EconPapers    
Economics at your fingertips  
 

Trust, Business Group Decentralization, and Firm Productivity

Christian Fons-Rosen, Miriam Manchin and Katalin Szemeredi

No 19417, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper evaluates how trust among affiliates determines the structure of business groups and, in turn, shapes firm productivity. After confirming that greater business group verticality is a desirable trait as it is associated with higher firm productivity, we develop a theoretical model on how bilateral trust impacts group verticality. Testing our predictions on a large European sample, we find that business groups with higher average trust between members have more vertical and complex structures. In addition, firm-level estimations reveal that being a trustworthy affiliate in the business group correlates both with being located in a layer closer to the headquarter and also with greater firm productivity. Results are robust to using somatic and linguistic distance as instruments for bilateral trust.

Keywords: Trust (search for similar items in EconPapers)
JEL-codes: F23 L21 L22 M14 (search for similar items in EconPapers)
Date: 2024-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19417 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
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:cpr:ceprdp:19417

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19417

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-31
Handle: RePEc:cpr:ceprdp:19417