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

Maria Guadalupe () and Julie M. Wulf ()
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Julie M. Wulf: Harvard Business School, Startegy Unit

No 09-067, Harvard Business School Working Papers from Harvard Business School

Abstract: This paper establishes a causal effect of competition from trade liberalization on various characteristics of organizational design. We exploit a unique panel dataset on firm hierarchies (1986-1999) of large U.S. firms and find that increasing competition leads firms to become flatter, i.e., (i) reduce the number of positions between the CEO and division managers (DM), (ii) increase the number of positions reporting directly to the CEO (span of control), (iii) increase DM total and performance-based pay. The results are generally consistent with the explanation that firms redesign their organizations through a set of complementary choices in response to changes in their environment.

Keywords: organizational change; hierarchy; organizational structure; incentives; complementarities; decentralization; competition (search for similar items in EconPapers)
JEL-codes: L2 M2 M52 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2008-11
New Economics Papers: this item is included in nep-com and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Working Paper: The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization (2008)
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