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Fundamentals of Managment Chapter Discussion Question - Shopify As a company gets bigger, Does it become...

Fundamentals of Managment Chapter Discussion Question - Shopify

As a company gets bigger, Does it become harder to stay innovative? Why or why not?

Homework Answers

Answer #1

As the size of the organization increases, there will be a lesser inclination towards the risk-taking ability of the organization in different dimensions of the business. The bigger the company becomes, the more risk averse it gets. This is irrespective of the fact that whether the company was innovative in its initial phase or not. The main reasons are as below:-

  • With the increase in the size, the ownership of the company shifts from venture capitalist to the private equity firms and these private equity firms are more conventional in their approach and they focus more of EBITDA for long-term sales and market share rather than the revenue. Thus they focus more on increasing market share rather than risk taking innovations
  • There will be a change in leadership when the size of the organization increases, The CEO of the companies can keep on changing with the size.
  • Change in human resources is also one of the leading factors as the founding employees can be seen as a type A personalities where entrepreneurship and risk-taking are inherent but when the size of the organization increase, more employees are induced and thus the out of the box thinking and innovations are curved out slowly with the increase in team size
  • Most of the big organization operates with consensus and they try to follow the middle path.
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