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Firm Organization with Multiple Establishments

Author

Listed:
  • Gumpert, Anna

    (LMU Munich)

  • Steimer, Henrike

    (Stanford GSB)

  • Antoni, Manfred

    (Institut für Arbeitsmarkt- und Berufsforschung)

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.

Suggested Citation

  • Gumpert, Anna & Steimer, Henrike & Antoni, Manfred, 2019. "Firm Organization with Multiple Establishments," Rationality and Competition Discussion Paper Series 163, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:163
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    5. Antonella Biscione & Chiara Burlina & Raul Caruso & Annunziata de Felice, 2021. "Innovation in Transition countries: the role of training," Working Papers 1013, European Centre of Peace Science, Integration and Cooperation (CESPIC), Catholic University 'Our Lady of Good Counsel'.

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    More about this item

    Keywords

    firm organization; multi-establishment firm; knowledge hierarchy; geography;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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