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European franchise expansion into Latin America

European franchise expansion into Latin America PurposeThis study aims to enhance the knowledge that managers and scholars have on franchising expansion. In this sense, it is worth mentioning that although the body of literature on international management focusing on emerging markets is growing, the attention paid to the Latin American context continues to be limited. This is surprising given the substantive economic importance of the region with a population over 590 million, and a gross domestic product of approximately US$5 trillion. To cover this gap, the present study examines how a number of market conditions may drive diffusion of franchising into Latin America: geographical distance, cultural distance, political stability and economic development. The authors also controlled for the host country’s market potential, transparency, unemployment rate and efficiency of contract enforcement.Design/methodology/approachThis study uses a quantitative approach applied to a sample of 77 Spanish franchisors operating through 4,064 franchisee outlets across 21 Latin American countries in late 2012. They are: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Bolivia, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela.FindingsResults conclude that geographical distance between the host and home countries, as well as the level of host country’s political stability, economic development, market potential and transparency are able to drive the spread of international franchising across Latin American nations.Research limitations/implicationsThis study provides readers with a general overview of the current state of global franchising diffusion overseas. Results obtained in this study are useful for understanding and predicting the demand for franchising in Latin American countries.Practical implicationsEconomics reports argue that by 2050, the largest economies in the world will be China, the USA, India, Brazil and Mexico. This fact highlights the substantive importance of Latin America for foreign investors willing to expand their business abroad. In an attempt to give insights from the Latin American context, the present paper develops and tests a model that can be useful to franchisors willing to establish new outlets in the region. In addition, our findings offer guidance to firm managers seeking to target their franchises in Latin America. Franchisors may then use the results of this study as a starting point for identifying such regions whose characteristics best meet their needs of expansion.Originality/valueThis paper explores how market conditions may drive international diffusion of franchising into Latin American markets. The scant theoretical or empirical attention given to this topic has usually been examined from the USA and British base and focused on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system into Latin America as a market for franchising expansion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research Review Emerald Publishing

European franchise expansion into Latin America

Management Research Review , Volume 38 (2): 17 – Feb 16, 2015

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2040-8269
DOI
10.1108/MRR-08-2013-0185
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study aims to enhance the knowledge that managers and scholars have on franchising expansion. In this sense, it is worth mentioning that although the body of literature on international management focusing on emerging markets is growing, the attention paid to the Latin American context continues to be limited. This is surprising given the substantive economic importance of the region with a population over 590 million, and a gross domestic product of approximately US$5 trillion. To cover this gap, the present study examines how a number of market conditions may drive diffusion of franchising into Latin America: geographical distance, cultural distance, political stability and economic development. The authors also controlled for the host country’s market potential, transparency, unemployment rate and efficiency of contract enforcement.Design/methodology/approachThis study uses a quantitative approach applied to a sample of 77 Spanish franchisors operating through 4,064 franchisee outlets across 21 Latin American countries in late 2012. They are: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Bolivia, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela.FindingsResults conclude that geographical distance between the host and home countries, as well as the level of host country’s political stability, economic development, market potential and transparency are able to drive the spread of international franchising across Latin American nations.Research limitations/implicationsThis study provides readers with a general overview of the current state of global franchising diffusion overseas. Results obtained in this study are useful for understanding and predicting the demand for franchising in Latin American countries.Practical implicationsEconomics reports argue that by 2050, the largest economies in the world will be China, the USA, India, Brazil and Mexico. This fact highlights the substantive importance of Latin America for foreign investors willing to expand their business abroad. In an attempt to give insights from the Latin American context, the present paper develops and tests a model that can be useful to franchisors willing to establish new outlets in the region. In addition, our findings offer guidance to firm managers seeking to target their franchises in Latin America. Franchisors may then use the results of this study as a starting point for identifying such regions whose characteristics best meet their needs of expansion.Originality/valueThis paper explores how market conditions may drive international diffusion of franchising into Latin American markets. The scant theoretical or empirical attention given to this topic has usually been examined from the USA and British base and focused on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system into Latin America as a market for franchising expansion.

Journal

Management Research ReviewEmerald Publishing

Published: Feb 16, 2015

References