The Organizational Design of High-Tech Startups and Product Innovation

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.

Grimpe, Christoph, Martin Murmann and Wolfgang Sofka (2017), The Organizational Design of High-Tech Startups and Product Innovation, ZEW Discussion Paper No. 17-074, Mannheim, published in: Strategic Entrepreneurship Journal.