Scaling high and wide: How firms leverage AI and organizational design to overcome the scale‐scope trade‐off

What the paper says

Abstract Research Summary The trade‐off between scale and scope has long posed a strategic dilemma, especially in digital settings, where specialization enables hyperscaling. Drawing on a longitudinal case study of ByteDance, we theorize how digital firms can overcome this constraint through the use of artificial intelligence (AI) combined with an adaptive organizational design. AI evolves and improves through self‐learning and cross‐fertilization across domains, becoming increasingly valuable as learning accumulates. This, however, is contingent on access to structurally related data that allow learning to transfer across domains. We show how AI reverses the conventional logic of the resource‐based view: rather than valuable resources enabling diversification, diversification amplifies the value of resources. AI thus transforms the scale‐scope nexus from being a trade‐off into a source of strategic advantage. Managerial Summary The growing centrality of AI and digital platforms is reshaping how firms pursue and sustain growth. This study examines how ByteDance leveraged AI and adaptive organizational design not only to scale rapidly but also to diversify across industries and markets. Rather than incurring rising costs or coordination complexity, the firm's AI capabilities improved with each deployment through cross‐fertilization across domains, enabling more efficient growth across multiple domains. For managers, the findings highlight how dynamic combinations of AI and organizational structure can help overcome traditional trade‐offs between scale and scope, opening new pathways for scalable, cross‐market expansion in increasingly competitive environments.