Power inside the firm and the market: a general equilibrium approach
Power inside the firm and the market: a general equilibrium approach
Recent years have witnessed an enormous amount of reorganization of the corporate sector in the US and in Europe. This paper examines the role of market competition for this trend in corporate reorganization. We find that at intermediate levels of competition the CEO of the corporation decides to have less power inside the firm and to delegate control to lower levels of the firms’ hierarchy. Thus, workers empowerment and the move to flatter firm organizations emerge as an equilibrium when competition is not too tough and not too weak. The model predicts merger waves or waves of outsourcing when countries become more integrated into the world economy as the corporate sector reorganizes in response to an increase in international competition.
monopolistic competition, corporate reorganisation, theory of the firm, allocation of control
752-788
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Marin, Dalia
4697a8ab-a4f6-4c26-b136-33ae4aa1e71f
2008
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Marin, Dalia
4697a8ab-a4f6-4c26-b136-33ae4aa1e71f
Verdier, Thierry and Marin, Dalia
(2008)
Power inside the firm and the market: a general equilibrium approach.
Journal of the European Economic Association, 6 (4), .
(doi:10.1162/JEEA.2008.6.4.752).
Abstract
Recent years have witnessed an enormous amount of reorganization of the corporate sector in the US and in Europe. This paper examines the role of market competition for this trend in corporate reorganization. We find that at intermediate levels of competition the CEO of the corporation decides to have less power inside the firm and to delegate control to lower levels of the firms’ hierarchy. Thus, workers empowerment and the move to flatter firm organizations emerge as an equilibrium when competition is not too tough and not too weak. The model predicts merger waves or waves of outsourcing when countries become more integrated into the world economy as the corporate sector reorganizes in response to an increase in international competition.
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Published date: 2008
Keywords:
monopolistic competition, corporate reorganisation, theory of the firm, allocation of control
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Local EPrints ID: 157441
URI: http://eprints.soton.ac.uk/id/eprint/157441
ISSN: 1542-4766
PURE UUID: ceb74993-f98d-4e33-a953-d8d338c328fe
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Date deposited: 07 Jun 2010 15:23
Last modified: 14 Mar 2024 01:47
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Author:
Thierry Verdier
Author:
Dalia Marin
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