? An explanatory study on the myth of high-growth technology start-up entrepreneurship

Abstract

This paper analyzes the relationship between growth and profitability of high growth high technology start-up firms. We focus on the role of strategic orientation, strategic plans, business plans, and the role of knowledge and skills of executive management and the boards with respect to firm performance. Results show that while high growth firms are indeed focused on growth these firms fail to translate an increase in revenues to profit. Nevertheless growth firms become profit oriented with increase age. In fact a firm's growth orientation shows a significant negative correlation to profitability. Those firms showing a strong belief in that growth will lead to profitability and that growth is a prerequisite for profitability are the least profitable.