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Reducing the Size of Internal Hierarchy: The Case of Multi-Unit Franchising

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  • Jindal, Rupinder

Abstract

Successive layers of supervisor–subordinate relationships in organizations often distort information, increase monitoring costs, and lead to a cumulative loss of control. This paper discusses how some organizations can reduce their internal hierarchy by slicing it into two components and substituting the supervisor–subordinate relationship with an independent contract. This substitution allows the organization to shift its lower-level hierarchy to the contractors. These contractors are less likely to indulge in moral hazard, which can further reduce the size of hierarchy required. The paper examines this theory in the domain of multi-unit franchising and tests the hypotheses with a longitudinal data set.

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  • Jindal, Rupinder, 2011. "Reducing the Size of Internal Hierarchy: The Case of Multi-Unit Franchising," Journal of Retailing, Elsevier, vol. 87(4), pages 549-562.
    • Handle: RePEc:eee:jouret:v:87:y:2011:i:4:p:549-562
    DOI: 10.1016/j.jretai.2011.07.003
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    Cited by:

    1. Evelien P. M. Croonen & Marko Grünhagen & Melody L. Wollan, 2016. "Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems," International Entrepreneurship and Management Journal, Springer, vol. 12(3), pages 697-711, September.
    2. Griessmair, Michele & Hussain, Dildar & Windsperger, Josef, 2014. "Trust and the tendency towards multi-unit franchising: A relational governance view," Journal of Business Research, Elsevier, vol. 67(11), pages 2337-2345.
    3. Sawant, Rajeev J. & Hada, Mahima & Blanchard, Simon J., 2021. "Contractual Discrimination in Franchise Relationships," Journal of Retailing, Elsevier, vol. 97(3), pages 405-423.
    4. Dildar Hussain & Marijana Sreckovic & Josef Windsperger, 2018. "An organizational capability perspective on multi-unit franchising," Small Business Economics, Springer, vol. 50(4), pages 717-727, April.
    5. Dildar Hussain & Josef Windsperger, 2013. "A property rights view of multi-unit franchising," European Journal of Law and Economics, Springer, vol. 35(2), pages 169-185, April.
    6. 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.
    7. Josef Windsperger, 2013. "The governance of franchising networks," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 27, Edward Elgar Publishing.
    8. Anna Sadovnikova & Manish Kacker & Saurabh Mishra, 2023. "Franchising structure changes and shareholder value: Evidence from store buybacks and refranchising," Journal of the Academy of Marketing Science, Springer, vol. 51(5), pages 1098-1117, September.
    9. Hadjielias, Elias & Dada, Olufunmilola (Lola) & Eliades, Kostas, 2021. "Entrepreneurial process in international multiunit franchise outlets: A social capital perspective," Journal of Business Research, Elsevier, vol. 134(C), pages 13-28.
    10. Muriel Fadairo & Cintya Lanchimba & Josef Windsperger, 2015. "Network Form and Performance. The Case of Multi-Unit Franchising," Working Papers 1502, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    11. Esther Calderon-Monge & Ivan Pastor-Sanz, 2017. "Effects of Contract and Trust on Franchisor Performance," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 11(4), December.
    12. Muriel Fadairo & Cintya Lanchimba & Josef Windsperger, 2015. "Network Form and Performance. The Case of Multi-Unit Franchising," Working Papers halshs-01128075, HAL.
    13. Kretinin, Andrey & Anokhin, Sergey & Wincent, Joakim, 2020. "Exploring the antecedents of franchise internationalization," Journal of Business Research, Elsevier, vol. 112(C), pages 422-430.
    14. Gillis, William E. & Combs, James G. & Yin, Xiaoli, 2020. "Franchise management capabilities and franchisor performance under alternative franchise ownership strategies," Journal of Business Venturing, Elsevier, vol. 35(1).

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