The Organization of Firms Across Countries

Nicholas Bloom and Raffaella Sadun

The Quarterly Journal of Economics, 2012, vol. 127, issue 4, 1663-1705

Abstract: We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high-trust regions are significantly more likely to decentralize. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational's country of origin and subsidiary's country of location increases decentralization, even after instrumenting trust using religious similarities between the countries. Finally, we show evidence suggesting that trust raises aggregate productivity by facilitating reallocation between firms and allowing more efficient firms to grow, as CEOs can decentralize more decisions. Copyright 2012, Oxford University Press.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (308)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qje029 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Organization of Firms Across Countries (2009)
Working Paper: The Organization of Firms Across Countries (2009)
Working Paper: The organization of firms across countries (2009)
Working Paper: The organization of firms across countries (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:127:y:2012:i:4:p:1663-1705

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().