Abstract: By selecting the data from China Industry Business Performance Data during 1999-2007, this paper examines the interaction between firm growth and profitability with the fixed effect model and GMM estimation method. The results reveals that the improvement of profitability can push the growth of enterprises, however, the speed-up of firm growth would reduce the profitability. This examination is carried out from three aspects: firstly, the data is turned from non-balanced panel into balanced panel, the regression result is generally unchanged; secondly, quadratic function and piecewise function are constructed, the result shows that there may exist a nonlinear relationship between them, but the basic conclusion keeps unchanged; finally, there do exist differences in the correlation between firm growth and profitability among enterprises with different characteristics.

Key words: enterprise growth; profitability; balanced panel; nonlinear relationship; enterprise characteristics