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Control and Performance in Franchising Networks

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Management and Governance of Networks

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

Abstract

The aim of the study is to examine the determinants of franchisor performance by focusing on the moderating role of control as transaction cost savings and value-creating mechanism. In line with resource-based view, we argue that intangible resources of the franchisor (brand name) and the intangible resources of the franchisees (local market knowledge, human resource management, quality control, and administrative capabilities) will positively impact franchisor performance. Based on the transaction cost view, we show that environmental uncertainty is negatively related to franchisor performance. Although the resource-based view and transaction cost economics have been extensively used in previous literature, no study examined the moderating role of control on the impact of resource-based and transaction cost variables on franchisor performance. We use cross-sectional data from the franchise sector in Germany to empirically test the hypotheses.

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Author information

Authors and Affiliations

  1. Department of Business Administration, University of Vienna, Oskar-Morgenstern-Platz 1, 1090, Vienna, Austria

    Ilir Hajdini, Helge Klapper, Paulus Rommer & Josef Windsperger

Authors
  1. Ilir Hajdini
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  2. Helge Klapper
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  3. Paulus Rommer
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  4. Josef Windsperger
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Corresponding author

Correspondence to Ilir Hajdini .

Editor information

Editors and Affiliations

  1. Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands

    George W. J. Hendrikse

  2. CREM, University of Rennes 1, Rennes, France

    Gérard Cliquet

  3. Institute for Strategic Management, University of Münster, Münster, Germany

    Thomas Ehrmann

  4. Department of Business Administration, University of Vienna, Vienna, Austria

    Josef Windsperger

Appendix: Measures of the Variables

Appendix: Measures of the Variables

Constructs

Items

Description of measures

Franchisor performance

CA = 0.77

CR = 0.79

AVE = 0.48

Four seven-point items, anchored by “much worse than planned” [1] and “much better than planned” [7], adopted from Sorenson and Sørensen (2001)

The extent the franchisor achieved the following goals last year

1. Reduction of costs

2. Increase of revenues

3. More innovation

4. Savings on coordination and control costs

Franchisor intangible brand name assets

CA = 0.75

CR = 0.79

AVE = 0.47

Four seven-point items, anchored by “strongly disagree” [1] and “strongly agree” [7], adapted from Barthélemy (2008)

How franchisors evaluated their brands

1. Our brand name is very strong compared with that of our competitors

2. The quality of our franchise system has a very good reputation

3. Our franchise system is well recognized compared with that of our competitors

4. Our brand name is very important to achieve a competitive advantage

Franchisees intangible local market assets

CA = 0.84

CR = 0.80

AVE = 0.61

Five seven-point items, anchored by “strongly disagree” [1] and “strongly agree” [7], adapted from Mumdžiev and Windsperger (2011)

Franchisee’s know-how advantage compared to the manager of a company-owned outlet evaluated by the franchisor with regard to

1. Local market knowledge

2. Quality control

3. Administrative skills

4. Human resource capabilities

Environmental uncertainty

CA = 0.74

CR = 0.74

AVE = 0.54

Three seven-point items, anchored by “strongly disagree” [1] and “strongly agreed” [7], adapted from John and Weitz (1988); Celly and Frazier (1996)

Franchisor’s opinion on

1. Sales at the local markets are very unpredictable

2. It is very difficult to forecast the market development in the local markets

3. Economic environment is changing quickly in the local markets

Control

CA = 0.84

CR = 0.85

AVE = 0.50

Six seven-point items, anchored by “very large extent” [1] and “not at all” [7], based on Windsperger (2004)

Franchisor’s opinions on the extent they influence franchisees on the following decisions

1. Supplier decision

2. Product/service decision

3. Equipment decision

4. Procurement decision

5. New product decision

6. Accounting and controlling system decision

  1. Sector: dummy variable, 0 = service franchising and 1 = product franchising
  2. Age: log of the number of year since opening the first franchise outlet
  3. Size: log of the number of employees in the franchisor’s headquarters
  4. CA Cronbach’s alpha, CR composite reliability, AVE average variance extracted

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Hajdini, I., Klapper, H., Rommer, P., Windsperger, J. (2017). Control and Performance in Franchising Networks. In: Hendrikse, G., Cliquet, G., Ehrmann, T., Windsperger, J. (eds) Management and Governance of Networks . Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-319-57276-5_3

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