Patterns of Functional Specialization in Emerging High Tech Firms

In building a business venture, entrepreneurs face a number of significant challenges. The immediate challenge lies in establishing the 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 the organization abandons its simple entrepreneurial structure and adopts a more differentiated functional 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 functional roles emerge as distinctly specialized roles? These issues have yet to be carefully explored in the literature. The purpose of this study is to examine the 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 the work of Kazanjian and Drazin (1990), our basic thesis is that the pattern of specialization will reflect the dominant management problems associated with each stage of development. Learning more about the 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 the 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 "horizontal differentiation," occurs in two distinct forms within organizations: Horizontal differentiation refers to the subdivision of tasks performed by the 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 the second is to subdivide the tasks minutely so that non-specialists can perform them. The first approach is exemplified by the professionals or craft- persons in the organizational setting who are solely responsible for complete opera- tions.... The second form of horizontal differentiation is most plainly seen on the assembly line, where each worker per- forms only one or a few repetitive tasks. (52) The focus of this study lies on the first approach which we refer to as "functional specialization." The rationale behind specialization is two-fold (Robbins 1990). First, it increases the ability of the organization to complete sophisticated and highly complex tasks which are beyond the 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 the 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 the whole tend to exhibit a greater degree of specialization than do small organizations. Studies of the 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). …