Working Paper: CEPR ID: DP3526
Authors: Dalia Marin; Thierry Verdier
Abstract: Recent years have witnessed an enormous amount of reorganization of the corporate sector in the US and in Europe. This paper examines the role of market competition for this trend in corporate reorganization. We find that at intermediate levels of competition the CEO of the corporation decides to have less power inside the firm and to delegate control to lower levels of the firms? hierarchy. Thus, workers empowerment and the move to flatter firm organizations emerge as an equilibrium when competition is not too tough and not too weak. The model predicts merger waves or waves of outsourcing when countries become more integrated into the world economy as the corporate sector reorganizes in response to an increase in international competition.
Keywords: allocation of control; corporate reorganisation; monopolistic competition; theory of the firm
JEL Codes: D23; L1; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market competition (L13) | CEO delegation (M12) |
| CEO delegation (M12) | Organizational structure (L22) |
| Market competition (L13) | Organizational structure (L22) |
| International competition (Z28) | Corporate restructuring (G34) |