Corporate Hierarchies and the Size of Nations: Theory and Evidence

Marin, Dalia und Verdier, Thierry (Februar 2008): Corporate Hierarchies and the Size of Nations: Theory and Evidence. SFB/TR 15 Discussion Paper No. 227

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.

• Dokumententyp: Paper
• Keywords: international trade with endogenous firm organizations, endogenous congruence in the firm, corporate organization in similar countries, empirical test of the theory of the firm
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B5 - Weltwirtschaftliche Integration und die neue Firmenorganisation ; Volkswirtschaft ; Volkswirtschaft > Lehrstühle > Seminar für Internationale Wirtschaftsbeziehungen
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: F12, F14, L22, D23
• Sprache: Englisch