Work

The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies

Year: 2010

Type: article

Abstract: This paper establishes a causal effect of product market competition on various characteristics of organizational design. Using a unique panel dataset on firm hierarchies of large US firms (1986–1999) and a quasi-natural experiment (trade liberalization), we find that competition leads firms to flatten their hierarchies: firms reduce the number of positions between the CEO and division managers, and firms increase the number of positions reporting directly to the CEO. The results illustrate how firms redesign their organizational structure through a set of complementary choices in response to changes in their environment. We discuss several possible interpretations of these changes. (JEL D23, F13, G34, M12, M51)

Source: American Economic Journal Applied Economics

DOI: 10.1257/app.2.4.105

Authors: Maria Guadalupe, Julie Wulf

Institutions: Center for Economic and Policy Research, National Bureau of Economic Research, Columbia University, Harvard University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W2107093894