Working Paper: NBER ID: w14491
Authors: Maria Guadalupe; Julie Wulf
Abstract: 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 of positions reporting directly to the CEO (span of control), (iii) increase DM total and performance-based pay. The results are generally consistent with the explanation that firms redesign their organizations through a set of complementary choices in response to changes in their environment.
Keywords: No keywords provided
JEL Codes: L2; M2; M52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased competition due to trade liberalization (F19) | Firms flatten their organizational hierarchies (L22) |
| Increased competition due to trade liberalization (F19) | Reduction in division depth (C69) |
| Increased competition due to trade liberalization (F19) | Increase in CEO's span of control (M12) |
| Trade liberalization (F13) | Firms adapt their structures to enhance decision-making efficiency (L22) |