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Too many products: decentralized decision making in multinational firms

Thomas, Catherine (2011) Too many products: decentralized decision making in multinational firms. American Economic Journal: Microeconomics, 3 (1). pp. 280-306. ISSN 1945-7669

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Identification Number: 10.1257/mic.3.1.280

Abstract

I analyze country-level product ranges offered by multinational laundry detergent manufacturers in Western Europe. Observed product range variation across countries exceeds the optimal firm-level response to differences in consumer preferences and retail environments. Counterfactual analysis reveals that increased product range standardization would reduce firm costs and increase profits. These findings are consistent with theory models of local agency, where decentralized decision making can be the constrained optimal organizational form despite the resulting lack of coordination across divisions. My analysis suggests that organizational structure affects product market outcomes and firm performance.

Item Type: Article
Official URL: http://dx.doi.org/10.1257/mic.3.1.280
Additional Information: © 2011 AEA
Divisions: Management
Subjects: H Social Sciences > H Social Sciences (General)
JEL classification: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L65 - Chemicals; Rubber; Drugs; Biotechnology
Sets: Departments > Management
Collections > Economists Online
Date Deposited: 02 May 2013 12:02
Last Modified: 20 Feb 2019 09:58
URI: http://eprints.lse.ac.uk/id/eprint/50005

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