Too Many Products: Decentralized Decision-Making in Multinational Firms
Columbia Business School - Finance and Economics
August 5, 2010
American Economic Journal: Microeconomics, Forthcoming
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.
Number of Pages in PDF File: 33
Keywords: Multinational Firms, Organizational Design, Firm and Product Panel Data
JEL Classification: F12, F23, L22, L25Accepted Paper Series
Date posted: December 26, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.407 seconds