Patterns of Functional Specialization in Emerging High Tech Firms

Abstract

In building a business venture, entrepreneurs face a number of significant challenges. The immediate challenge lies in establishing company as a successful business venture. Once early success is achieved, a subsequent challenge emerges--the management of business growth. Organization theorists have long argued that as organizations grow in size and complexity, they tend to increase in specialization (Blau and Schoenherr 1971, Child 1973, Pugh et al. 1969). Broad overlapping roles give way to more specialized assignments as organization abandons its simple entrepreneurial structure and adopts a more differentiated structure. While it is well documented that specialization tends to increase with size, we know little about its nature. Are there common patterns of specialization associated with different developmental stages? At what point in time do various roles emerge as distinctly specialized roles? These issues have yet to be carefully explored in literature. The purpose of this study is to examine pattern of specialization across life cycle stage configurations in high technology firms. This study is an extension of an earlier study by Hanks, Watson, Jansen, and Chandler (1994) wherein a taxonomy of growth stages in high technology organizations was derived. Building on work of Kazanjian and Drazin (1990), our basic thesis is that pattern of specialization will reflect dominant management problems associated with each stage of development. Learning more about pattern of specialization can enhance our understanding of how organizations grow, why they grow as they do, and in time, provide a basis for prescriptive recommendations which might aid business founders as they face challenging task of growing a business venture. REVIEW OF THE LITERATURE Daft (1986, 16) defined specialization as the degree to which organizational tasks are subdivided into separate jobs. Hall (1991) noted that specialization, referred to as differentiation, occurs in two distinct forms within organizations: Horizontal differentiation refers to subdivision of tasks performed by or- ganization. Unfortunately, for conceptual clarity, there are two basic ways in which such tasks can be subdivided. The first way is to give highly trained specialists a rather comprehensive range of activities to perform, and second is to subdivide tasks minutely so that non-specialists can perform them. The first approach is exemplified by professionals or craft- persons in organizational setting who are solely responsible for complete opera- tions.... The second form of horizontal differentiation is most plainly seen on assembly line, where each worker per- forms only one or a few repetitive tasks. (52) The focus of this study lies on first approach which we refer to as functional specialization. The rationale behind specialization is two-fold (Robbins 1990). First, it increases ability of organization to complete sophisticated and highly complex tasks which are beyond ability of one person to accomplish. Second, greater efficiency is thought to be achieved through increased expertise being applied to tasks, reduced training costs, better employee selection, reduced change-over costs, and creation of special inventions and machinery. Specialization has been demonstrated in multiple studies to be related to organization size (Blau and Schoenherr 1971, Child 1973, Pugh et al. 1969). Large organizations on whole tend to exhibit a greater degree of specialization than do small organizations. Studies of organization life cycle support these findings suggesting that as organizations progress through growth stages, they become progressively more specialized (Kazanjian and Drazin 1990; Smith, Mitchell, and Summer 1985). …