IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/17074.html
   My bibliography  Save this paper

The organizational design of high-tech startups and product innovation

Author

Listed:
  • Grimpe, Christoph
  • Murmann, Martin
  • Sofka, Wolfgang

Abstract

We investigate whether appointing a middle management level affects startups' innovation performance. Additional hierarchical levels are often suspected to restrict innovative activities. However, founders' capacities for information processing and resource allocation are usually strongly limited while, at the same time, R&D decisions are among the most consequential choices of startups. We argue that middle management is positively related to introducing product innovations because it improves the success rates from recombining existing knowledge as well as managing R&D personnel. In addition, we suggest that the effectiveness of these mechanisms depends on the riskiness of a startup's business opportunity. Based on a sample of German high-tech startups, we find support for our conjectures.

Suggested Citation

  • Grimpe, Christoph & Murmann, Martin & Sofka, Wolfgang, 2017. "The organizational design of high-tech startups and product innovation," ZEW Discussion Papers 17-074, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:17074
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/172526/1/1009651013.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Johan Wiklund & Dean Shepherd, 2003. "Aspiring for, and Achieving Growth: The Moderating Role of Resources and Opportunities," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 1919-1941, December.
    2. Milton Harris & Artur Raviv, 2002. "Organization Design," Management Science, INFORMS, vol. 48(7), pages 852-865, July.
    3. Gregory G. Dess & G. T. Lumpkin & Jeffrey E. Mcgee, 1999. "Linking Corporate Entrepreneurship to Strategy, Structure, and Process: Suggested Research Directions," Entrepreneurship Theory and Practice, , vol. 23(3), pages 85-102, April.
    4. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 805-851.
    5. Ireland, R. Duane & Webb, Justin W., 2009. "Crossing the great divide of strategic entrepreneurship: Transitioning between exploration and exploitation," Business Horizons, Elsevier, vol. 52(5), pages 469-479, September.
    6. Kenneth W. Koput, 1997. "A Chaotic Model of Innovative Search: Some Answers, Many Questions," Organization Science, INFORMS, vol. 8(5), pages 528-542, October.
    7. Massimo G. Colombo & Luca Grilli, 2013. "The Creation of A Middle‐Management Level by Entrepreneurial Ventures: Testing Economic Theories of Organizational Design," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 390-422, June.
    8. Raghuram G. Rajan & Julie Wulf, 2006. "The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 759-773, November.
    9. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start‐Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, February.
    10. Kent D Miller, 1992. "A Framework for Integrated Risk Management in International Business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(2), pages 311-331, June.
    11. Czarnitzki, Dirk & Doherr, Thorsten & Hussinger, Katrin & Schliessler, Paula & Toole, Andrew A., 2015. "Individual versus institutional ownership of university-discovered inventions," ZEW Discussion Papers 15-007, ZEW - Leibniz Centre for European Economic Research.
    12. Bersch, Johannes & Gottschalk, Sandra & Müller, Bettina & Niefert, Michaela, 2014. "The Mannheim Enterprise Panel (MUP) and firm statistics for Germany," ZEW Discussion Papers 14-104, ZEW - Leibniz Centre for European Economic Research.
    13. Colombo, Massimo G. & Grilli, Luca, 2005. "Founders' human capital and the growth of new technology-based firms: A competence-based view," Research Policy, Elsevier, vol. 34(6), pages 795-816, August.
    14. Shanker Satyanath & Nico Voigtländer & Hans-Joachim Voth, 2017. "Bowling for Fascism: Social Capital and the Rise of the Nazi Party," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 478-526.
    15. Helmut Fryges & Sandra Gottschalk & Karsten Kohn, 2010. "The KfW/ZEW Start-up Panel: Design and Research Potential," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 117-132.
    16. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    17. Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
    18. Scott Shane, 2000. "Prior Knowledge and the Discovery of Entrepreneurial Opportunities," Organization Science, INFORMS, vol. 11(4), pages 448-469, August.
    19. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    20. Keren, Michael & Levhari, David, 1989. "Decentralization, aggregation, control loss and costs in a hierarchical model of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 11(2), pages 213-236, March.
    21. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    22. Yingyi Qian, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 527-544.
    23. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-952, October.
    24. John C. Dencker & Marc Gruber, 2015. "The effects of opportunities and founder experience on new firm performance," Strategic Management Journal, Wiley Blackwell, vol. 36(7), pages 1035-1052, July.
    25. Michael Keren & David Levhari, 1979. "The Optimum Span of Control in a Pure Hierarchy," Management Science, INFORMS, vol. 25(11), pages 1162-1172, November.
    26. Baron, James N & Burton, M Diane & Hannan, Michael T, 1999. "Engineering Bureaucracy: The Genesis of Formal Policies, Positions, and Structures in High-Technology Firms," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 1-41, April.
    27. Alfonso Gambardella & Martin Ganco & Florence Honoré, 2015. "Using What You Know: Patented Knowledge in Incumbent Firms and Employee Entrepreneurship," Organization Science, INFORMS, vol. 26(2), pages 456-474, April.
    28. Greene, William, 2010. "Testing hypotheses about interaction terms in nonlinear models," Economics Letters, Elsevier, vol. 107(2), pages 291-296, May.
    29. Colombo, Massimo G. & Delmastro, Marco & Grilli, Luca, 2004. "Entrepreneurs' human capital and the start-up size of new technology-based firms," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1183-1211, November.
    30. Kent D Miller, 1993. "Industry and Country Effects on Managers′ Perceptions of Environmental Uncertainties," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(4), pages 693-714, December.
    31. Daniel A. Levinthal & James G. March, 1993. "The myopia of learning," Strategic Management Journal, Wiley Blackwell, vol. 14(S2), pages 95-112, December.
    32. Miller, K.D., 1993. "Industry and Country Effects on Manager's Perceptions of Environmental Uncertainties," Papers 93-105, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    33. Lori Rosenkopf & Atul Nerkar, 2001. "Beyond local search: boundary‐spanning, exploration, and impact in the optical disk industry," Strategic Management Journal, Wiley Blackwell, vol. 22(4), pages 287-306, April.
    34. Michael C. Jensen & William H. Heckling, 1995. "Specific And General Knowledge, And Organizational Structure," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 4-18, June.
    35. R. Duane Ireland & Jeffrey G. Covin & Donald F. Kuratko, 2009. "Conceptualizing Corporate Entrepreneurship Strategy," Entrepreneurship Theory and Practice, , vol. 33(1), pages 19-46, January.
    36. Bansak, Kirk & Hainmueller, Jens & Hangartner, Dominik, 2016. "How economic, humanitarian, and religious concerns shape European attitudes toward asylum seekers," LSE Research Online Documents on Economics 67898, London School of Economics and Political Science, LSE Library.
    37. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-1146, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Massimo G. Colombo & Cristina Rossi-Lamastra, 2013. "The organizational design of high- tech start- ups: state of the art and directions for future research," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 21, Edward Elgar Publishing.
    2. Massimo G. Colombo & Luca Grilli, 2013. "The Creation of A Middle‐Management Level by Entrepreneurial Ventures: Testing Economic Theories of Organizational Design," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 390-422, June.
    3. Paola Rovelli & Vincenzo Butticè, 2020. "On the organizational design of entrepreneurial ventures: the configurations of the entrepreneurial team," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(2), pages 243-269, June.
    4. Andrea Patacconi, 2009. "Coordination and delay in hierarchies," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 190-208, March.
    5. Filippo Belloc & Gabriel Burdin & Fabio Landini, 2020. "Corporate Hierarchies and Labor Institutions," Department of Economics University of Siena 827, Department of Economics, University of Siena.
    6. Phillip J. Lederer & Xiaobo Zheng, 2021. "Can information economics explain the organization of productive facilities?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 525-553, August.
    7. Andrea Patacconi, 2005. "Optimal Coordination in Hierarchies," Economics Series Working Papers 238, University of Oxford, Department of Economics.
    8. Thomas Hubbard & Luis Garicano, 2004. "Hierarchies, Specialization, and the Utilization of Knowledge: Theory and Evidence from the Legal Services Industry," Working Papers 04-07, Center for Economic Studies, U.S. Census Bureau.
    9. Stefano Colombo & Luca Grilli, 2017. "Should I stay or should I go? Founder’s decision to leave an entrepreneurial venture during an industrial crisis," Industry and Innovation, Taylor & Francis Journals, vol. 24(2), pages 97-121, February.
    10. Richard Fu & Ajay Subramanian & Anand Venkateswaran, 2016. "Project Characteristics, Incentives, and Team Production," Management Science, INFORMS, vol. 62(3), pages 785-801, March.
    11. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1759-1799.
    12. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2014. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," Management Science, INFORMS, vol. 60(12), pages 2859-2885, December.
    13. Garicano, Luis & Hubbard, Thomas N, 2007. "Managerial Leverage Is Limited by the Extent of the Market: Hierarchies, Specialization, and the Utilization of Lawyers' Human Capital," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 1-43, February.
    14. Choe, Chongwoo & Ishiguro, Shingo, 2008. "On the (Sub)optimality of Multi-tier Hierarchies: Coordination versus Motivation," MPRA Paper 13451, University Library of Munich, Germany.
    15. Maria Guadalupe & Hongyi Li & Julie Wulf, 2014. "Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management," Management Science, INFORMS, vol. 60(4), pages 824-844, April.
    16. Louise Lindbjerg & Theodor Vladasel, 2021. "Hiring Entrepreneurs for Innovation," Working Papers 1309, Barcelona School of Economics.
    17. Brixy, Udo & Murmann, Martin, 2016. "The growth and human capital structure of new firms over the business cycle," IAB-Discussion Paper 201642, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    18. Tobias Hiller, 2021. "Hierarchy and the size of a firm," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 389-404, September.
    19. Vera Rocha & Luca Grilli, 2024. "Early-stage start-up hiring: the interplay between start-ups’ initial resources and innovation orientation," Small Business Economics, Springer, vol. 62(4), pages 1641-1668, April.
    20. Byoung-Hyoun Hwang & José María Liberti & Jason Sturgess, 2019. "Information Sharing and Spillovers: Evidence from Financial Analysts," Management Science, INFORMS, vol. 65(8), pages 3624-3636, August.

    More about this item

    Keywords

    middle management; innovation performance; R&D; startups; organizational design; R&D management;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:17074. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.