Start-up to Scale-up: Role of Organizational Structure

Organizational structure is a double-edged sword. While contributing to improving efficiency on one hand, it also stifles innovation and creativity by constraining flexibility in an organization. While extant literature provides insights regarding costs and benefits of various aspects of organizational structure in an established firm context, it is less clear as to what role organizational structure plays in a start-up. This is majorly due to data constraints. Multiple research streams unite on underlying tradeoff between flexibility-efficiency when they refer to mixed effects of organizational structure. While start-ups are resource-constrained entities that are experimenting with their business models and flexibility is their strength that provides them a conducive environment to explore. Having an organizational structure can reduce decision-making time, coordination costs and improve efficiency of processes as start-ups setup routines required to scale-up. In this study, I ask if having an organizational structure early-on helps start-ups scale-up. Using a novel linked employee-employer dataset of internet-based start-ups in India; I focus upon hierarchy and horizontal functional structure in start-ups