Citation

Discussion Paper Details

Please find the details for DP13837 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Firm organization with multiple establishments

Author(s): Manfred Antoni, Anna Gumpert and Henrike Steimer

Publication Date: July 2019

Keyword(s): firm organization, Geography, knowledge hierarchy and multi-establishment firm

Programme Area(s): Industrial Organization

Abstract: How do geographic frictions affect firm organization? We show theoretically and empirically that geographic frictions increase the use of middle managers in multi-establishment firms. In our model, we assume that a CEO's time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multi-establishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed train routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13837

Bibliographic Reference

Antoni, M, Gumpert, A and Steimer, H. 2019. 'Firm organization with multiple establishments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13837