The Non-Equity Entry Mode Choices of International Hotel Organizations in New Zealand

ABSTRACT

Research on the non-equity entry mode choices of service firms is relatively limited. We use transaction cost economics and organizational capability perspectives to examine the determinants of choosing between franchising and management contracts in the hotel industry. In our analysis of four international hotel organizations operating in New Zealand, we found that both asset specificity and imperfect imitability helped in explaining the choice between franchising and management contracts. Behavioral uncertainty and host country management capabilities explained the entry mode choice of some hotel organizations but were not applicable for others that entered New Zealand via international strategic alliances or used strata titles. Finally, environmental uncertainty and the development of New Zealand’s business environment had a limited effect on choosing between franchising and management contracts.