Firm hierarchy and the market for knowledge

Fabio Pieri and Massimiliano Vatiero

No 482, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper investigates the role of the market for knowledge in shaping firm hierarchy—that is, the span of control and the number of layers. We predict that, the larger the extent of the market for knowledge, the larger the span of control and the fewer the layers. We test our predictions using a rich database representing industrial firms in Italy during 2005-2018. Our identification strategy is based on existing cross-regional and cross-industry heterogeneity within the extent of the market for business services’ providers and instrumental variables. Results confirm that firms are flatter as the regional market for knowledge expands.

Keywords: firm hierarchy; number of layers; span of control; market for knowledge (search for similar items in EconPapers)
JEL-codes: D21 D22 D23 L22 L23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ent, nep-eur, nep-knm, nep-sbm and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:482

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