Profitable growth is aimed at seducing the financial community; it emerged in the early 80s when shareholder value creation became firms’ main objective.
It is a break from previous firms’ development models which advocated growth at first to achieve economies of scale and then profitability (see BCG Growth-share matrix).
Ben-Hafaïedh & Hamelin (2022) undertook a replication on more than 650,000 firms and confirmed the same main results separately in each of 28 studied countries as well as across industry sectors, firm age and size classes, time spans from 1 to 7 years, alternative growth and profitability measures, and using several alternative analysis techniques.
An interesting piece of research by the BCG shows that no business model is able to achieve a sustainable competitive advantage for more than 10 years.
There are 2 ways to measure Capital Employed (CE) : - CE = Shareholders’ Equity + Net Financial DebtNet Financial Debt is computed as: interest bearing Debt – Cash and Cash equivalents.
One prefers the first one when computing Capital Employed at the firm level; the second one is more practical when focusing on a company's business unit.
Entrepreneurship Theory and Practice, 10422587211059991 Brännback, M., Carsrud, A., Renko, M., Östermark, R., Aaltonen, J., & Kiviluoto, N. (2009).
Growth and profitability in small privately held biotech firms: Preliminary findings.