Abstract

Emerging countries tend to be characterized by large quantities of labor and by rapidly expanding markets. High growth firms typically need to increase their workforce to maintain rapid sales growth. Thus, emerging countries tend to be well suited for high growth firms with labor intensive strategies. Difficult decisions, however, must be made to achieve and sustain high growth and profitability. These decisions involve various tradeoffs, including maximizing hiring in order to generate early profit versus making short term sacrifices and investing in complementary resources in order to generate long term profits. We develop a multi-period decision model of hiring policies for high growth firms that offers new insights on the relationships between profitability, size, and relative size increase in rapidly expanding markets.

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