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Contractual Design as a Determinant of Performance

Author

Listed:
  • Magali Chaudey

    (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - UJM - Université Jean Monnet - Saint-Étienne)

  • Muriel Fadairo

    (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - UJM - Université Jean Monnet - Saint-Étienne)

Abstract

This empirical note deals with the contractual design of relationships between producers and retailers. It provides evidence on the links between the features of vertical contracts organizing franchising networks and the performances of these networks. An agency perspective is used to understand the structure of contracts. We focus on the relevance of vertical restraints by the upstream firm to prevent retailers from free-riding in the distribution networks. From six frequent contractual provisions we distinguish two types of contracts according to the degree of constraint imposed on the franchisees. Econometric estimations carried out on this basis offer evidence consistent with the hypothesis that within franchising systems, more constrained contracts for retailers encourage better performance at the network level.

Suggested Citation

  • Magali Chaudey & Muriel Fadairo, 2008. "Contractual Design as a Determinant of Performance," Post-Print ujm-00268803, HAL.
    • Handle: RePEc:hal:journl:ujm-00268803
    DOI: 10.1080/13571510701830556
    as

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    Cited by:

    1. Constantino J. Garcia Martin & Amparo Medal-Bartual & Marta Peris-Ortiz, 2014. "Analysis of efficiency and profitability of franchise services," The Service Industries Journal, Taylor & Francis Journals, vol. 34(9-10), pages 796-810, July.

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