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Spatial Organization of Firms: The Decision to Split Production and Administration

  • Kristin Aarland
  • James Davis
  • J Vernon Henderson
  • Yukako Ono

A firm’s production activities are often supported by non-production activities. Among these activities are administrative units including headquarters, which process information both within and between firms. Often firms physically separate such administrative units from their production activities and create stand alone Central Administrative Offices (CAO). However, having its activities in multiple locations potentially imposes significant internal firm face-to-face communication costs. What types of firms are more likely to separate out such functions? If firms do separate administration and production, where do they place CAOs and why? How often do firms open and close, or relocate CAOs? This paper documents such firms’ decisions on their spatial organization by using micro-level data from the U.S. Census Bureau.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 04-03.

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Length: 42 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:cen:wpaper:04-03
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  1. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Gilles Duranton & Diego Puga, 2001. "From sectoral to functional urban specialisation," Working Papers dpuga-01-01, University of Toronto, Department of Economics.
  3. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers 1-88-2, Pennsylvania State - Department of Economics.
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