This research investigates legitimate authority in flat organizations. In particular, it aims to unpack what gives individuals the legitimate authority to influence the division of labor. Hence, it problematizes the role of formal structure – i.e., formal leadership appointment – vis-à-vis other established behavioral and structural characteristics for individuals to exert influence over tasks and agents. We study the above by leveraging a longitudinal dataset covering all peer-to-peer interactions in 10 Decentralized Autonomous Organizations. Our findings reveal the persistence of formal superior-subordinate relationships even in such forms of organizing, with formal leaders exerting greater influence than an average member. Yet, not all members are born equal. Thus, if compared to similar contributors, a formally appointed leader pays a penalty, suggesting that structure is not inherently consequential for legitimate authority. Our study highlights the limits of formally derived authority in flat organizations, demonstrating that while formal roles may facilitate managerial action, they must be legitimized through social processes to exert legitimate authority. Otherwise, the formal structure penalty propagates across behavioral and structural characteristics commonly associated with the ability to lead.
