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Researchers from Waseda University and the World Bank have found that the timing of organisational changes can shape how firms sustain rapid growth.
Entrepreneurship research often focuses on how and why firms grow rapidly, yet the factors that influence this growth are not fully understood. A recent study, titled Planning ahead or dragging one’s feet? Organisational structure and high-growth events, looks specifically at how the timing of introducing new hierarchical layers affects a company’s growth.
High-growth firms (HGFs) are defined as businesses with at least 10 employees and an annual growth rate of 20% or more, measured over a three-year period. This three-year window is considered the high-growth (HG) phase. While these bursts of growth are typically short-lived, HGFs play an important role in driving economic activity.
To understand how organisational structures evolve during such periods, Professor Alex Coad, Waseda Business School, Japan and Dr Antonio Martins-Neto, World Bank, Washington, D.C., analysed employer–employee census data from Brazil spanning 2003 to 2019. Their research, published in Small Business Economics on 11 September 2025, investigates what happens when firms add new hierarchical layers either before or after the growth phase.
Prof Coad said: "There are two competing theories regarding the companies’ plans for the organizational infrastructure."
The study outlined two main theories on how firms approach organisational planning. The first, known as the “planning ahead” theory, suggests that companies prepare for expansion by introducing new management layers before the high-growth period begins. The second, referred to as the 'dragging one’s feet' theory, describes firms that postpone structural changes until much later, often adding new layers only towards the end of their growth phase.
The researchers used data from the Relação Anual de Informações Sociais (RAIS) database, managed by Brazil’s Ministry of Labour and Employment. This large dataset contains information on more than 40mn individuals each year. For the study, 3,211,353 firm-level observations were analysed, focusing on the years 2013 to 2016 as the high-growth period.
The researchers classified roles into chief executive officers and managers, professionals, technicians, clerks and services, and production workers. They then applied a difference-in-difference method to examine how firm growth aligns with changes in organisational structure, aiming to determine the timing that best supports expansion.
The results offered a nuanced picture. “The findings neither fit the ‘planning ahead’ scenario nor the ‘dragging one’s feet’ theory,” said Prof Coad. The study showed that firms tend to add new hierarchical layers gradually as they grow, with changes slowing once the high-growth period ends.
Company size also affected these patterns. Smaller firms with fewer than 50 employees typically added management layers soon after growth started. Larger firms, however, saw a drop in the proportion of managers during the high-growth period, suggesting a leaner structure before reintroducing more layers late
"Planning ahead too much can be risky, but delaying for too long also has drawbacks. It is better to take the middle road," said Prof Coad.
Speaking on the implications of the study, Prof Coad said the findings could help policymakers focus on supporting firms during their growth phase rather than pushing for early organisational planning. This approach may encourage further expansion and development of high-growth firms in the future.
Lead image / Provided
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