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Firm Organization with Multiple Establishments

Author

Listed:
  • Anna Gumpert
  • Henrike Steimer
  • Manfred Antoni
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.

Suggested Citation

  • Anna Gumpert & Henrike Steimer & Manfred Antoni, 2018. "Firm Organization with Multiple Establishments," CESifo Working Paper Series 7435, CESifo.
    • Handle: RePEc:ces:ceswps:_7435
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    Cited by:

    1. Alessandro Sforza, 2020. "Shocks and the Organization of the Firm: Who Pays the Bill?," CESifo Working Paper Series 8084, CESifo.
    2. Gehrke, Britta & Maug, Ernst & Obernberger, Stefan & Schneider, Christoph, 2021. "Post-merger Restructuring of the Labor Force," IZA Discussion Papers 14409, Institute of Labor Economics (IZA).
    3. Antonella Biscione & Chiara Burlina & Raul Caruso & Annunziata de Felice, 2021. "Innovation in Transition countries: the role of training," Working Papers 1013, European Centre of Peace Science, Integration and Cooperation (CESPIC), Catholic University 'Our Lady of Good Counsel'.
    4. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2021. "The internal spatial organization of firms: Evidence from Denmark," Journal of Urban Economics, Elsevier, vol. 124(C).
    5. Askenazy, Philippe & Cottineau, Clémentine, 2022. "The geography of collective bargaining in multi-establishment companies: a strategic choice of employers," CEPREMAP Working Papers (Docweb) 2205, CEPREMAP.

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    More about this item

    Keywords

    firm organization; multi-establishment firm; knowledge hierarchy; geography;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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