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Firm Organization with Multiple Establishments

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Listed:
  • Anna Gumpert
  • Henrike Steimer
  • Manfred Antoni

Abstract

We show theoretically and empirically that the managerial organization of multiestablishment firms is interdependent across establishments. To derive our result, we study the effect of geographic frictions on firm organization. In our model, we assume that a CEO’s time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multiestablishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed railway routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.

Suggested Citation

  • Anna Gumpert & Henrike Steimer & Manfred Antoni, 2023. "Firm Organization with Multiple Establishments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(2), pages 1091-1138.
    • Handle: RePEc:oup:qjecon:v:137:y:2023:i:2:p:1091-1138.
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    File URL: http://hdl.handle.net/10.1093/qje/qjab049
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    References listed on IDEAS

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