Divisional Multimarket Contact within and between Multiunit Organizations

Arturs Kalnins, Cornell University School of Hotel Administration

© Academy of Management. Reprinted with permission. All rights reserved.

Abstract

The theory of multimarket contact has important but uninvestigated implications for interactions among a firm's divisions because divisions often meet and even compete in multiple geographical and product markets. I hypothesize that firms with incentives to induce competition among divisions will act to reduce levels of multimarket contact among those divisions. Further, I predict that, in markets with substantial uncertainty, firms will increase divisional multimarket contact. I find support for these hypotheses in the setting of the franchised fast-food industry.