Research Summary
Research Summary
How and When Does Hierarchy Emerge in Firms?
Description
Despite understanding that formal structure within firms is crucial for maintaining coordination and control as young firms grow, relatively little is systematically known about the initial formation of hierarchy in firms. By exploiting access to a dataset of all employees within all firms in Brazil between 2004 and 2014, we test and find support for factors that may contribute to the genesis of middle management using theories developed regarding information processing, initial founding conditions, and external environmental conditions. We also capture hires into specific functional areas and find that established theories are less predictive of the emergence of specialized managers. Above all, the size of the firm appears to have the strongest effect on the emergence of hierarchy in young firms.