NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Maria Guadalupe, Julie Wulf

NBER Working Paper No. 14491
Issued in November 2008
NBER Program(s):   IO   ITI   LS

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.

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Document Object Identifier (DOI): 10.3386/w14491

Published: Guadalupe, Maria, and Julie Wulf. 2010. "The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies." American Economic Journal: Applied Economics, 2(4): 105-27. DOI: 10.1257/app.2.4.105

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