Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail

Pauline Charnoz, Claire Lelarge and C. Trevien

Abstract: We document the impact of travel time between headquarters and affiliates of geographically dispersed corporate groups on the management of such business organizations. Theory suggests that the easier circulation of managers might facilitate the transmission of information between production plants and headquarters, thus fostering growth and functional specialization (on production activities) at remote affiliates and decreasing operational costs at the group level. We test these predictions on the population of French corporate groups, using the expansion of the High Speed Rail network as a shock on internal travel times. We estimate that HSR induced the creation of one production job for the average affiliate in the service industries (against 0.2 job in retail, trade or manufacturing industries), and the shift of around one managerial job from affiliate to HQ. At the group level, descriptive regressions suggest that the impact on the operational profit margin is around 0.5 percentage points in most industries.

Keywords: Communication costs; headquarters; firm organization; public infrastructure; highspeed rail. (search for similar items in EconPapers)
JEL-codes: L22 R30 R40 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2017
New Economics Papers: this item is included in nep-geo, nep-tid and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:635

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