Conflict management capabilities in franchising

Conflicts are common in franchising, however, they become dysfunctional above a certain threshold. Our aim is to understand how conflict management processes and, in particular, problem solving, persuasion, bargaining and politics, are developed and implemented within franchise chains and how they contribute to franchisors’ organizational capabilities. We do so through a qualitative study based on 44 in-depth interviews with franchisors and franchisees operating in France. Our main findings show that the implementation of these conflict management processes over time and with various franchisees nurture conflict management capabilities of franchisors.     

Antecedents and effects of free riding in the franchisor–franchisee relationship

This field study investigated contextual antecedents of free riding by franchisees on franchisor brand reputation and effects of free riding on performance in a multinational corporation's franchising network. Structural elements (increased formalization, decentralized decision-making), interactions between franchisor representatives and franchisee dealers, and market-related factors (external competition) were associated with lower levels of franchisee free riding. The findings also indicated that free riding has deleterious effects on franchisee performance. The results support theoretical arguments that both economic and social exchange perspectives are valuable in examining free riding and provide important practical guidance in designing and managing franchise systems.     

A strategic groups approach to the franchising–performance relationship

Although franchising is a pervasive organizational form, little is known about its performance consequences. Prior studies have not found a direct performance effect, suggesting a need for alternative approaches. Drawing upon agency and resource scarcity theories, we develop the idea that strategic groups exist among franchisors and that performance differs among the groups. Using a sample of 65 restaurant chains, three strategic groups were found. The strategic group most influenced to franchise out of resource scarcity exhibited poorer performance than the other two groups. Results indicate that important, but nonlinear, relationships exist among franchising, its antecedents, and performance.     

Contractibility and ownership redirection in franchising: A property rights view

This paper offers a property rights theoretical interpretation of the ownership redirection hypothesis advanced by Oxenfeldt and Kelly [Oxenfeldt, Alfred R. and Kelly, Anthony O. (1968). “Will Successful Franchise Systems Ultimately Become Wholly-owned Chains?”, Journal of Retailing, 44, 69-83]. In a nutshell, couched in resource dependence theory, the ownership redirection hypothesis argues that successful franchise systems will eventually become corporate owned systems because of the reacquisition of franchisee units by the more powerful, and resource-flush franchisors. We argue that the structure and dynamics of ownership patterns in franchising networks depends on the contractibility of the franchisor's system-specific assets and the contractibility of the franchisee's local market assets. Under the property rights view, ownership redirection will result from an increase in the contractibility of the franchisee's local market assets (local market information, financial resources, and managerial capabilities) and the resultant increase of the franchisor's bargaining power during the contract period. We extend the franchise literature by arguing that informational, financial and managerial resource constraints are only relevant for the change of ownership structure if they are noncontractible. This hypothesis is evaluated using data collected from the Austrian franchise sector. The empirical results are largely supportive of the hypothesis.     

Board composition,family ownership,institutional distance and the foreign equity ownership strategies of Turkish MNEs

In much of the developing world, families represent the dominant form of firm ownership. This study investigates how this influences equity ownership strategies when firms venture abroad. Drawing on agency theory and institutional theory, we investigate the direct effect of board composition and family ownership on the equity-based ownership strategies of multinational enterprises (MNEs) in their affiliates, and how institutional distance may moderate this. Examining foreign affiliates of listed Turkish MNEs, we find that a high ratio of independent directors is negatively linked to levels of equity ownership of MNE affiliates. We also find that a high ratio of inside directors on the board is positively associated with the equity stake of MNEs in their affiliates. The significant interaction effect between board composition, family ownership and institutional distance helps explain the unexpectedly weak effects of institutional distance.     

Trust and the tendency towards multi-unit franchising: A relational governance view

Previous research mainly focused on the agency-theoretical explanation of multi-unit franchising (MUF). The aim of this study is to develop a relational governance perspective of MUF by investigating the role of knowledge-based trust and general trust in franchisor's choice between multi-unit and single-unit franchising. Our data from the German franchise sector indicate that knowledge-based trust positively influences and general trust negatively influences the franchisor's tendency towards multi-unit franchising.     

Family Ties that B(l)ind: Do Family-Owned Franchisees Have Lower Financial Performance than Nonfamily-Owned Franchisees?

Over the past three decades, franchisee performance has attracted the attention of scholars in both retailing and entrepreneurship. However, to date, research has not investigated whether the type of franchisee ownership influences franchisee financial performance. Family ownership, the most dominant form of firm organization worldwide, ingrains greater focus on noneconomic goals that could, in turn, reduce the financial performance of a family-owned franchisee. Drawing on the tenets of agency theory undergirding the franchising and family business literature, we examine whether family-owned franchisees have lower financial performance than nonfamily-owned franchisees. Using data from the 2007 Small Business Owner survey and propensity score matching, we observed that family franchisees generated at least 6.7% lower sales per employee than nonfamily franchisees. The inferences are consistent across two additional samples and robust to additional performance outcomes and specifications. Overall, this research provides a novel empirical examination of the influence of family ownership on franchisee financial performance and has managerial implications for both franchisors and franchisees.     

Exploring country-level institutional arrangements on the rate and type of entrepreneurial activity

This study introduces a novel multidimensional measure of the entrepreneurial environment that reveals how differences in institutional arrangements influence both the rate and the type of entrepreneurial activity in a country. Drawing from institutional theory, the measure examines the regulatory, normative, and cognitive dimensions of entrepreneurial activity, and introduces a novel conducive dimension that measures a country's capability to support high-impact entrepreneurship. Our findings suggest that differences in institutional arrangements are associated with variance in both the rate and type of entrepreneurial activity across countries. For the formation of innovative, high-growth new ventures, the regulative environment matters very little. For high-impact entrepreneurship an institutional environment filled with new opportunities created by knowledge spillovers and the capital necessary for high-impact entrepreneurship matter most.     

Large established firms entry into franchising: an exploratory investigation of strategic and operational issues

Although franchising is traditionally associated with newly emerging businesses which need to finance growth, this marketing technique is being increasingly utilized by large established firms as a method of business development. This article analyses the business objectives which led a sample of such firms in the UK to introduce franchising as a means of channel management. The modes of franchising-including the master franchise-selected by these firms as well as their operational and organizational experiences are investigated. In particular, there is an examination of the major managerial/cultural issues which these firms encountered in trying to reconcile the decentralized organization and operating methods implicit in the franchising concept with the centralized decision making and organization of a corporate concern. The implications for management of this dichotomy are explored.     

The impact of formal and informal institutional distances on MNE corporate social performance

Can host country selection affect the corporate social performance (CSP) of multinational enterprises (MNEs)? Using institutional distance as our theoretical lens, we propose and empirically examine the notion that greater institutional diversity can have disparate influences on the social performance of different types of MNEs. We conceptualize each MNE as a unique portfolio of locations and use that “footprint” to examine the impact of formal and informal institutional distances on CSP. We hypothesize and find (1) a moderating influence of greater formal institutional distance in the MNE portfolio that slows the rate of increased benefits associated with greater international scope; and (2) a direct influence of greater informal institutional distance that lowers the overall levels of CSP independent of the international scope of the MNE. Managerial implications for international location selection are discussed.     

Foreign institutional investors and dividend policy: Evidence from China

This study examines whether foreign institutional investment influences firms’ dividend policies. Using data from all domestically listed nonfinancial firms in China during the period of 2003–2013, we find that foreign shareholding influences dividend decisions and vice versa.Furthermore, changes in dividend payments over time positively affect subsequent changes in foreign shareholding, but the opposite is not true. Our study indicates that foreign institutional investors do not change firms’ future dividend payments once they have made their investment choices in China. Moreover, they self-select into Chinese firms that pay high dividends. Our evidence suggests that in an institutional setting where foreign investors have tightly restricted access to local securities markets and a relatively high risk of expropriation by controlling shareholders exists, firms can use dividends to signal good investment opportunities to foreign investors.     

Towards a framework for the study of franchising as an operating mode for international retail companies

In recent years franchising has become a popular operating strategy for companies competing in the global marketplace. In particular, international retailing companies have increasingly been adopting franchising as a marketentry mechanism. While this growth in the popularity of franchising has led to increased research interest in the topic, there has only recently been a recognition of the need to consider franchising within the wider context of retailer internationalization activity. This paper attempts to provide a framework for the study of franchising as a strategy for retailers expanding into international markets. The discussion examines key findings to date from the established literature on international franchising concerning the motivations underlying internationalization, the internationalization process itself and the operating problems encountered. It is argued that a careful examination of findings from the international franchising literature can provide further development of retail internationalization conceptualization.     

Contractual Design as a Determinant of Performance: Evidence from Franchising

This empirical note deals with the contractual design of relationships between producers and retailers. It provides evidence on the links between the features of vertical contracts organizing franchising networks and the performances of these networks. An agency perspective is used to understand the structure of contracts. We focus on the relevance of vertical restraints by the upstream firm to prevent retailers from free‐riding in the distribution networks. From six frequent contractual provisions we distinguish two types of contracts according to the degree of constraint imposed on the franchisees. Econometric estimations carried out on this basis offer evidence consistent with the hypothesis that within franchising systems, more constrained contracts for retailers encourage better performance at the network level.     

Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin,corporate governance,and host country effects

Integrating signaling and institutional perspectives, we develop and test hypotheses relating institutions and corporate governance to foreign IPO success. Our investigation highlights the importance of three important drivers of foreign IPO success: home country legal institutions, corporate governance, and host capital market choice. This research demonstrates that board independence and country of origin effects are powerful signals. However, these factors do not have a universal impact on foreign IPO success. Instead, the value of home country institutions along with corporate governance signals are contingent upon the institutional environment in which international entrepreneurs choose to seek capital resources.     

Special issue introduction: Historical research on institutional change

Abstract

Both business historians and organisation studies scholars study institutional change to understand the interactions between business and society. However, research approaches differ fundamentally, with organisational research focusing on theory-driven explanations, whereas historical research is rather theory-informed. The consequence of such disciplinary orientation is that interdisciplinary conversations rarely occur. For this special issue, we invited submissions that address how historical research can contribute to our understanding of institutional change while demonstrating ‘dual integrity’ in terms of being significant pieces of historical research that provide us with new insights into historiography and at the same time addressing important theoretical concerns.     

Governance structures in the hotel industry

This study investigates alternative governance forms in the hotel industry. Agency theory maintains that the need for control over service quality, financial risk, and the market environment affect the choice of governance form. Prior agency research emphasizes alternative governance structures that principals employ, given local market conditions, agent incentives, and risk preferences. The study augments the established principal-agent perspective with a discussion of entrepreneurial motivations to join hotel alliances. The study analyzes the choice between independent ownership and affiliation with a voluntary chain as well as the choice between integration and franchising. Data analyses from 650 hotels indicate that the hotel size, amenities, population, and distance to headquarters influence governance.     

Sustainable water storage by agricultural businesses: Strategic responses to institutional pressures

Management of water storage in agriculture is under increasing public scrutiny. In Australia, water is being stored unsustainably by agricultural businesses, putting communities downstream at risk. Yet, sustainable water storage management institutional policy mechanisms remain disjointed around the country. This study seeks to investigate the problem through application of Oliver's (1991) strategic response typology to a survey of 404 agribusiness managers in four different institutional environments. Findings highlight the importance of social aspects of water storage and sharing in agribusiness regions and industries, and suggest that increased manager connectedness could reduce resistance to water storage policy pressures. The results not only provide beneficial guidance for policymakers faced with potentially catastrophic flood and drought conditions exacerbated by poor water storage management practice, but also add support to those found by Clemens and Douglas (2005), indicating the robustness of this theoretical approach for solutions to modern problems faced by business, policymakers and society.     

Ownership structure and earnings management in emerging markets—An institutionalized agency perspective

Previous earnings management research has largely focused on firm-level governance mechanisms in single countries or on macro-level variables in multiple countries. Building on this research, we incorporate firm ownership predictors along with national institutional dimensions to explore why firm decision makers in emerging markets vary in their earnings management behavior. Our theoretical framework integrates agency and institutional theories proposing that firm-level ownership mechanisms do not function in isolation, but are reinforced or attenuated by elements of the institutional governance environment. The multilevel empirical analysis of 1200 firms in 24 emerging markets indicates that controlling ownership is positively related to earnings management. We find that the level of minority shareholder protection in a country weakens this positive relationship. We also find that regulatory quality strengthens the negative relationship between institutional ownership and earnings management activity. It is hoped that awareness of how firm ownership structures interact with national-level institutions in affecting firm-level behavior will help managers and investors develop skills and practices to better cope with business norms in emerging economies.     

Internationalization and breaking the glass ceiling: An institutional perspective

Gender diversity continues to serve as a thought-provoking and challenging topic for society and business alike. Even as organizations implement policies to minimize discriminatory practices in the workplace, evidence of gender inequality in firms around the world persists. Drawing on institutional theory, this study focuses on the effect that foreign investors and host country corporate social responsibility (CSR) policies have on gender diversity, and how professional groups can moderate this relationship. In analyzing 608 observations from listed firms in Taiwan, the findings demonstrate these relationships. It is shown that both foreign investor ownership and good host country CSR in firms are positively linked to the promotion of women into managerial positions. The assurance of professional groups in home countries further enhances this positive relationship. Our results further indicate how institutions carried across borders by organizations can influence firm decisions such as gender diversity through global norms of corporate CSR and also by the assurance of professional groups in the home multinational firm.