Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/94037 
Year of Publication: 
2008
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 227
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
Corporate organization varies within a country and across countries with country size. The paper starts by establishing some facts about corporate organization based on unique data of 660 Austrian and German corporations. The larger country (Germany) has larger firms with flatter and more decentralized corporate hierarchies compared to the smaller country (Austria). Firms in the larger country change their organization less fast than firms in the smaller country. Over time firms have been introducing less hierarchical organizations by delegating power to lower levels of the corporation. We develop a theory which explains these facts and which links these features to the trade environment that countries and firms face. We introduce firms with internal hierarchies in a Krugman (1980) cum Melitz and Ottaviano (2007) model of trade. We show that international trade and the toughness of competition in international markets induce a power struggle in firms which eventually leads to decentralized corporate hierarchies. We offer empirical evidence which is consistent with the models predictions.
Subjects: 
international trade with endogenous firm organizations
endogenous congruence in the firm
corporate organization in similar countries
empirical test of the theory of the firm
JEL: 
F12
F14
L22
D23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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