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 US firms (1986-1999) and a quasi-natural experiment (trade liberalization), we find that competition leads firms to flatten their hierarchies: firms reduce the
number of positions between the CEO and division managers, and firms increase the number of positions reporting directly to the CEO. The results illustrate how firms redesign their organizational structure through a set of complementary choices in response to changes in their environment. We discuss several possible interpretations of these changes. (JEL D23, F13, G34, M12, M51)
Guadalupe, Maria, and Julie Wulf.
"The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies."
American Economic Journal: Applied Economics,
Organizational Behavior; Transaction Costs; Property Rights
Trade Policy; International Trade Organizations
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Personnel Management; Executive Compensation
Personnel Economics: Firm Employment Decisions; Promotions