Resource Scarcity and Agency Theory Predictions Concerning the Continued Use of Franchising in Multi‐outlet Networks

Resource Scarcity and Agency Theory Predictions Concerning the Continued Use of Franchising in... A study of 439 franchisors was conducted to identify factors influencing changes in their propensity to franchise. Consistent with agency theory, franchisors with wide multinational scope were increasing their proportion of franchised outlets whereas franchisors with large outlets were emphasizing firm ownership. As predicted by resource scarcity theory, franchisors were decreasing their proportion franchised as they grew in size, although most of the decrease occurred while firms were relatively small. In contrast to resource scarcity theory, franchisors increased their proportion franchised over time. Key implications are that both agency and resource scarcity theories are needed to explain franchising, but perhaps future research should look beyond resource scarcities toward resource‐based capabilities to better explain franchising decisions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Small Business Management Wiley

Resource Scarcity and Agency Theory Predictions Concerning the Continued Use of Franchising in Multi‐outlet Networks

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Publisher
Wiley
Copyright
Copyright © 2006 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0047-2778
eISSN
1540-627X
DOI
10.1111/j.1540-627X.2006.00152.x
Publisher site
See Article on Publisher Site

Abstract

A study of 439 franchisors was conducted to identify factors influencing changes in their propensity to franchise. Consistent with agency theory, franchisors with wide multinational scope were increasing their proportion of franchised outlets whereas franchisors with large outlets were emphasizing firm ownership. As predicted by resource scarcity theory, franchisors were decreasing their proportion franchised as they grew in size, although most of the decrease occurred while firms were relatively small. In contrast to resource scarcity theory, franchisors increased their proportion franchised over time. Key implications are that both agency and resource scarcity theories are needed to explain franchising, but perhaps future research should look beyond resource scarcities toward resource‐based capabilities to better explain franchising decisions.

Journal

Journal of Small Business ManagementWiley

Published: Jan 1, 2006

References

  • Vertical Integration in Franchise Systems: Agency Theory and Resource Explanations
    Carney, Carney; Gedajlovic, Gedajlovic
  • Control Techniques and Upward Flow of Information in Franchising in Distant Markets: Conceptualization and Preliminary Evidence
    Dant, Dant; Nasr, Nasr
  • NAFTA and Franchising: A Comparison of Franchisor Perceptions of Characteristics Associated with Franchisee Success and Failure in Canada, Mexico, and the United States
    Falbe, Falbe; Welsh, Welsh
  • Multi‐Unit Franchising: Growth and Management Issues
    Kaufmann, Kaufmann; Dant, Dant
  • The Economics of Franchise Contracts
    Klein, Klein
  • Retail Contracting: Theory and Practice
    Lafontaine, Lafontaine; Slade, Slade
  • To Franchise Or Not to Franchise: Analysis of Decision Rights and Organizational Form Shares
    Michael, Michael
  • Is Franchising a Capital Structure?
    Norton, Norton
  • Why Franchise Companies Expand Overseas
    Shane, Shane

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