Publications
Publications
- October 2010
- American Economic Journal: Applied Economics
The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies
By: Maria Guadalupe and Julie Wulf
Abstract
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 U.S. 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 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.
Keywords
Business Ventures; Product; Markets; Competition; Organizational Design; Governing Rules, Regulations, and Reforms; Rank and Position; Organizational Structure; Decision Choices and Conditions; Change; Trade; United States
Citation
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 2, no. 4 (October 2010).