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Agency and institutional influences on franchising decisions

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  • Barthélemy, Jérôme

Abstract

While the franchising literature has typically relied on agency theory, efficiency considerations may not fully explain decisions to expand through franchising or company ownership. In this study, I re-examine franchising decisions using insights from institutional theory. The key tenet of institutional theory is that decisions are influenced by isomorphic pressures arising from the environment. Economic rationales such as the achievement of efficiency are thought of as less pervasive concerns. I begin by investigating whether institutional theory explains variance in franchising decisions beyond what is explained by agency theory. Then, I explore the extent to which institutional considerations moderate the relationships between agency considerations and franchising decisions. Hypotheses are tested on a unique database of 132 French franchise chains. Empirical results suggest that successful competitors' use of franchising explains variance in the focal chain's use of franchising beyond what is explained by the importance of local managerial inputs and the threat of franchisee opportunism. In addition, the threat of franchise opportunism is less strongly related to the focal chain's use of franchising when successful competitors have a high proportion of franchised outlets. Overall, findings from this study suggest that researchers should supplement agency theory with institutional theory to adequately explain franchising decisions.

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  • Barthélemy, Jérôme, 2011. "Agency and institutional influences on franchising decisions," Journal of Business Venturing, Elsevier, vol. 26(1), pages 93-103, January.
    • Handle: RePEc:eee:jbvent:v:26:y:2011:i:1:p:93-103
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    Cited by:

    1. Richard S. Brown, 2017. "Franchisor market power and control rights in franchise systems: the case of Major League Baseball versus the Los Angeles Dodgers," Service Business, Springer;Pan-Pacific Business Association, vol. 11(1), pages 1-21, March.
    2. 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.
    3. Odile CHANUT & Nadjoua GHARBI & Dominique BONET FERNANDEZ, 2014. "Heterogeneous Institutional environments and Franchise networks Development in Maghreb," Working Papers 2014-171, Department of Research, Ipag Business School.
    4. Muriel Fadairo & Cintya Lanchimba, 2012. "Performance in distribution systems : What is the influence of the upstream firm's organizational choices ?," Working Papers halshs-00727382, HAL.
    5. repec:ipg:wpaper:2013-039 is not listed on IDEAS
    6. repec:ipg:wpaper:39 is not listed on IDEAS
    7. Odile CHANUT & Nadjoua GHARBI & Dominique BONET FERNANDEZ, 2014. "Institutional Environments and the internationalization of franchise chains: the contrasting cases of North African countries," Working Papers 2014-200, Department of Research, Ipag Business School.
    8. Odile Chanut & Nadjoua Gharbi & Dominique Bonet Fernandez & Muhammad Shahbaz & E. Hachemi Aliouche, 2013. "Institutional Environments and the Internationalization of Franchise Chains: The Contrasting Cases of Three North African Countries," Working Papers 2013-39, Department of Research, Ipag Business School.
    9. 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.
    10. Liang, Hueimei & Lee, Kuo-Jung & Huang, Jen-Tsung & Lei, Hsien-Wei, 2013. "The optimal decisions in franchising under profit uncertainty," Economic Modelling, Elsevier, vol. 31(C), pages 128-137.

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