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Chain Affiliation and Human Resource Investments: Evidence from the Restaurant Industry

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  • Tashlin Lakhani

    (Nolan School of Hotel Administration, SC Johnson College of Business, Cornell University, Ithaca, New York 14853)

  • Can Ouyang

    (Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China)

Abstract

Drawing on organizational theory, agency theory, and research in strategic human resource management, this study explores how chain affiliation influences human resource (HR) investments using data from a nationally random survey of restaurant establishments. We propose that chain-affiliated units will make different investments in those areas of the HR system where chains establish superior organizational routines compared with nonaffiliated units. By contrast, we argue that in the absence of chain routines, ownership incentives will drive differences in human resource investments. Specifically, we find that franchisee-owned units focus more on cost reduction by underinvesting in human resource practices compared with company-owned units and independently owned units when organizational routines are not provided by the chain. We provide further support for our theoretical arguments using additional data on multiunit ownership and franchisor influence. Finally, we conduct supplemental analyses to explore the relationship between different human resource investments and two important organizational outcomes: employee turnover and customer satisfaction ratings from Yelp. Our results highlight the types of human resource practices that are important for service work and suggest that the provision of organizational routines can have important implications for the long-run success of chains and their units.

Suggested Citation

  • Tashlin Lakhani & Can Ouyang, 2022. "Chain Affiliation and Human Resource Investments: Evidence from the Restaurant Industry," Organization Science, INFORMS, vol. 33(6), pages 2209-2225, November.
    • Handle: RePEc:inm:ororsc:v:33:y:2022:i:6:p:2209-2225
    DOI: 10.1287/orsc.2021.1539
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    References listed on IDEAS

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    Cited by:

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    3. Can Ouyang & Rosemary Batt, 2026. "Which Firms Offer Better Jobs for Low-Wage Service Workers? Evidence from Fast-Food Franchising," ILR Review, Cornell University, ILR School, vol. 79(2), pages 247-279, March.

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