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The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization

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  • Maria Guadalupe

    ()
    (Columbia University)

  • Julie M. Wulf

    ()
    (Harvard Business School, Startegy Unit)

Abstract

This paper establishes a causal effect of competition from trade liberalization on various characteristics of organizational design. We exploit a unique panel dataset on firm hierarchies (1986-1999) of large U.S. firms and find that increasing competition leads firms to become flatter, i.e., (i) reduce the number of positions between the CEO and division managers (DM), (ii) increase the number of positions reporting directly to the CEO (span of control), (iii) increase DM total and performance-based pay. The results are generally consistent with the explanation that firms redesign their organizations through a set of complementary choices in response to changes in their environment.

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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 09-067.

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Length: 56 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:hbs:wpaper:09-067

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Keywords: organizational change; hierarchy; organizational structure; incentives; complementarities; decentralization; competition;

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Citations

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Cited by:
  1. Andrew F. Newman & Patrick Legros & Paola Conconi, 2011. "Trade Liberalization and Organizational Change," Boston University - Department of Economics - Working Papers Series WP2011-037, Boston University - Department of Economics.
  2. ITO Koji, 2013. "Impact of Growing Imports: A comparison of international and domestic firms in the Japanese manufacturing industry (Japanese)," Discussion Papers (Japanese) 13034, Research Institute of Economy, Trade and Industry (RIETI).
  3. Giordano Mion & Luca David Opromolla, 2011. "Managers' Mobility, Trade Status and Wages," CEP Discussion Papers dp1044, Centre for Economic Performance, LSE.
  4. Bloom, Nicholas & Garicano, Luis & Sadun, Raffaella & Van Reenen, John, 2013. "The distinct effects of Information Technology and Communication Technology on firm organization," CEPR Discussion Papers 9762, C.E.P.R. Discussion Papers.
  5. Paola Conconi & Patrick Legros & Andrew F. Newman, 2008. "Trade Liberalization and Organizational Choice," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-172, Boston University - Department of Economics.
  6. Eichhorst, Werner & Kendzia, Michael J. & Schneider, Hilmar & Buhlmann, Florian, 2013. "Report No. 51: Neue Anforderungen durch den Wandel der Arbeitswelt," IZA Research Reports 51, Institute for the Study of Labor (IZA).
  7. Mion, Giordano & Opromolla, Luca David, 2013. "Managers’ mobility, trade performance, and wages," Working Paper Series 1596, European Central Bank.

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