Coordination Costs and the Emergence of Hierarchy in Young Firms

Posted: 3 Jun 2020

See all articles by Megan Lawrence

Megan Lawrence

Vanderbilt University - Strategy and Business Economics

Christopher Poliquin

UCLA Anderson School of Management

Date Written: July 26, 2019

Abstract

We have long known that organizational design choices have a significant impact on a firm’s processes and performance. However, most knowledge about organizational structure comes from settings with static or already established structures. We propose and find evidence that coordination costs influence the development of organizational structure. Using a dataset of employees in all new Brazilian firms from 2003 to 2014, we find that factors associated with a greater need for coordination and with a lesser ability to coordinate amongst the founding team are associated with a greater likelihood of adopting a formal structure. These results contribute to our understanding of the role of organizational structure in coordinating knowledge and highlight one mechanism by which founding conditions influence a young firm’s evolution and capabilities.

Keywords: organizational structure; hierarchy; coordination; founder characteristics; new ventures

Suggested Citation

Lawrence, Megan and Poliquin, Christopher, Coordination Costs and the Emergence of Hierarchy in Young Firms (July 26, 2019). Available at SSRN: https://ssrn.com/abstract=3594400

Megan Lawrence (Contact Author)

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

HOME PAGE: http://www.meganllawrence.com

Christopher Poliquin

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States

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