The Flattening Firm and Product Market Competition
نویسندگان
چکیده
This paper establishes a causal effect of product market competition on various characteristics of organizational design. Using a unique panel dataset on firm hierarchies of large U.S. firms (1986-1999) and a quasi-natural experiment (trade liberalization), we find that increasing competition leads firms to flatten their hierarchies, i.e., (i) firms reduce the number of positions between the CEO and division managers and (ii) increase the number of positions reporting directly to the CEO (span of control). Firms also alter the structure and level of division manager compensation, increasing total pay as well as local (division-level) and global (firm-level) incentives. Taken together, the results illustrate how firms redesign their organizational structure through a set of complementary choices in response to changes in their environment.
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متن کاملThe Flattening Firm and Product Market Competition : The Effect of Trade Liberalization on Corporate
Firms are flattening their corporate hierarchies. Spans of control have broadened and the number of levels within firms has declined. These trends are suggested and documented in a number of academic papers (e.g., Paul Osterman 1996, Richard Whittington et al. 1999, and Raghuram G. Rajan and Wulf 2006) and are often discussed in the business press. However, much less is known about what causes ...
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It has been documented that firm hierarchies are flattening. CEO span of control has increased significantly over time while the number of levels in the hierarchy has declined. In this paper, we establish a causal effect of competition, from trade liberalization and changing trade costs on various characteristics of organizational design. We exploit a unique panel dataset of large US firms with...
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متن کاملThe Flattening Firm and Product Market Competition: The Effect of Trade Liberalization
This paper establishes a causal effect of competition from trade liberalization on various characteristics of organizational design. We exploit a unique panel dataset on firm hierarchies (1986-1999) of large U.S. firms and find that increasing competition leads firms to become flatter, i.e., (i) reduce the number of positions between the CEO and division managers (DM), (ii) increase the number ...
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