The Myth of the Flat Start-up: Reconsidering the Organizational Structure of Start-ups

Strategic Management Journal, Forthcoming

60 Pages Posted: 5 May 2021 Last revised: 11 Mar 2022

See all articles by Saerom (Ronnie) Lee

Saerom (Ronnie) Lee

Wharton School, University of Pennsylvania

Date Written: April 28, 2021

Abstract

There has been an ongoing debate over whether start-ups should be "flat" with minimal hierarchical layers. To reconcile this debate, this paper distinguishes between creative and commercial success (i.e., product novelty vs. profitability), and examines how these outcomes are variously influenced by a start-up’s hierarchy. This study suggests that while a flatter hierarchy can improve ideation and creative success, it can result in haphazard execution and commercial failure by overwhelming managers with the burden of direction and causing subordinates to drift into power struggles and aimless idea explorations. I find empirical support for this trade-off using a large sample of game development start-ups. These findings offer one resolution to the debate by sorting out the conditions under which hierarchy can be conducive or detrimental to start-ups.

Keywords: organizational structure, hierarchy, organizational design, entrepreneurship, start-up

JEL Classification: D22, D70, D81, D83, L26, L82, M13, O32

Suggested Citation

Lee, Saerom (Ronnie), The Myth of the Flat Start-up: Reconsidering the Organizational Structure of Start-ups (April 28, 2021). Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3835538 or http://dx.doi.org/10.2139/ssrn.3835538

Saerom (Ronnie) Lee (Contact Author)

Wharton School, University of Pennsylvania ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

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

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,261
Abstract Views
4,175
Rank
30,576
PlumX Metrics