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Organization governance form in franchising: efficient contracting or organizational momentum?

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  • Hitoshi Mitsuhashi
  • Scott Shane
  • Wesley D. Sine

Abstract

We examine firms' choice of organizational governance form. Using longitudinal data on a sample of business format franchisors operating in North America, we show that the cross‐sectional evidence commonly used to demonstrate support for efficient contracting explanations for organizational governance form is not robust to the year of investigation, firm effects, or selection effects. We theorize that this outcome may result from dynamic processes through which a firm's organizational governance form evolves. We develop and test two hypotheses for the effects of organizational momentum on organizational governance form, and find that organizational momentum is a robust predictor. Our results suggest that researchers consider the dynamics of momentum in explaining the form of firm governance. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Hitoshi Mitsuhashi & Scott Shane & Wesley D. Sine, 2008. "Organization governance form in franchising: efficient contracting or organizational momentum?," Strategic Management Journal, Wiley Blackwell, vol. 29(10), pages 1127-1136, October.
    • Handle: RePEc:bla:stratm:v:29:y:2008:i:10:p:1127-1136
    DOI: 10.1002/smj.702
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    Cited by:

    1. Gonzalez-Diaz, Manuel & Solis-Rodriguez, Vanesa, 2012. "Why do entrepreneurs use franchising as a financial tool? An agency explanation," Journal of Business Venturing, Elsevier, vol. 27(3), pages 325-341.
    2. Farhad Sadeh & Manish Kacker, 2018. "Quality signaling through ex-ante voluntary information disclosure in entrepreneurial networks: evidence from franchising," Small Business Economics, Springer, vol. 50(4), pages 729-748, April.
    3. Lamar Pierce & Michael W. Toffel, 2010. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Harvard Business School Working Papers 11-004, Harvard Business School, revised Feb 2012.
    4. Muriel Fadairo & Cintya Lanchimba & Miguel Yangari, 2016. "Optimal Monetary Provisions and Risk Aversion in Plural Form Franchise Networks A Model of Incentives with Heterogeneous Agents," Working Papers halshs-01251344, HAL.
    5. Lamar Pierce & Michael W. Toffel, 2013. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Organization Science, INFORMS, vol. 24(5), pages 1558-1584, October.
    6. Muriel Fadairo & Cyntia Lanchimba & Miguel Yangari, 2016. "Optimal Monetary Provisions and Risk Aversion in Plural Form Franchise Network. A Model of Incentives with Heterogeneous Agents," Working Papers 1602, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    7. Per Davidsson & Johan Wiklund, 2009. "Scott A. Shane: winner of the Global Award for Entrepreneurship Research," Small Business Economics, Springer, vol. 33(2), pages 131-140, August.
    8. Boulay, Jacques & Caemmerer, Barbara & Evanschitzky, Heiner & Duniach, Krista, 2020. "Multi-unit franchising from franchisor and franchisee perspectives: Antecedents, performance outcomes, and the optimal mini-chain size," Journal of Business Research, Elsevier, vol. 113(C), pages 49-58.
    9. Pamela S. Tolbert & Robert J. David & Wesley D. Sine, 2011. "Studying Choice and Change: The Intersection of Institutional Theory and Entrepreneurship Research," Organization Science, INFORMS, vol. 22(5), pages 1332-1344, October.
    10. Chabowski, Brian R. & Hult, G. Tomas M. & Mena, Jeannette A., 2011. "The Retailing Literature as a Basis for Franchising Research: Using Intellectual Structure to Advance Theory," Journal of Retailing, Elsevier, vol. 87(3), pages 269-284.
    11. Rozenn Perrigot, & Isabelle Piot-Lepetit & Gérard Cliquet, 2012. "Plural Form and Franchise Chains Efficency: A Dea Meta-Frontier Approach applied to French Chains," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201210, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    12. Kretinin, Andrey & Anokhin, Sergey & Wincent, Joakim, 2020. "Exploring the antecedents of franchise internationalization," Journal of Business Research, Elsevier, vol. 112(C), pages 422-430.

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