Inter-firm cooperation and the problem of free riding behavior: an empirical study of voluntary retail chains

This article explores the problem of free riding behavior in voluntary retail chains. Based on agency theory and group theory, the authors analyze the antecedents to free riding behavior in voluntary retail chains and examine whether it is possible to handle the problem of free riding behavior by the use of monitoring arrangements. Hypotheses are developed and tested on a sample of 70 voluntary chains. The empirical findings show that both the size of the chain (the number of retailers being members of the chain) and the level of goal conflict within the chain are associated with free riding problems. It is also demonstrated that the implementation of monitoring arrangements is effective in lowering free riding behavior in voluntary retail chains.