Why? Each division can still have separate profit-loss accounting, so you can decide to shut one down if it starts making losses, and the benefits of having that division to the rest of the company doesn’t outweigh the losses. The latter may be somewhat tricky to judge though. Perhaps that’s what you meant?
That’s a good point. I was imagining that each division ends up becoming a monopoly in its particular area due to the benefits of within-firm coordination, which means that even if the division is inefficient there isn’t an alternative that the firm can go with. But that was an assumption, and I’m not sure it would actually hold.
That’s a good point. I was imagining that each division ends up becoming a monopoly in its particular area due to the benefits of within-firm coordination, which means that even if the division is inefficient there isn’t an alternative that the firm can go with. But that was an assumption, and I’m not sure it would actually hold.