Firm Organization with Multiple Establishments

104 Pages Posted: 30 Jul 2019

See all articles by Manfred Antoni

Manfred Antoni

Institute for Employment Research (IAB)

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 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 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.

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

JEL Classification: D21, D22, D24

Suggested Citation

Antoni, Manfred and Gumpert, Anna and Steimer, Henrike, Firm Organization with Multiple Establishments (July 2019). CEPR Discussion Paper No. DP13837, Available at SSRN: https://ssrn.com/abstract=3428359

Manfred Antoni (Contact Author)

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Anna Gumpert

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
264
PlumX Metrics