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Power Inside the Firm and the Market

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  • Marin, Dalia
  • Verdier, Thierry

Abstract

Recent years have witnessed an enormous amount of reorganization of the corporate sector in the US and in Europe. This paper examines the role of market competition for this trend in corporate reorganization. We find that at intermediate levels of competition the CEO of the corporation decides to have less power inside the firm and to delegate control to lower levels of the firms’ hierarchy. Thus, workers empowerment and the move to flatter firm organizations emerge as an equilibrium when competition is not too tough and not too weak. The model predicts merger waves or waves of outsourcing when countries become more integrated into the world economy as the corporate sector reorganizes in response to an increase in international competition.

Suggested Citation

  • Marin, Dalia & Verdier, Thierry, 2002. "Power Inside the Firm and the Market," Discussion Papers in Economics 10, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:10
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    File URL: https://epub.ub.uni-muenchen.de/10/1/0206_marin.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bas, Maria & Carluccio, Juan, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
    2. Macchiavello, Rocco, 2006. "Contractual Institutions, Financial Development and Vertical Integration: Theory and Evidence," CEPR Discussion Papers 5903, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    monopolistic competition ; corporate reorganisation ; theory of the firm ; allocation of control;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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