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Corporate hierarchies and international trade: Theory and evidence

Author

Listed:
  • Dalia Marin

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

  • Thierry Verdier

    (CEPR - Center for Economic Policy Research, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - 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)

Abstract

Corporate organization varies within countries and between countries. We develop a theory which explains the variation in levels of decentralization across firms and links it to the trade environment that firms face. We introduce firms with internal hierarchies in a Melitz and Ottaviano (2008) model of international trade. We show that international trade increases the conflict of interest between CEO/owners and middle managers within firms and these eventually lead to decentralized corporate hierarchies. We test the theory with original data on the internal organizations of 2200 Austrian and German firms and find that the empirical evidence is consistent with the model's predictions.

Suggested Citation

  • Dalia Marin & Thierry Verdier, 2014. "Corporate hierarchies and international trade: Theory and evidence," Post-Print halshs-01109476, HAL.
    • Handle: RePEc:hal:journl:halshs-01109476
    DOI: 10.1016/j.jinteco.2014.08.002
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Putin’s War and the German Economic Model
      by Dalia Marin in Project Syndicate on 2022-06-13 12:55:42

    Citations

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    Cited by:

    1. Sotiris Blanas & Adnan Seric, 2017. "Knowledge Transfer and Intra-Firm Trade," Working Papers 178612931, Lancaster University Management School, Economics Department.
    2. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    3. Sarah Guillou & Tania Treibich, 2019. "Firm export diversification and change in workforce composition," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(4), pages 645-676, November.
    4. 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.
    5. Chakraborty, Pavel & Raveh, Ohad, 2018. "Input-trade liberalization and the demand for managers: Evidence from India," Journal of International Economics, Elsevier, vol. 111(C), pages 159-176.
    6. Doerr, S. & Marin, D. & Suverato, D. & Verdier, T., 2025. "International trade and the allocation of capital within firms," Journal of International Economics, Elsevier, vol. 153(C).
    7. Saidou Baba Oumar & Salihu Zummo Hayatudeen, 2015. "The Impact of the Unofficial Cattle Business on the Household Welfare of Cattle Traders of the Border Towns of Cameroon and Nigeria," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 6(2), pages 146-158, March.
    8. Schymik, Jan, 2018. "Globalization and the evolution of corporate governance," European Economic Review, Elsevier, vol. 102(C), pages 39-61.
    9. Guillou, Sarah & Treibich, Tania, 2017. "Firm Export Diversification and Change in Workforce Composition," Research Memorandum 026, Maastricht University, Graduate School of Business and Economics (GSBE).
    10. Schymik, Jan Simon, 2015. "Trade, Technologies, and the Evolution of Corporate Governance," Discussion Papers in Economics 24871, University of Munich, Department of Economics.
    11. Marin, Dalia & Doerr, Sebastian & Suverato, Davide & Verdier, Thierry, 2020. "Mis-allocation Within Firms: Internal Finance and International Trade," CEPR Discussion Papers 14478, C.E.P.R. Discussion Papers.
    12. Nikolaos Antonakakis & Ioannis Chatziantoniou & George Filis, 2016. "Business Cycle Spillovers in the European Union: What is the Message Transmitted to the Core?," Manchester School, University of Manchester, vol. 84(4), pages 437-481, July.
    13. Xiaoyang Li & Xuan Zhou, 2021. "Autonomy, incentive and trade: How does trade liberalisation reshape corporate decentralisation in China?," The World Economy, Wiley Blackwell, vol. 44(10), pages 3051-3069, October.
    14. Chen, Cheng, 2019. "Trade liberalization, agency problem and aggregate productivity," European Economic Review, Elsevier, vol. 111(C), pages 421-442.

    More about this item

    Keywords

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    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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