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Signaling the value of a business concept : Evidence from a structural model with Brazilian franchising data

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  • Muriel Fadairo

    ()
    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,Université Jean Monnet, Saint-Etienne, F-42000, France)

  • Cintya Lanchimba Lopez

    ()
    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,Université Jean Monnet, Saint-Etienne, F-42000, France)

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    Abstract

    Within the wide literature regarding franchising, a few studies were devoted to the adverse selection phenomena in the franchise relationships, and to the signaling explanation of the franchisors’ organizational choices. Previous empirical works concluded that the signaling framework is not well adapted to study franchising. However, most of the empirical literature has focused on developed countries. This empirical paper deals with the case of Brazil. We estimate on recent franchising data a structural equation model capturing the simultaneous influences of a valuable business concept. The paper provides evidence that the signaling theory is adequate to understand the organizational choices regarding the ownership structure of franchised networks in emerging markets. The estimation results suggest indeed that the Brazilian franchisors use signaling devices, and that the necessity to signal the value of a business concept affects the organizational choices at the network level.

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    Bibliographic Info

    Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 1228.

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    Date of creation: 2012
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    Handle: RePEc:gat:wpaper:1228

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    Keywords: Franchising; Emerging countries; Signaling theory; Structural Equation Modeling;

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    1. Jay Squalli & Kenneth Wilson & Sarah Hugo, 2010. "An analysis of market access," Applied Economics, Taylor & Francis Journals, vol. 42(14), pages 1833-1844.
    2. 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.
    3. 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.
    4. Thierry Pénard & Emmanuel Raynaud & Stéphane Saussier, 2011. "Monitoring Policy and Organizational Forms in Franchised Chains," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(3), pages 399-417, November.
    5. Francine Lafontaine & Joanne E. Oxley, 2004. "International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 95-123, 03.
    6. Lafontaine, Francine, 1993. "Contractual Arrangements as Signaling Devices: Evidence from Franchising," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 256-89, October.
    7. Falbe, Cecilia M. & Welsh, Dianne H. B., 1998. "NAFTA and franchising: A comparison of franchisor perceptions of characteristics associated with franchisee success and failure in Canada, Mexico, and the United States," Journal of Business Venturing, Elsevier, vol. 13(2), pages 151-171, March.
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