IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/635.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/dt_635.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
    2. Andrea Bassanini & Giorgio Brunello & Eve Caroli, 2017. "Not in My Community: Social Pressure and the Geography of Dismissals," Journal of Labor Economics, University of Chicago Press, vol. 35(2), pages 429-483.
    3. Mugele, Christian & Schnitzer, Monika, 2008. "Organization of multinational activities and ownership structure," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1274-1289, November.
    4. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, vol. 66(1), pages 1-29, May.
    5. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, vol. 102(1), pages 167-201, February.
    6. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2020. "On the road: Access to transportation infrastructure and economic growth in China," Journal of Development Economics, Elsevier, vol. 145(C).
    7. Nicholas Bloom & Raffaella Sadun, 2012. "The Organization of Firms Across Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1663-1705.
    8. 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.
    9. Henderson, J. Vernon & Ono, Yukako, 2008. "Where do manufacturing firms locate their headquarters?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 431-450, March.
    10. repec:hrv:faseco:4784031 is not listed on IDEAS
    11. Lelarge, Claire & Charnoz, Pauline & Trevien, Corentin, 2018. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed," CEPR Discussion Papers 12585, C.E.P.R. Discussion Papers.
    12. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 31-77.
    13. Boutin, Xavier & Cestone, Giacinta & Fumagalli, Chiara & Pica, Giovanni & Serrano-Velarde, Nicolas, 2013. "The deep-pocket effect of internal capital markets," Journal of Financial Economics, Elsevier, vol. 109(1), pages 122-145.
    14. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    15. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
    16. Strauss-Kahn, Vanessa & Vives, Xavier, 2009. "Why and where do headquarters move?," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 168-186, March.
    17. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    18. Lorenzo Caliendo & Ferdinando Monte & Esteban Rossi-Hansberg, 2015. "The Anatomy of French Production Hierarchies," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 809-852.
    19. Claude Picart, 2004. "Le tissu productif : renouvellement à la base et stabilité au sommet," Économie et Statistique, Programme National Persée, vol. 371(1), pages 89-108.
    20. Stein, Jeremy C, 1997. "Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-133, March.
    21. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    22. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    23. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    24. Sergio Correia, 2014. "REGHDFE: Stata module to perform linear or instrumental-variable regression absorbing any number of high-dimensional fixed effects," Statistical Software Components S457874, Boston College Department of Economics, revised 21 Aug 2023.
    25. Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A "Market Access" Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 799-858.
    26. Arturs Kalnins & Francine Lafontaine, 2013. "Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 157-179, August.
    27. Giacinta Cestone & Chiara Fumagalli & Francis Kramaz & Giovanni Pica, 2015. "Insurance Between Firms: The Role of Internal Labor Markets," CSEF Working Papers 386, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 22 Jan 2020.
    28. Duranton, Gilles & Puga, Diego, 2005. "From sectoral to functional urban specialisation," Journal of Urban Economics, Elsevier, vol. 57(2), pages 343-370, March.
    29. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    30. Paulo Guimarães & Pedro Portugal, 2010. "A simple feasible procedure to fit models with high-dimensional fixed effects," Stata Journal, StataCorp LP, vol. 10(4), pages 628-649, December.
    31. Kristin Aarland & James C. Davis & J. Vernon Henderson & Yukako Ono, 2007. "Spatial organization of firms: the decision to split production and administration," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 480-494, June.
    32. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2016. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," Economic Journal, Royal Economic Society, vol. 126(591), pages 317-357, March.
    33. Augustin Landier & Vinay B. Nair & Julie Wulf, 2009. "Trade-offs in Staying Close: Corporate Decision Making and Geographic Dispersion," The Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 1119-1148.
    34. Behrens, Christiaan & Pels, Eric, 2012. "Intermodal competition in the London–Paris passenger market: High-Speed Rail and air transport," Journal of Urban Economics, Elsevier, vol. 71(3), pages 278-288.
    35. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
    36. Cristea, Anca D., 2011. "Buyer-seller relationships in international trade: Evidence from U.S. States' exports and business-class travel," Journal of International Economics, Elsevier, vol. 84(2), pages 207-220, July.
    37. Enghin Atalay & Ali Horta?su & Chad Syverson, 2014. "Vertical Integration and Input Flows," American Economic Review, American Economic Association, vol. 104(4), pages 1120-1148, April.
    38. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    39. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    40. Datta, Saugato, 2012. "The impact of improved highways on Indian firms," Journal of Development Economics, Elsevier, vol. 99(1), pages 46-57.
    41. Giacinta Cestone & Chiara Fumagalli & Francis Kramaz & Giovanni Pica, 2015. "Insurance Between Firms: The Role of Internal Labor Markets," CSEF Working Papers 386, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 22 Jan 2020.
    42. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1383-1435.
    43. Xavier Giroud, 2013. "Proximity and Investment: Evidence from Plant-Level Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 861-915.
    44. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 169-215.
    45. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," The Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
    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


    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. 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).
    3. 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.
    4. Lelarge, Claire & Charnoz, Pauline & Trevien, Corentin, 2018. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed," CEPR Discussion Papers 12585, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lelarge, Claire & Charnoz, Pauline & Trevien, Corentin, 2018. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed," CEPR Discussion Papers 12585, C.E.P.R. Discussion Papers.
    2. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2021. "The internal spatial organization of firms: Evidence from Denmark," Journal of Urban Economics, Elsevier, vol. 124(C).
    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. 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.
    5. Anna Gumpert, 2018. "The Organization of Knowledge in Multinational Firms," Journal of the European Economic Association, European Economic Association, vol. 16(6), pages 1929-1976.
    6. Toshihiro Okubo & Eiichi Tomiura, 2016. "Multi-plant operation and corporate headquarters separation: Evidence from Japanese plant-level," Keio-IES Discussion Paper Series 2016-016, Institute for Economics Studies, Keio University.
    7. OKUBO Toshihiro & TOMIURA Eiichi, 2016. "Multi-plant Operation and Corporate Headquarters Separation: Evidence from Japanese plant-level panel data," Discussion papers 16002, Research Institute of Economy, Trade and Industry (RIETI).
    8. Giacinta Cestone & Chiara Fumagalli & Francis Kramaz & Giovanni Pica, 2015. "Insurance Between Firms: The Role of Internal Labor Markets," CSEF Working Papers 386, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 22 Jan 2020.
    9. Bartelme, Dominick & Ziv, Oren, 2024. "The internal geography of firms," Journal of International Economics, Elsevier, vol. 148(C).
    10. Anna Gumpert & Henrike Steimer & Manfred Antoni, 2023. "Firm Organization with Multiple Establishments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(2), pages 1091-1138.
    11. Bassanini, Andrea & Caroli, Eve & Fontaine, François & Rebérioux, Antoine, 2021. "Escaping social pressure: Fixed-term contracts in multi-establishment firms," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 697-715.
    12. Kuang, Chun & Liu, Zijie & Zhu, Wenyu, 2021. "Need for speed: High-speed rail and firm performance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    13. Okubo, Toshihiro & Tomiura, Eiichi, 2016. "Multi-plant operation and headquarters separation: Evidence from Japanese plant-level panel data," Japan and the World Economy, Elsevier, vol. 39(C), pages 12-22.
    14. Jin, Zhi & Yang, Yinan & Zhang, Liguang, 2021. "Geographic proximity and cross-region merger and acquisitions: Evidence from the opening of high-speed rail in China," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    15. Bird, Julia & Straub, Stéphane, 2020. "The Brasília experiment: The heterogeneous impact of road access on spatial development in Brazil," World Development, Elsevier, vol. 127(C).
    16. Gibbons, Stephen & Lyytikäinen, Teemu & Overman, Henry G. & Sanchis-Guarner, Rosa, 2019. "New road infrastructure: The effects on firms," Journal of Urban Economics, Elsevier, vol. 110(C), pages 35-50.
    17. César Salazar-Espinoza & Sam Jones, 2017. "The impact of infrastructure shocks on agricultural markets: Evidence from the Zambezi river in Mozambique," WIDER Working Paper Series wp-2017-191, World Institute for Development Economic Research (UNU-WIDER).
    18. Dalia Marin & Linda Rousová & Thierry Verdier, 2021. "Do Multinationals Transplant their Business Model?," The Economic Journal, Royal Economic Society, vol. 131(634), pages 899-945.
    19. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    20. Abeberese, Ama Baafra & Chen, Mary, 2022. "Intranational trade costs, product scope and productivity: Evidence from India's Golden Quadrilateral project," Journal of Development Economics, Elsevier, vol. 156(C).

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:635. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.