Selling, General, and Administrative Cost Asymmetry in Hypergrowth Private Fintech Firms
Keywords:
Cost Asymmetry, Fintech, Hypergrowth, Scale-up, Financial ServicesAbstract
This research investigates the cost asymmetry between hypergrowth and non-hypergrowth firms by using private fintech firms in the United Kingdom (U.K.) as a sample. Examining cost growth elasticity and cost multiplier elasticity, the findings indicate that hypergrowth firms’ cost growth elasticity and cost multiplier elasticity are significantly lower than those of non-hypergrowth firms. The results show that, in private fintech firms, cost asymmetry can occur between non-hypergrowth and hypergrowth stages, which is different from prior asymmetry findings that focused only on the revenue-increasing and revenue-decreasing stages. Our study further provides empirical evidence of the static internal economies of scale from which hypergrowth firms benefit, serving as one of the explanations for cost asymmetry in the hypergrowth stage. Overall, our findings suggest that U.K. private fintech companies gain a cost advantage during the hypergrowth stage by balancing the finding of new opportunities with successfully reaping high-quality revenues while effectively dealing with managerial inefficiency.
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