New Product Diffusion Within Retailers: The Effect of Managerial Quality on Rollout

Retailers are key intermediaries through which consumers encounter innovation in the form of new products. How are these products rolled out within retailers? Despite standardized processes, we observe significant variation in the availability of new products across stores within a large retail chain in Colombia—even for products from the same supplier and product category. This variation aligns with known frictions in the rollout process, such as geographic frictions, that limit product diffusion. We find that managerial quality, which differs substantially across store managers, affects this rollout process in two ways. First, high-quality managers enhance the performance of new products in their stores, leading to greater subsequent diffusion: new products initially allocated to high-quality managers reach 30.9 percent more stores within 11 months. Second, high-quality managers proactively source new products for their stores, reducing rollout frictions by an amount equivalent to 8.5 percent of geographic frictions. Thus, heterogeneity in middle management quality significantly influences the diffusion of new products within retail chains.