Consumer Search, Competition, and the Organizational Structure of Multi-Unit Firms

A computational model of competing multi-unit firms, such as a retail chain, is developed in which unit managers and corporate staff continually search for better practices while consumers search among units to find a better match. The main objective of this research is to determine how the amount of discretion given to unit managers, as to how they run their units, influences the rate of innovation. A primary finding is that the presence of competition enhances the relative performance of the centralized form though an increased rate of consumer search differentially benefits the decentralized form.