Global Brand, Local Flexibility: How Social Norms Can Help Guide Companies

Whether a French luxury brand displays the same handbags in the display windows of its stores around the world, or whether global fast-food chains adapt their product ranges to country-specific preferences and conditions, is a challenging management decision for companies that typically operate a large number of branches. A research team of business scholars has now investigated how these companies can find effective solutions when navigating the tension between flexibility and standardization. The findings were recently presented in the European Journal of Operational Research.

Companies and organizations that offer similar products or services in different markets across geographically dispersed locations often face the question: how centralized can and should decisions be made in order to achieve the best possible performance? Stephan Leitner, co-author of the current paper, explains: “On the one hand, organizations want to use centralized control to ensure a consistent brand identity across all units; on the other hand, they want to grant the units sufficient autonomy to respond to local challenges.” Research has so far generally assumed a trade-off between performance and standardization: greater performance requires greater decentralization; standardization, by contrast, requires more centralized control. Strict requirements intended to enforce standards can therefore sometimes lead to losses in performance, because the specific characteristics of markets are not used to their best advantage.

Ravshanbek Khodzhimatov, Stephan Leitner and Friederike Wall (subject area Organizational Control and Strategic Management) at the University of Klagenfurt, have now investigated how soft control mechanisms such as social norms, informal communication structures and social influence can resolve this apparent conflict between standardization and performance.

Stephan Leitner and Friederike Wall explain one of the basic assumptions as follows: “We start from the intrinsic tendency of managers to take their cues from the behavior of their colleagues.” The researchers use an agent-based model of an organization with several interdependent units that face similar task environments. The research team integrated various assumptions about managers’ motivation, behavior and decisions into this model. The simulation ultimately made it possible to investigate how the structure of communication relationships, actual knowledge exchange and the way organizational members adapt to one another’s behavior influence the dynamics within the organization.

“Using the model, we were able to determine that, under certain communication structures, increased decentralization can improve both performance and standardization,” explains Stephan Leitner.

Ravshanbek Khodzhimatov, Stephan Leitner und Friederike Wall (2026). Conformity: Resolving the trade-off between performance and standardization in multi-unit organizations. European Journal of Operational Research, https://www.sciencedirect.com/science/article/pii/S0377221726003814.