Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198795 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7435
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
How do geographic frictions affect firm organization? We show theoretically and empirically that geographic frictions increase the use of middle managers in multi-establishment firms. In our model, we assume that the time of the CEO of a firm is a resource of limited supply that is shared among the headquarters and the establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at an establishment substitutes for CEO time that is reallocated over all establishments. In consequence, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multi-establishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed train routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.
Subjects: 
firm organization
multi-establishment firm
knowledge hierarchy
geography
JEL: 
D21
D22
D24
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.