Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208063
Authors: 
Gumpert, Anna
Steimer, Henrike
Antoni, Manfred
Year of Publication: 
2019
Series/Report no.: 
Discussion Paper No. 163
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 a CEO's time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, 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

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