One reason for the proliferation of firms during the growth phase is that strong growth is more conducive to making a profit, and more forgiving of inefficient management.

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During the growth phase, firms may experience high demand and increasing revenues, which can lead to higher profits. This growth may also provide more room for error or inefficiencies in management compared to a stagnant or declining market. As a result, more firms may be able to start or expand their businesses during this phase.

One Reason for the Proliferation of Firms During the Growth