Sleeping Gazelles: High Profits But No Growth

Among 205,322 limited liability firms in Sweden during 1997-2010, more than 10% did not hire new employees in any given 3-year period despite having high profits. Nearly one-third continued to have high profits in the next three-year period, but still no growth. Regression analysis indicates that these firms were not randomly distributed; rather they were small and young, did not belong to an enterprise group, had low own-capital as a share of total liabilities, and operated in local markets with high profit- opportunities and low competition. We conclude that it might be more beneficial to focus policy towards these firms instead of towards a few high-growth firms that, having just grown exponentially, may not be best positioned to grow further.