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Modes of governance for market entry by international franchisors: factors affecting the choice

Modes of governance for market entry by international franchisors: factors affecting the choice This study aims to provide an empirical test of an existing theoretical model depicting the governance modes used by international franchisors when entering international markets.Design/methodology/approachUsing a unique panel data set of 222 market expansions by US firms over a seven-year period, this paper tests hypotheses regarding the factors affecting the franchisors’ choice of governance modes when entering foreign markets.FindingsFranchisors use governance modes with lower levels of control when faced with environmental uncertainties due to corruption, economic downturns and when the geographic distance is large. Moreover, the franchise system assets and its local market assets also affect the choice of governance modes.Practical implicationsFirms need to balance the costs of environmental uncertainty with the need to safeguard the firm’s capabilities and resources using governance modes with appropriate levels of control. This balance changes as the franchise company gains more experience in the local market and as once-emerging markets continue to develop.Originality/valueThis research identified additional governance modes used by franchisors compared to previous studies. Using multiple theoretical perspectives, the study supported significant portions of the Jell-Ojobor and Windsperger (2014) model of franchisor governance mode choice. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research Review Emerald Publishing

Modes of governance for market entry by international franchisors: factors affecting the choice

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2040-8269
DOI
10.1108/mrr-07-2020-0400
Publisher site
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Abstract

This study aims to provide an empirical test of an existing theoretical model depicting the governance modes used by international franchisors when entering international markets.Design/methodology/approachUsing a unique panel data set of 222 market expansions by US firms over a seven-year period, this paper tests hypotheses regarding the factors affecting the franchisors’ choice of governance modes when entering foreign markets.FindingsFranchisors use governance modes with lower levels of control when faced with environmental uncertainties due to corruption, economic downturns and when the geographic distance is large. Moreover, the franchise system assets and its local market assets also affect the choice of governance modes.Practical implicationsFirms need to balance the costs of environmental uncertainty with the need to safeguard the firm’s capabilities and resources using governance modes with appropriate levels of control. This balance changes as the franchise company gains more experience in the local market and as once-emerging markets continue to develop.Originality/valueThis research identified additional governance modes used by franchisors compared to previous studies. Using multiple theoretical perspectives, the study supported significant portions of the Jell-Ojobor and Windsperger (2014) model of franchisor governance mode choice.

Journal

Management Research Review – Emerald Publishing

Published: Jun 21, 2021

Keywords: International business; Environmental uncertainty; Governance modes; International franchising; Property rights theory; Firm resources and capabilities; Franchisor choice model; Market entry/re-entry

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