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

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  • 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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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. Duranton, Gilles & Puga, Diego, 2005. "From sectoral to functional urban specialisation," Journal of Urban Economics, Elsevier, vol. 57(2), pages 343-370, March.
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  3. 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.
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Cited by:
  1. Puga, Diego, 2008. "Agglomeration and cross-border infrastructure," EIB Papers 9/2008, European Investment Bank, Economics Department.
  2. Liao, Wen-Chi, 2012. "Inshoring: The geographic fragmentation of production and inequality," Journal of Urban Economics, Elsevier, vol. 72(1), pages 1-16.
  3. William R. Kerr & Scott Duke Kominers, 2010. "Agglomerative Forces and Cluster Shapes," Harvard Business School Working Papers, Harvard Business School 11-061, Harvard Business School, revised Nov 2012.
  4. Duranton, Gilles, 2014. "Growing through cities in developing countries," Policy Research Working Paper Series 6818, The World Bank.
  5. Deschryvere, Matthias, 2009. "Mobility of Corporate Headquarter Functions: A Literature Review," Discussion Papers, The Research Institute of the Finnish Economy 1203, The Research Institute of the Finnish Economy.
  6. Francis, Bill & Hasan, Iftekhar & John, Kose & Waisman , Maya, 2012. "Urban agglomeration and CEO compensation," Research Discussion Papers, Bank of Finland 17/2012, Bank of Finland.
  7. G. F. Gori, 2013. "Urban Functional Specialisation and the Interplay between Firm’s Communication Costs," Working Papers wp877, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Franz-Josef Bade & Eckhardt Bode & Eleonora Cutrini, 2012. "Spatial fragmentation of industries by functions," Working Papers, Macerata University, Department of Studies on Economic Development (DiSSE) 39-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Feb 2012.
  9. Xavier Giroud, 2010. "Soft Information and Investment: Evidence from Plant-Level Data," Working Papers, Center for Economic Studies, U.S. Census Bureau 10-38r, Center for Economic Studies, U.S. Census Bureau, revised Nov 2010.
  10. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers, Center for Economic Studies, U.S. Census Bureau 04-02, Center for Economic Studies, U.S. Census Bureau.
  11. David Audretsch & Oliver Falck & Stephan Heblich, 2011. "Who’s got the aces up his sleeve? Functional specialization of cities and entrepreneurship," The Annals of Regional Science, Springer, Springer, vol. 46(3), pages 621-636, June.

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