Firms in larger markets are more productive due to hierarchical organization.
The article explores how the way a company organizes its employees affects its productivity in different locations. The researchers found that firms in bigger markets tend to have more layers of hierarchy, which makes them more productive. They studied data from various industries in France, like clothing stores and restaurants, and found that firms with more layers are more productive. They also discovered that a significant portion of productivity gains in denser areas come from differences in how firms are organized. The results were similar for firms in the manufacturing sector.