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

Maria Guadalupe () and Julie Wulf

American Economic Journal: Applied Economics, 2010, vol. 2, issue 4, 105-27

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)

JEL-codes: D23 F13 G34 M12 M51 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/app.2.4.105
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Citations: View citations in EconPapers (171)

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