Staying Home or Moving Away? Restructuring Efforts within Multinational Enterprises

Filip Abraham, Tim Goesaert and Jozef Konings

The World Economy, 2014, vol. 37, issue 6, 765-782

Abstract: type="main" xml:id="twec12179-abs-0001">

This paper analyses the impact of geographic dispersion on employment changes within multinationals. Building on earlier work of Landier et al. (2009, Review of Financial Studies 22, 3: 1119), we investigate whether corporate decision-making within a multinational is affected by the distance between an affiliate and its headquarter. Our findings suggest a detrimental impact of distance on employees, by either an increased likelihood of observing a downsizing event, or by witnessing a larger decrease in the number of employees at distant locations during downsizing events. In addition, our results seem to relate the higher likelihood of observing a downsizing event to the role of social factors on decision making. The more visible a manager is in his community, the less likely he is to downsize proximate divisions.

Date: 2014
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