Advanced Search
MyIDEAS: Login to save this paper or follow this series

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

Contents:

Author Info

  • Maria Guadalupe
  • Julie Wulf

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.

Download Info

If 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.
File URL: http://www.nber.org/papers/w14491.pdf
Download Restriction: no

Bibliographic Info

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

as in new window
Length:
Date of creation: Nov 2008
Date of revision:
Publication status: published as Guadalupe, Maria, and Julie Wulf. 2010. "The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies." American Economic Journal: Applied Economics, 2(4): 105-27. DOI: 10.1257/app.2.4.105
Handle: RePEc:nbr:nberwo:14491

Note: IO ITI LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Dessein, Wouter & Garicano, Luis & Gertner, Robert, 2007. "Organizing for Synergies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6019, C.E.P.R. Discussion Papers.
  2. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
  3. Conconi, Paola & Legros, Patrick & Newman, Andrew F., 2012. "Trade liberalization and organizational change," Journal of International Economics, Elsevier, Elsevier, vol. 86(2), pages 197-208.
  4. Daniel Trefler, 2006. "The Long and Short of the Canada-U.S. Free Trade Agreement," STICERD - Economics of Industry Papers, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 41, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Susan Athey & John Roberts, 2001. "Organizational Design: Decision Rights and Incentive Contracts," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 200-205, May.
  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. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 972-91, September.
  8. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 179-208, April.
  9. Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
  10. Maurice Kugler & Eric Verhoogen, 2008. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," NBER Working Papers 14418, National Bureau of Economic Research, Inc.
  11. Mathias Dewatripont & Patrick Bolton, 1994. "The firm as a communication network," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/9595, ULB -- Universite Libre de Bruxelles.
  12. Dalia Marin & Thierry Verdier, 2003. "Globalization and the New Enterprise," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(2-3), pages 337-344, 04/05.
  13. Michael P. Keane & Susan E. Feinberg, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, American Economic Association, vol. 96(5), pages 1515-1558, December.
  14. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2009. "The organization of firms across countries," NBER Working Papers 15129, National Bureau of Economic Research, Inc.
  15. Friebel, Guido & Raith, Michael, 2006. "Resource Allocation and Firm Scope," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5763, C.E.P.R. Discussion Papers.
  16. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, American Economic Association, vol. 93(4), pages 1425-1436, September.
  17. Alonso, Ricardo & Dessein, Wouter & Matouschek, Niko, 2006. "When Does Coordination Require Centralization?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5802, C.E.P.R. Discussion Papers.
  18. S Black & L Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," CEP Discussion Papers, Centre for Economic Performance, LSE dp0376, Centre for Economic Performance, LSE.
  19. J. Bradford Jensen & Andrew Bernard & Peter Schott, 2005. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers, Center for Economic Studies, U.S. Census Bureau 05-19, Center for Economic Studies, U.S. Census Bureau.
  20. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0205, National Bureau of Economic Research, Inc.
  21. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 841-64, October.
  22. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 44(2), pages 367-390, June.
  23. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
  24. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction And Firm Organization Choice," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(4), pages 1201-1237, November.
  25. Iain Cockburn & Rebecca Henderson & Scott Stern, 1999. "Balancing Incentives: The Tension Between Basic and Applied Research," NBER Working Papers 6882, National Bureau of Economic Research, Inc.
  26. Thomas Hubbard & Luis Garicano, 2007. "The Return to Knowledge Hierarchies," Working Papers, Center for Economic Studies, U.S. Census Bureau 07-01, Center for Economic Studies, U.S. Census Bureau.
  27. Vicente Cuñat & Maria Guadalupe, 2009. "Globalization and the Provision of Incentives inside the Firm: The Effect of Foreign Competition," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 27(2), pages 179-212, 04.
  28. Ann Bartel & Casey Ichniowski & Kathryn Shaw, 2007. "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(4), pages 1721-1758, November.
  29. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(1), pages 339-376, February.
  30. John Romalis, 2007. "NAFTA's and CUSFTA's Impact on International Trade," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 416-435, August.
  31. Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 991-1010, October.
  32. Philippe Askenazy & David Thesmar & Mathias Thoenig, 2006. "On the Relation Between Organisational Practices and New Technologies: the Role of (Time Based) Competition," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(508), pages 128-154, 01.
  33. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 123.
  34. George P. Baker & Thomas N. Hubbard, 2004. "Contractibility and Asset Ownership: On-board Computers and Governance in U. S. Trucking," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(4), pages 1443-1479, November.
  35. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 874-904, October.
  36. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 858-876, September.
  37. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, Econometric Society, vol. 61(5), pages 1109-46, September.
  38. Jose Maria Liberti, 2004. "Initiative, Incentives and Soft Information. How Does Delegation Impact The Role of Bank Relationship Managers?," Finance, EconWPA 0404023, EconWPA.
  39. Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Giordano Mion & Luca David Opromolla, 2011. "Managers' Mobility, Trade Status and Wages," CEP Discussion Papers, Centre for Economic Performance, LSE dp1044, Centre for Economic Performance, LSE.
  2. 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.
  3. 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, Boston University - Department of Economics dp-172, Boston University - Department of Economics.
  4. Eichhorst, Werner & Kendzia, Michael J. & Schneider, Hilmar & Buhlmann, Florian, 2013. "Report No. 51: Neue Anforderungen durch den Wandel der Arbeitswelt," IZA Research Reports, Institute for the Study of Labor (IZA) 51, Institute for the Study of Labor (IZA).
  5. Conconi, Paola & Legros, Patrick & Newman, Andrew, 2008. "Trade Liberalization and Organizational Change," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7028, C.E.P.R. Discussion Papers.
  6. Mion, Giordano & Opromolla, Luca David, 2013. "Managers’ mobility, trade performance, and wages," Working Paper Series, European Central Bank 1596, European Central Bank.
  7. ITO Koji, 2013. "Impact of Growing Imports: A comparison of international and domestic firms in the Japanese manufacturing industry (Japanese)," Discussion Papers (Japanese), Research Institute of Economy, Trade and Industry (RIETI) 13034, Research Institute of Economy, Trade and Industry (RIETI).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14491. See general 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.