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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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  • Charnoz, Pauline
  • Lelarge, Claire
  • Trevien, Corentin

Abstract

We take advantage of the expansion of the French High Speed Rail to study the impact of reductions in travel times between headquarters and the affiliated plants of corporate groups on their employment structure and profit margin. We rely on comprehensive administrative data allowing us to provide a large scale, cross-industry test of alternatives theories of firm organization, with a rich set of empirical indicators. We obtain that decreases in communication costs in the form of lower travel times foster the functional specialization of remote affiliates on their production activities. Support activities shrink because of the transfer of the high-skilled managers to headquarters. These organizational rationalizations have a significant but relatively small impact on overall groups' profit. These results hold across all industries but are strongest in the service industries, where the information to be transmitted across sites is arguably softer.

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  • Charnoz, Pauline & Lelarge, Claire & Trevien, Corentin, 2018. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail," CEPR Discussion Papers 12585, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12585
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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. 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.
    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. Anna Gumpert & Henrike Steimer & Manfred Antoni, 2018. "Firm Organization with Multiple Establishments," CESifo Working Paper Series 7435, CESifo.
    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. 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.
    7. 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.
    8. Matthias Firgo, 2019. "The Causal Economic Effects of Olympic Games on Host Regions," WIFO Working Papers 591, WIFO.
    9. 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.
    10. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2019. "The Internal Spatial Organization of Firms: Evidence from Denmark," MPRA Paper 95283, University Library of Munich, Germany.
    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; firm organization; headquarters; high-speed rail; Public Infrastructure;
    All these keywords.

    JEL classification:

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

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