The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies
AbstractThis paper establishes a causal effect of product market competition on various characteristics of organizational design. Using a unique panel dataset on firm hierarchies of large US firms (1986-1999) and a quasi-natural experiment (trade liberalization), we find that competition leads firms to flatten their hierarchies: firms reduce the number of positions between the CEO and division managers, and firms increase the number of positions reporting directly to the CEO. The results illustrate how firms redesign their organizational structure through a set of complementary choices in response to changes in their environment. We discuss several possible interpretations of these changes. (JEL D23, F13, G34, M12, M51)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Applied Economics.
Volume (Year): 2 (2010)
Issue (Month): 4 (October)
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
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