The Growth of Hierarchy in Organizations : Managing Knowledge Scope

Theory posits hierarchy as a response to coordination challenges and emphasizes organizationsize and the need to transfer knowledge between people as the mainspring of these challenges.Building on the knowledge-based view, we propose that knowledge scope—the variety ofknowledge across an organization’s members—also affects coordination costs and therefore theuse of hierarchy. Using an economy-wide database from Brazil, we show that firms are morelikely to expand their hierarchy when knowledge scope increases. This effect varies with firms’capacities to manage knowledge; firms whose employees perform more similar tasks or haveshared experience at previous employers are less likely to expand hierarchy in response toincreases in knowledge scope. We reveal knowledge scope to be an understudied determinant oforganizational hierarchy