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Capitalizing on Franchisee Autonomy: Relational Forms of Governance as Controls in Idiosyncratic Franchise Dyads

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  • Olivier Cochet
  • Julian Dormann
  • Thomas Ehrmann

Abstract

Franchisee autonomy not only fosters system‐wide adaptability and outlet owners' satisfaction but also raises the costs from agency problems present in franchisee–franchisor dyads. Advancing upon the understanding of agency issues involved in franchising, we test the argument that chains counterbalance the loss in control inherent to autonomy with relational governance mechanisms. The empirical results provided strong support for this presumption. In addition, and most notably, we found that the more relational governance becomes important, the weaker agents' incentives are aligned with the interests of the entire network. The moderating effects of five franchisee characteristics influencing goal congruencies were considered: multiunit ownership, age of the relationship, geographic distance, franchisee success, and the level of perceived intra‐chain competition. Implications for chain management are provided.

Suggested Citation

  • Olivier Cochet & Julian Dormann & Thomas Ehrmann, 2008. "Capitalizing on Franchisee Autonomy: Relational Forms of Governance as Controls in Idiosyncratic Franchise Dyads," Journal of Small Business Management, Taylor & Francis Journals, vol. 46(1), pages 50-72, January.
    • Handle: RePEc:taf:ujbmxx:v:46:y:2008:i:1:p:50-72
    DOI: 10.1111/j.1540-627X.2007.00231.x
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    Cited by:

    1. Andrieli Vizzoto & Jorge Renato Verschoore, 2023. "What Drives Network Governance? A Microstructural Approach," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(11), pages 1-78, February.
    2. Gukseong Lee, 2022. "Matching Task Complexity With Supplier Management to Enhance Outsourcing Performance," SAGE Open, , vol. 12(3), pages 21582440221, September.
    3. Mischa Seiter & Christopher Marquard, 2015. "Steuerung der Partner in Industrial Service Networks — Anreizsysteme als zentrales Steuerungsinstrument," Schmalenbach Journal of Business Research, Springer, vol. 67(69), pages 60-78, January.

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