Competing in Organizations: Firm Heterogeneity and International Trade

THE ORGANIZATION OF FIRMS IN A GLOBAL ECONOMY, E. Helpman, D. Marin, T. Verdier, Harvard University Press, November 2008

36 Pages Posted: 16 Jan 2009

See all articles by Dalia Marin

Dalia Marin

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Thierry Verdier

Paris School of Economics (PSE); Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2008

Abstract

This paper develops a theory which investigates how firms' choice of corporate organization is affecting firm performance and the nature of competition in international markets. We develop a model in which firms' organisational choices determine heterogeneity across firms in size and productivity in the same industry. We then incorporate these organisational choices in a Krugman cum Melitz and Ottaviano model of international trade. We show that the toughness of competition in a market depends on who - headquarters or middle managers - have power in firms. Furthermore, we propose two new margins of trade adjustments: the monitoring margin and the organizational margin. International trade may or may not lead to an increase in aggregate productivity of an industry depending on which of these margins dominate. Trade may trigger firms to opt for organizations which encourage the creation of new ideas and which are less well adapt to price and cost competition.

Keywords: international trade with endogenous firm organizations and endogenous toughness of competition, firm heterogeneity, power struggle in the firm

JEL Classification: F12, F14, L22, D23

Suggested Citation

Marin, Dalia and Verdier, Thierry, Competing in Organizations: Firm Heterogeneity and International Trade (November 2008). THE ORGANIZATION OF FIRMS IN A GLOBAL ECONOMY, E. Helpman, D. Marin, T. Verdier, Harvard University Press, November 2008, Available at SSRN: https://ssrn.com/abstract=1328377

Dalia Marin (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

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Munich, D-80539
Germany
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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Thierry Verdier

Paris School of Economics (PSE) ( email )

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Paris, 75014
France

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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