Strategy for Sustained Profitable Growth: The Difference Between Growth- and Profit-Oriented Firms

Firms adopt different strategies to achieve sustained profitable growth. We argue that the success of sustained profitable growth relies on the alignment between a firm's prior and subsequent strategy. This study views a firm's prior strategy, i.e., growth-oriented vs profit-oriented, as a primary driver of future sustained profitable growth. We adopt the resource-based view to understand the types of resources required for these two strategies. We argue that to achieve sustained profitable growth, growth-oriented firms need to enhance their firm-specific advantages by developing valuable, rare, inimitable, and non-substitutable resources such as technology and brand. In comparison, profit-oriented firms must identify versatile resources to capture growth opportunities and manage growth by successfully replicating their profitable operations. Low turnover in senior management could help profit-oriented firms achieve this goal. We find support for the arguments in a sample of 3,802 listed firms worldwide from 1992 to 2019.