Firm Organization with Multiple Establishments

104 Pages Posted: 6 Nov 2019

See all articles by Anna Gumpert

Anna Gumpert

Ludwig Maximilian University of Munich (LMU); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Henrike Steimer

Stanford University

Manfred Antoni

Institute for Employment Research (IAB)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2019

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.

Keywords: firm organization, multi-establishment firm, knowledge hierarchy, geography

JEL Classification: D210, D220, D240

Suggested Citation

Gumpert, Anna and Steimer, Henrike and Antoni, Manfred, Firm Organization with Multiple Establishments (June 2019). CESifo Working Paper No. 7435. Available at SSRN: https://ssrn.com/abstract=3338789

Anna Gumpert (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

HOME PAGE: http://www.en.compecon.econ.uni-muenchen.de/staff/postdocs/gumpert/index.html

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Henrike Steimer

Stanford University ( email )

Stanford, CA 94305
United States

Manfred Antoni

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
66
Abstract Views
285
rank
352,169
PlumX Metrics