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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6342.
Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F14 - International Economics - - Trade - - - Country and Industry Studies of Trade L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007.
"Firms in International Trade,"
NBER Working Papers
13054, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
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.
[Downloadable!]
Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007.
"Firms in International Trade,"
Working Papers
07-14, Center for Economic Studies, U.S. Census Bureau.
[Downloadable!]
Dalia Marin & Thierry Verdier, 2004.
"Globalization and the Empowerment of Talent,"
Discussion Papers
1, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Pol Antràs & Elhanan Helpman, 2003.
"Global Sourcing,"
NBER Working Papers
10082, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Dalia Marin & Thierry Verdier, 2001.
"Power Inside the Firm and the Market: A General Equilibrium Approach,"
Discussion Papers
109, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich, revised Apr 2006.
[Downloadable!]
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Dalia Marin & Verdier Thierry, 2007.
"Power in the Multinational Corporation in Industry Equilibrium,"
Discussion Papers
209, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
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