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Innovation and Authority in Franchise Systems: An Empirical Exploration of the Plural Form

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  • Lewin-Solomons, S.
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    Abstract

    The co-existence of franchised and company-owned stores influences the dynamic of innovation in franchise systems as well as the balance of power between franchisees and their chain. We report on case studies of five franchise system. We focus on how innovation and authority are interrelated in franchise systems, and we illustrate how a synergism exists between the franchised and company-owned sectors. We relate these finding to a theoretical model which predicts that franchisees will have moderate power when there are many company stores, and either very low or very high power when there are few company stores.

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    File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/wp0015.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0015.

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    Date of creation: Nov 2000
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    Handle: RePEc:cam:camdae:0015

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    Web page: http://www.econ.cam.ac.uk/index.htm

    Related research

    Keywords: franchising; case study; organisations; innovation; plural form;

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    References

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    1. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Howard Beales, J. III & Muris, Timothy J., 1995. "The foundations of franchise regulation: Issues and evidence," Journal of Corporate Finance, Elsevier, vol. 2(1-2), pages 157-197, October.
    3. Katz, Barbara G. & Joel Owen, 1992. "On the existence of franchise contracts and some of their implications," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 567-593, December.
    4. Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," The Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April.
    5. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
    6. Maness, Robert, 1996. "Incomplete contracts and the choice between vertical integration and franchising," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 101-115, October.
    7. Lafontaine, F. & Slade, M., 1996. "Retail Contracting: Theory and Practice," G.R.E.Q.A.M. 96b09, Universite Aix-Marseille III.
    8. Brickley, J.A. & Dark, F.H. & Weisbach, M.S., 1988. "The Economic Effects Of Franchise Termination Laws," Papers 88-11, Rochester, Business - Managerial Economics Research Center.
    9. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June.
    10. Lafontaine, Francine & Slade, Margaret E., 1996. "Retail contracting and costly monitoring: Theory and evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 923-932, April.
    11. Gallini, Nancy T & Lutz, Nancy A, 1992. "Dual Distribution and Royalty Fees in Franchising," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 471-501, October.
    12. George Baker & Robert Gibbons & Kevin J. Murphy, 1997. "Implicit Contracts and the Theory of the Firm," NBER Working Papers 6177, National Bureau of Economic Research, Inc.
    13. Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 503-26, October.
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    Cited by:
    1. Hennessy, David A., 2003. "Property Rights, Productivity, and the Nature of Noncontractible Actions in a Franchise System," Staff General Research Papers 11750, Iowa State University, Department of Economics.
    2. Sebastian Kranz & Shira B. Lewin-Solomons, 2008. "Decision Structures in Franchise Systems of the Plural Form," Bonn Econ Discussion Papers bgse8_2008, University of Bonn, Germany.

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