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Innovation and Authority in Franchise Systems: An Empirical Exploration of the Plural Form

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  • Lewin-Solomons, S.

Abstract

The co-existence of franchised and company-owned stores influences the dynamic of innovation in franchise systems as well as the balance of power between franchisees and their chain. We report on case studies of five franchise system. We focus on how innovation and authority are interrelated in franchise systems, and we illustrate how a synergism exists between the franchised and company-owned sectors. We relate these finding to a theoretical model which predicts that franchisees will have moderate power when there are many company stores, and either very low or very high power when there are few company stores.

Suggested Citation

  • Lewin-Solomons, S., 2000. "Innovation and Authority in Franchise Systems: An Empirical Exploration of the Plural Form," Cambridge Working Papers in Economics 0015, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0015
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    References listed on IDEAS

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    1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    2. Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 503-526, October.
    3. Brickley, James A & Dark, Frederick H & Weisbach, Michael S, 1991. "The Economic Effects of Franchise Termination Laws," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 101-132, April.
    4. Lafontaine, Francine & Slade, Margaret E, 1997. "Retail Contracting: Theory and Practice," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 1-25, March.
    5. Maness, Robert, 1996. "Incomplete contracts and the choice between vertical integration and franchising," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 101-115, October.
    6. 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.
    7. Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," The Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April.
    8. George Baker & Robert Gibbons & Kevin J. Murphy, 1997. "Implicit Contracts and the Theory of the Firm," NBER Working Papers 6177, National Bureau of Economic Research, Inc.
    9. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
    10. Gallini, Nancy T & Lutz, Nancy A, 1992. "Dual Distribution and Royalty Fees in Franchising," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(3), pages 471-501, October.
    11. Katz, Barbara G. & Joel Owen, 1992. "On the existence of franchise contracts and some of their implications," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 567-593, December.
    12. Lafontaine, Francine & Slade, Margaret E., 1996. "Retail contracting and costly monitoring: Theory and evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 923-932, April.
    13. Howard Beales, J. III & Muris, Timothy J., 1995. "The foundations of franchise regulation: Issues and evidence," Journal of Corporate Finance, Elsevier, vol. 2(1-2), pages 157-197, October.
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    Cited by:

    1. Hennessy, David A., 2003. "Property rights, productivity, and the nature of noncontractible actions in a franchise system," Journal of Economic Behavior & Organization, Elsevier, vol. 52(4), pages 443-468, December.
    2. Sebastian Kranz & Shira B. Lewin-Solomons, 2008. "Decision Structures in Franchise Systems of the Plural Form," Bonn Econ Discussion Papers bgse8_2008, University of Bonn, Germany.

    More about this item

    Keywords

    franchising; case study; organisations; innovation; plural form;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L8 - Industrial Organization - - Industry Studies: Services
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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