Megan L. Lawrence

Abstract

We combine organization design and knowledge-based views of the firm to examine determinants of young firms initially expanding their hierarchies. Using an economy-wide dataset of employees in all Brazilian firms founded from 2003 to 2014, we propose and find evidence that increased knowledge scope is associated with an increased likelihood of hierarchy expansion in otherwise similar firms. Further, these firms have differing abilities to coordinate as a result of differences in shared experiences among founders and early employees, with increased abilities associated with later hierarchy emergence. These results contribute to our understanding of the role of organizational structure in managing knowledge and of the expansion of hierarchy in young firms.