Information technology and the spatial reorganization of firms

Abstract

This study investigates how the adoption of an enterprise resource planning (ERP) system affects firms' spatial organization. We first provide a conceptual framework that explains how a firm reallocates different types of labor across establishments in different locations by adopting an ERP system, to lower internal coordination costs. Guided by this framework, we empirically find that ERP adopters increase production activities in non-headquarter (HQ) establishments, while they decrease these activities in their HQ. An ERP system also enhances both HQ and retail/wholesale activities in an HQ. Additional tests confirm the robustness of these results.