scholarly journals The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization

2008 ◽  
Author(s):  
Maria Guadalupe ◽  
Julie M. Wulf
Keyword(s):  
Trade Liberalization ◽  
Market Competition ◽  
Product Market ◽  
Product Market Competition

scholarly journals The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies

2010 ◽  
Vol 2 (4) ◽  
pp. 105-127 ◽  
Author(s):  
Maria Guadalupe ◽  
Julie Wulf
Keyword(s):  
Organizational Structure ◽  
Trade Liberalization ◽  
Organizational Design ◽  
Natural Experiment ◽  
Causal Effect ◽  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
Division Managers

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)

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