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Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail

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  • P. Charnoz
  • C. Lelarge
  • C. Trevien

Abstract

We document the impact of travel time between headquarters and affiliates of geographically dispersed corporate groups on the management of such business organizations. Theory suggests that the easier circulation of managers might facilitate the transmission of information between production plants and headquarters, thus fostering growth and functional specialization (on production activities) at remote affiliates and decreasing operational costs at the group level. We test these predictions on the population of French corporate groups, using the expansion of the High Speed Rail network as a shock on internal travel times. We estimate that HSR induced the creation of one production job for the average affiliate in the service industries (against 0.2 job in retail, trade or manufacturing industries), and the shift of around one managerial job from affiliate to HQ. At the group level, descriptive regressions suggest that the impact on the operational profit margin is around 0.5 percentage points in most industries.

Suggested Citation

  • P. Charnoz & C. Lelarge & C. Trevien, 2017. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail," Working papers 635, Banque de France.
  • Handle: RePEc:bfr:banfra:635
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    Cited by:

    1. P. Charnoz & C. Lelarge & C. Trevien, 2016. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail," Documents de Travail de l'Insee - INSEE Working Papers g2016-02, Institut National de la Statistique et des Etudes Economiques.
    2. Anna Gumpert & Henrike Steimer & Manfred Antoni, 2018. "Firm Organization with Multiple Establishments," CESifo Working Paper Series 7435, CESifo.
    3. Gokan, Toshitaka & Kichko, Sergey & Thisse, Jacques-François, 2019. "How do trade and communication costs shape the spatial organization of firms?," Journal of Urban Economics, Elsevier, vol. 113(C).
    4. Antoine Gervais & James R. Markusen & Anthony J. Venables, 2021. "Urban Specialisation; from Sectoral to Functional," NBER Working Papers 28352, National Bureau of Economic Research, Inc.
    5. Andrea Bassanini & Eve Caroli & Francois Fontaine & Antoine Rebérioux, 2019. "Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms," Working Papers halshs-01724188, HAL.
    6. Hayakawa, Kazunobu & Koster, Hans R.A. & Tabuchi, Takatoshi & Thisse, Jacques-François, 2021. "High-speed Rail and the Spatial Distribution of Economic Activity: Evidence from Japan's Shinkansen," CEPR Discussion Papers 15771, C.E.P.R. Discussion Papers.
    7. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    8. Marisa Fernanda Figueiredo Tavares, 2020. "Across establishments, within firms: worker’s mobility, knowledge transfer and survival," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-19, December.
    9. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2019. "The Internal Spatial Organization of Firms: Evidence from Denmark," MPRA Paper 95283, University Library of Munich, Germany.
    10. Matthias Firgo, 2019. "The Causal Economic Effects of Olympic Games on Host Regions," WIFO Working Papers 591, WIFO.
    11. Li, Leona Shao-Zhi & Cui, Chuantao, 2018. "High-speed rail and inventory reduction: Firm-level evidence from China," RIEI Working Papers 2018-08, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration.

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    More about this item

    Keywords

    Communication costs; headquarters; firm organization; public infrastructure; highspeed rail.;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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