The Flattening Firm and Product Market Competition
AbstractThis paper establishes a causal effect of product market competition on various characteristics of organizational design. Using a unique panel dataset on firm hierarchies of large U.S. firms (1986-1999) and a quasi-natural experiment (trade liberalization), we find that increasing competition leads firms to flatten their hierarchies, i.e., (i) firms reduce the number of positions between the CEO and division managers and (ii) increase the number of positions reporting directly to the CEO (span of control). Firms also alter the structure and level of division manager compensation, increasing total pay as well as local (division-level) and global (firm-level) incentives. Our estimates show that for the average firm, span of control increased by 6% and depth decreased by 11% as a result of the quasi-natural experiment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7253.
Date of creation: Apr 2009
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
- NEP-BEC-2009-04-25 (Business Economics)
- NEP-COM-2009-04-25 (Industrial Competition)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.