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

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Author Info
Maria Guadalupe
Julie Wulf

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14491.

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Date of creation: Nov 2008
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Handle: RePEc:nbr:nberwo:14491

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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

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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.)

  1. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2009. "The distinct effects of Information Technology and Communication Technology on firm organization," NBER Working Papers 14975, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Kieron Meagher & Andrew Wait, 2008. "Who Decides about Change and Restructuring in Organizations?," CEPR Discussion Papers 587, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  3. Paola Conconi & Patrick Legros & Andrew F. Newman, 2008. "Trade Liberalization and Organizational Change," ECARES Working Papers 2008_025, Université Libre de Bruxelles, Ecares. [Downloadable!]
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