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Spatial organization of firms: the decision to split production and administration

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Author Info

  • Kristin Aarland
  • James C. Davis
  • J. Vernon Henderson
  • Yukako Ono

Abstract

A firm’s production activities are often supported by non-production activities. Among these activities are administrative units including headquarters, which process information both within and between firms. Often firms physically separate such administrative units from their production activities and create stand alone Central Administrative Offices (CAO). However, having its activities in multiple locations potentially imposes significant internal firm face-to-face communication costs. What types of firms are more likely to separate out such functions? If firms do separate administration and production, where do they place CAOs and why? How often do firms open and close, or relocate CAOs? This paper documents such firms’ decisions on their spatial organization by using micro-level data from the U.S. Census Bureau.

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File URL: http://hdl.handle.net/10.1111/j.1756-2171.2007.tb00079.x
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Bibliographic Info

Article provided by RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 38 (2007)
Issue (Month): 2 (06)
Pages: 480-494

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Handle: RePEc:bla:randje:v:38:y:2007:i:2:p:480-494

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References

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  1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  2. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
  3. Gilles Duranton & Diego Puga, 2001. "From Sectoral To Functional Urban Specialisation," CEP Discussion Papers dp0511, Centre for Economic Performance, LSE.
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Citations

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Cited by:
  1. G. F. Gori, 2013. "Urban Functional Specialisation and the Interplay between Firm’s Communication Costs," Working Papers wp877, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Xavier Giroud, 2010. "Soft Information and Investment: Evidence from Plant-Level Data," Working Papers 10-38r, Center for Economic Studies, U.S. Census Bureau, revised Nov 2010.
  3. Duranton, Gilles, 2014. "Growing through cities in developing countries," Policy Research Working Paper Series 6818, The World Bank.
  4. William R. Kerr & Scott Duke Kominers, 2012. "Agglomerative Forces and Cluster Shapes," Working Papers 12-09, Center for Economic Studies, U.S. Census Bureau.
  5. Davis, James C. & Henderson, J. Vernon, 2008. "The agglomeration of headquarters," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 445-460, September.
  6. Liao, Wen-Chi, 2012. "Inshoring: The geographic fragmentation of production and inequality," Journal of Urban Economics, Elsevier, vol. 72(1), pages 1-16.
  7. Diego Puga, 2008. "Agglomeration and cross-border infrastructure," Working Papers 2008-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  8. Audretsch, David B. & Falck, Oliver & Heblich, Stephan, 2011. "Who’s got the aces up his sleeve? Functional specialization of cities and entrepreneurship," Munich Reprints in Economics 20179, University of Munich, Department of Economics.
  9. Deschryvere, Matthias, 2009. "Mobility of Corporate Headquarter Functions: A Literature Review," Discussion Papers 1203, The Research Institute of the Finnish Economy.
  10. Francis, Bill & Hasan, Iftekhar & John, Kose & Waisman , Maya, 2012. "Urban agglomeration and CEO compensation," Research Discussion Papers 17/2012, Bank of Finland.
  11. Franz-Josef Bade & Eckhardt Bode & Eleonora Cutrini, 2012. "Spatial fragmentation of industries by functions," Working Papers 39-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Feb 2012.

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