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Competing in Organizations: Firm Heterogeneity and International Trade

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  • Marin, Dalia
  • Verdier, Thierry

Abstract

This paper develops a theory which investigates how firms' choice of corporate organization is affecting firm performance and the nature of competition in international markets. We develop a model in which firms' organisational choices determine heterogeneity across firms in size and productivity in the same industry. We then incorporate these organisational choices in a Krugman cum Melitz and Ottaviano model of international trade. We show that the toughness of competition in a market depends on who - headquarters or middle managers - have power in firms. Furthermore, we propose two new margins of trade adjustments: the monitoring margin and the organizational margin. International trade may or may not lead to an increase in aggregate productivity of an industry depending on which of these margins dominate. Trade may trigger firms to opt for organizations which encourage the creation of new ideas and which are less well adapt to price and cost competition.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6342.

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Date of creation: Jun 2007
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Handle: RePEc:cpr:ceprdp:6342

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Keywords: firm heterogeneity; international trade with endogenous firm organizations; productivity; theory of the firm; trade adjustment;

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References

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  1. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers dp0795, Centre for Economic Performance, LSE.
  3. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 80, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Marin, Dalia & Verdier, Thierry, 2003. "Globalization and the Empowerment of Talent," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4129, C.E.P.R. Discussion Papers.
  5. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  6. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(1), pages 1-29, February.
  7. Bloom, Nicholas & Van Reenen, John, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5581, C.E.P.R. Discussion Papers.
  8. Marin, Dalia & Verdier, Thierry, 2002. "Globalization and the 'New Enterprise'," Discussion Papers in Economics 11, University of Munich, Department of Economics.
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  10. Marin, Dalia & Verdier, Thierry, 2006. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Papers in Economics 1346, University of Munich, Department of Economics.
  11. Marin, Dalia & Verdier, Thierry, 2008. "Power inside the firm and the market: A general equilibrium approach," Munich Reprints in Economics, University of Munich, Department of Economics 19255, University of Munich, Department of Economics.
  12. repec:hrv:faseco:4784029 is not listed on IDEAS
  13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  14. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  15. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  16. Paula Bustos, 2005. "The impact of trade liberalization on skill upgrading. Evidence from Argentina," Economics Working Papers 1189, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
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Citations

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Cited by:
  1. Caliendo, Lorenzo & Rossi-Hansberg, Esteban, 2011. "The Impact of Trade on Organization and Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8535, C.E.P.R. Discussion Papers.
  2. Marin, Dalia & Verdier, Thierry, 2009. "Power in the multinational corporation in industry equilibrium," Munich Reprints in Economics, University of Munich, Department of Economics 19264, University of Munich, Department of Economics.
  3. Marin, Dalia, 2012. "The Theory of the Firm goes Global," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8880, C.E.P.R. Discussion Papers.
  4. Naudé, Wim & Matthee, Marianne, 2012. "Do Export Costs Matter in Determining Whether, When, and How Much African Firms Export?," Working Papers, JICA Research Institute 38, JICA Research Institute.
  5. Marin, Dalia & Verdier, Thierry, 2008. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 227, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Marin, Dalia & Rousová, Linda, 2011. "The Organization of European Multinationals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 367, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. Zhou, Jun, 2012. "Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 369, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Yanhui Wu, 2011. "Managerial Incentives and Compensation in a Global Market," CEP Discussion Papers dp1066, Centre for Economic Performance, LSE.

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