IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Too Many Products: Decentralized Decision Making in Multinational Firms

  • Catherine Thomas
Registered author(s):

    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. (JEL D23, F23, L21, L25, L65)

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.1.280
    Download Restriction: no

    File URL: http://www.aeaweb.org/aej/mic/data/2010-0028_data.zip
    Download Restriction: no

    File URL: http://www.aeaweb.org/aej/mic/app/2010-0028_app.pdf
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

    Volume (Year): 3 (2011)
    Issue (Month): 1 (February)
    Pages: 280-306

    as
    in new window

    Handle: RePEc:aea:aejmic:v:3:y:2011:i:1:p:280-306
    Note: DOI: 10.1257/mic.3.1.280
    Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
    Email:


    More information through EDIRC

    Order Information: Web: https://www.aeaweb.org/subscribe.html

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    2. Van Reenen, John & Caroli, Eve, 2001. "Skill-Biased Organizational Change? Evidence from a panel of British and French establishments," Economics Papers from University Paris Dauphine 123456789/10093, Paris Dauphine University.
    3. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
    4. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
    5. Hart, Oliver D. & Moore, John, 2005. "On the Design of Hierarchies: Coordination Versus Specialization," Scholarly Articles 3448676, Harvard University Department of Economics.
    6. Michaela Draganska & Dipak C. Jain, 2006. "Consumer Preferences and Product-Line Pricing Strategies: An Empirical Analysis," Marketing Science, INFORMS, vol. 25(2), pages 164-174, 03-04.
    7. Michaela Draganska & Dipak C. Jain, 2005. "Product-Line Length as a Competitive Tool," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 1-28, 03.
    8. Brambilla, Irene, 2005. "A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil," Working Papers 4, Yale University, Department of Economics.
    9. Bouwens, J.F.M.G. & van Lent, L.A.G.M., 2006. "Assessing the Performance of Business Unit Managers," Discussion Paper 2006-92, Tilburg University, Center for Economic Research.
    10. Bouwens, J.F.M.G. & van Lent, L.A.G.M., 2007. "Assessing the performance of business unit managers," Other publications TiSEM b319acf4-637b-4b50-ab08-2, Tilburg University, School of Economics and Management.
    11. Raghuram G. Rajan & Luigi Zingales, 2000. "The Firm as a Dedicated Hierarchy: A Theory of the Origin and Growth of Firms," NBER Working Papers 7546, National Bureau of Economic Research, Inc.
    12. Jakub Kastl & David Martimort & Salvatore Piccolo, 2008. "Delegation and R&D Spending: Evidence from Italy," CSEF Working Papers 192, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 17 Oct 2009.
    13. repec:ner:tilbur:urn:nbn:nl:ui:12-210600 is not listed on IDEAS
    14. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
    15. Maria Guadalupe & Julie Wulf, 2010. "The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 105-27, October.
    Full references (including those not matched with items on IDEAS)

    This item is featured on the following reading lists or Wikipedia pages:

    1. Too Many Products: Decentralized Decision Making in Multinational Firms (AEJ:MI 2011) in ReplicationWiki

    When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:3:y:2011:i:1:p:280-306. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)

    or (Michael P. Albert)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.