Hierarchy Alignment and Incremental Innovation in Professional Service Firms: the Case of the U.S. Legal Industry

Research has long examined how hierarchical structures shape organizational outcomes, yet the effects of alignment between different hierarchies remain underexplored. We address this gap by investigating how alignment between power and status hierarchies influences incremental innovation in professional service firms. Drawing on a longitudinal dataset of U.S. law firms, we find that hierarchy alignment enhances the creation of new practice areas, but its impact depends on the steepness of the underlying hierarchies. Alignment weakens innovation under flat power hierarchies but improves it under steep power hierarchies. Status hierarchy steepness shows a similar but weaker moderating pattern, with alignment having no significant effect under flat status hierarchies but improving innovation under steep status hierarchies. By reconceptualizing hierarchy as a multidimensional construct, our study highlights alignment as a powerful yet contingent mechanism through which firms foster innovation.