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Competing in Organizations: Firm heterogeneity and International Trade

Author

Listed:
  • Thierry Verdier

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Dalia Marin

    (LMU - Ludwig Maximilian University [Munich] = Ludwig Maximilians Universität München)

Abstract

This paper develops a theory which investigates how firms’ choice of corporate organization is affecting firm performance and the nature of competition in international markets. We develop a model in which firms’ organisational choices determine heterogeneity across firms in size and productivity in the same industry. We then incorporate these organisational choices in a Krugman cum Melitz and Ottaviano model of international trade. We show that the toughness of competition in a market depends on who - headquarters or middle managers - have power in firms. Furthermore, we propose two new margins of trade adjustments: the monitoring margin and the organizational margin. International trade may or may not lead to an increase in aggregate productivity of an industry depending on which of these margins dominate. Trade may trigger firms to opt for organizations which encourage the creation of new ideas and which are less well adapt to price and cost competition.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Thierry Verdier & Dalia Marin, 2008. "Competing in Organizations: Firm heterogeneity and International Trade," Post-Print halshs-00754768, HAL.
    • Handle: RePEc:hal:journl:halshs-00754768
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    Cited by:

    1. Dalia Marin & Thierry Verdier, 2009. "Power in the multinational corporation in industry equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 437-464, March.
    2. Naudé, Wim & Gries, Thomas & Bilkic, Natasa, 2015. "Playing the lottery or dressing up? A model of firm-level heterogeneity and the decision to export," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 1-17.
    3. Marin, Dalia & Verdier, Thierry, 2006. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Papers in Economics 1346, University of Munich, Department of Economics.
    4. Marin, Dalia & Rousová, Linda, 2011. "The Organization of European Multinationals," Discussion Papers in Economics 12453, University of Munich, Department of Economics.
    5. Leslie A. Robinson & Phillip C. Stocken, 2013. "Location of Decision Rights Within Multinational Firms," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 51(5), pages 1261-1297, December.
    6. Marin, Dalia & Schymik, Jan & Tarasov, Alexander, 2018. "Trade in tasks and the organization of firms," European Economic Review, Elsevier, vol. 107(C), pages 99-132.
    7. Enrique Andreu & Damien Neven & Salvatore Piccolo & Roberto Venturini, 2023. "Upstream conduct and price authority with competing organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 788-810, October.
    8. Yanhui Wu, 2011. "Managerial Incentives and Compensation in a Global Market," CEP Discussion Papers dp1066, Centre for Economic Performance, LSE.
    9. Peter Egger & Christian Keuschnigg, 2009. "Corporate Finance and Comparative Advantage," University of St. Gallen Department of Economics working paper series 2009 2009-04, Department of Economics, University of St. Gallen.
    10. Marin, Dalia, 2012. "The Theory of the Firm goes Global," Discussion Papers in Economics 12690, University of Munich, Department of Economics.
    11. Hartmut Egger & Michael Koch, 2013. "Trade and the Firm-Internal Allocation of Workers to Tasks," Working Papers 139, Bavarian Graduate Program in Economics (BGPE).
    12. Harish, Nikki & Plouffe, Michael, 2018. "The Political Economy of Foreign Direct Investment to Developing Countries," OSF Preprints chzpq, Center for Open Science.
    13. Marin, Dalia & Verdier, Thierry, 2014. "Corporate hierarchies and international trade: Theory and evidence," Journal of International Economics, Elsevier, vol. 94(2), pages 295-310.
    14. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
    15. Lorenzo Caliendo & Esteban Rossi-Hansberg, 2012. "The Impact of Trade on Organization and Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1393-1467.
    16. Martin Hellwig, 2021. "‘Capitalism: what has gone wrong?’: Who went wrong? Capitalism? The market economy? Governments? ‘Neoliberal’ economics? [‘It Takes a Village to Maintain a Dangerous Financial System’, ch. 13]," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(4), pages 664-677.
    17. Naudé, Wim & Matthee, Marianne, 2012. "Do Export Costs Matter in Determining Whether, When, and How Much African Firms Export?," Working Papers 38, JICA Research Institute.
    18. Fromenteau, Philippe, 2016. "Information Technology and Global Sourcing," Discussion Papers in Economics 29631, University of Munich, Department of Economics.
    19. Chen, Cheng, 2019. "Trade liberalization, agency problem and aggregate productivity," European Economic Review, Elsevier, vol. 111(C), pages 421-442.
    20. Zhou, Jun, 2012. "Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 369, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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