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Communication and the organization of firms across space
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Abstract:
This paper studies how adapting the hierarchical organization helps firms alleviate the negative impact of geographic frictions between their establishments on their performance.
We document that multi-establishment firms empirically have more management layers than comparable single-establishment firms. Greater distance between subordinate establishments and headquarters reinforces the effect.
We develop a model to understand the interplay of the number of establishments and the optimal hierarchical organization of a firm. We assume that the knowledge of the CEO is a resource of limited supply for a firm, because the CEO has a limited amount of time. The model shows that adding a layer of management at one establishment increases the efficiency of the use of CEO time in multi-establishment firms and has repercussions for the optimal hierarchical organization of the other establishments. The model mechanism explains both the cross-sectional differences between the organization of single and multi-establishment firms and patterns of their reorganization over time.
Date:
13 February 2018, 14:30
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room A
Speaker:
Anna Gumpert (LMU Munich)
Organising department:
Department of Economics
Part of:
International Trade Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editors:
Erin Saunders,
Anne Pouliquen
