Too Many Products : Decentralized Decision-Making in Multinational Firms

I analyze the country-level product ranges offered by multinational laundry detergent manufacturers in Western Europe. Observed product range variation across countries is too great to be 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 lead to too little coordination across divisions even when it is the constrained optimal organizational form. My analysis suggests that organizational structure affects product market outcomes and firm performance