We show theoretically and empirically that the managerial organization of multiestablishment firms is interdependent across establishments. To derive our result, we study the effect of geographic frictions on firm organization. In our model, we assume that a CEO’s time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multiestablishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed railway routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.

We study the human capital effects of private equity buyouts in Germany. We conduct matched-sample difference-in-differences estimations at the establishment and at the individual employee level with more than 152 thousand buyout employees and a carefully matched control group. Buyouts are followed by a reduction in overall employment and an increase in employee turnover. Employees of buyout targets experience earnings declines equivalent to 2.8% of median earnings in the fifth year after the buyout. Managers and older employees fare far worse after buyouts compared with the average target employee, even though they are not more likely to lose their jobs at the target compared with other employees. We argue that the employees most negatively affected after buyouts are those who are less likely to find new employment, not those who are most likely to lose their jobs. Evidence exists of a reduction in administrative staff and more hiring for jobs that require IT skills.