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Decentralized Business Strategies in a Multi-Unit Firm

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Abstract

In a multi-unit firm, such as a retail chain or a multi-plant manufacturer, we compare the business strategies developed by unit managers with the strategies that maximize corporate profit. The setting is one in which units face different markets and where learning spillovers between two units are enhanced if their strategies are more similar. When there is a small number of units, we find a tendency for managers' strategies to be excessively tailored to their local market. When the firm has many units, unit strategies can be either excessively or insufficiently standardized.

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Authors and Affiliations

  1. Department of Economics, Cleveland State University, Cleveland, OH, 44115, USA

    Myong-Hun Chang

  2. Department of Economics, The Johns Hopkins University, Baltimore, MD, 21218, USA

    Joseph E. Harrington Jr.

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  1. Myong-Hun Chang
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  2. Joseph E. Harrington Jr.
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Chang, MH., Harrington, J.E. Decentralized Business Strategies in a Multi-Unit Firm. Annals of Operations Research 109, 77–98 (2002). https://doi.org/10.1023/A:1016391816826

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