Balancing Knowledge Expansion and Managerial Demand Through Shared Knowledge

How can organizations expand their knowledge scope without expanding managerial hierarchy? Integrating specialized expertise increases coordination and agency costs, requiring additional managerial layers. Building on a nested model of specialization where differentiated expertise rests on shared foundational skills, we theorize that shared knowledge functions as organizational infrastructure mitigating these costs. We distinguish lateral shared knowledge among peers from vertical shared knowledge between managers and subordinates, arguing the latter is more scalable. Using more than 300 million U.S. job postings, we show that vertical shared knowledge reduces managerial positions, increases delegation, and strengthens as knowledge scope grows.