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Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance

Listed author(s):
  • Arturs Kalnins
  • Francine Lafontaine

In the population of over 1.7 million Texan sales-tax collecting business establishments, we show that greater distance to owner headquarters is associated with shorter establishment longevity. For the lodging industry, where we have revenue data, increases in distance to headquarters due to HQ-moving owners or acquisitions are associated with reductions in revenues per room. We argue that this detrimental distance effect is robust and causal, arising even when we control for the potential endogeneity of HQ distance using instrumental variable and matched pair analyses. We interpret this as evidence of monitoring and local information asymmetry problems for distant owners.

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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 5 (2013)
Issue (Month): 3 (August)
Pages: 157-179

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Handle: RePEc:aea:aejmic:v:5:y:2013:i:3:p:157-79
Note: DOI: 10.1257/mic.5.3.157
Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
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