Corporate hierarchies and international trade: Theory and evidence

Dalia Marin and Thierry Verdier

Journal of International Economics, 2014, vol. 94, issue 2, 295-310

Abstract: Corporate organization varies within countries and between countries. We develop a theory which explains the variation in levels of decentralization across firms and links it to the trade environment that firms face. We introduce firms with internal hierarchies in a Melitz and Ottaviano (2008) model of international trade. We show that international trade increases the conflict of interest between CEO/owners and middle managers within firms and these eventually lead to decentralized corporate hierarchies. We test the theory with original data on the internal organizations of 2200 Austrian and German firms and find that the empirical evidence is consistent with the model's predictions.

Keywords: International trade with endogenous firm organizations; Decentralized management and trade; Endogenous congruence in the firm; Corporate organization in similar countries; Empirical test of the theory of trading firms (search for similar items in EconPapers)
JEL-codes: D23 F12 F14 L22 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Working Paper: Corporate hierarchies and international trade: Theory and evidence (2014)
Working Paper: Corporate hierarchies and international trade: Theory and evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:94:y:2014:i:2:p:295-310

DOI: 10.1016/j.jinteco.2014.08.002

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