Wharton Research Scholars

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Working Paper

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How does allocation of limited employee resources affect firms’ growth, and how does fast growth force or enable certain employee allocation structures?

We show a clear but weak negative correlation between employee count and firm growth. That is, firms with fewer employees grow faster than those with more employees, as a whole. However, we have not yet been able to draw more detailed conclusions about firm structure or about the use of revenue due to a number of confounding factors. We explain these confounding factors and suggest a number of possible explanations for the apparent relationship between employees and growth. Finally, we address next steps for resolving the confounding factors and describe the implications of our results.

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Date Posted: 28 October 2014