When Do Startups Scale? Large-scale Evidence from Job Postings
Strategic Management Journal, Forthcoming
75 Pages Posted: 28 Jan 2022 Last revised: 26 Feb 2024
Date Written: August 1, 2023
Abstract
Scaling at the right time is a crucial challenge for startups. Conceptualizing "scaling" as the entrepreneurial process of acquiring and committing resources to implement the core business idea and expand the customer base, this study examines how scaling early may decrease imitation risk at the expense of increasing commitment risk. As startups typically hire managers and sales personnel when they begin to scale, we propose that this timing can be empirically measured by when startups first post these jobs. Leveraging a dataset of job postings, we find that early scalers are more likely to fail, but no evidence of a countervailing benefit in terms of successful exit. Additional analyses suggest that the commitment risk in scaling early outweighs the benefit of reducing imitation risk.
Keywords: venture scaling, timing, entrepreneurship, human capital, organization design
JEL Classification: D22, L26, M10, M13, O15, O32
Suggested Citation: Suggested Citation