Firm growth and the job satisfaction of the startup workforce

Abstract Research Summary This study investigates how sales and employment growth shape employee job satisfaction in startups. Grounded in Penrosean growth theory and related literature, we propose an inverted U‐shaped relationship, where excessive growth triggers the “Penrose Effect” and impairs employee job satisfaction. Analysis of multilevel Glassdoor.com data reveals modest support for this relationship in employment growth, which is stronger for firms undergoing rapid workforce expansion. Exploratory text analysis further suggests that rapid employment growth exposes socio‐structural challenges, and rapid sales growth reveals managerial deficiencies in the scaling of revenues. The differences between these mediating mechanisms suggest that the Penrose effect may be less binding than previously theorized, warranting further scrutiny. Our findings bridge macro‐level growth dynamics with micro‐level employee experiences, providing insights into the contemporary challenges of rapidly growing firms. Managerial Summary Does startup growth enhance the employee work experience? If so, is it bound by the rate of growth? Our study offers insights into these questions by combining Glassdoor.com reviews with startup financial data and reveals that moderate levels of growth can enhance employee job satisfaction, while rapid expansion can undermine it. We identify two key mechanisms: first, rapid employment growth strains workplace dynamics, creating challenges with diversity, inclusion, and team cohesion. Second, rapid sales growth exposes management's limitations in scaling products and services effectively. For startup leaders, these findings shed light on how the tradeoffs of accelerated growth can cascade into employee‐level challenges that impair job satisfaction.