Multimarket competition, consumer search, and the organizational structure of multiunit firms

Multimarket competition, consumer search, and the organizational structure of multiunit firms

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Article ID: iaor20032692
Country: United States
Volume: 49
Issue: 4
Start Page Number: 541
End Page Number: 552
Publication Date: Apr 2003
Journal: Management Science
Authors: ,
Abstract:

This research explores how market competition influences a firm's optimal organizational structure. For this purpose, a computational model of competing multiunit firms is developed in which unit managers and corporate staff continually search for better practices, while consumers search among units to find a better match. Organizational structure impacts both the practices at the unit level and the extent of knowledge transfer. An increasing returns mechanism is identified, which results in the relative performance of the centralized form being greater when competition is more intense.

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