Prior research has examined why franchisors expand abroad, but no paper has empirically examined the role of franchising in the macroeconomy of developing nations. In this paper, the pattern of franchising development is statistically analyzed within the context of the general economic development of Latin America. It is found that franchising leads, rather than follows, economic development. Implications for theory and policy are considered.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Agarwal, S., & Ramaswami, S. N. (1992). Choice of foreign market entry mode: Impact of ownership, location, and internalization factors. Journal of International Business Studies,, 23, 1–27.
Arthur Andersen. (1996). International expansion by US franchisors. Chicago: Arthur Andersen.
Aydin, N., & Kacker, M. (1990). International outlook of US-based franchisers. International Marketing Review, 7(2), 43–53.
Baumol, W. J., Litan, R. E., & Schramm, C. J. (2007). Good capitalism, bad capitalism, and the economics of growth and prosperity. New Haven: Yale University Press.
Beck, S. (2010). Franchising in frontier markets. Innovations: Technology, Governance, Globalization, 5(1), 153–162.
Block, J. H., Hoogerheide, L. F., & Thurik, A. R. (2013). Education and entrepreneurial choice: An instrumental variables analysis. International Small Business Journal, 31(1), 23–33.
Brock, W., & Evans, D. S. (1986). The economics of small business. New York: Holmes and Meier.
Cali, M., Ellis, K., & te Velde, D. W. (2008). The contribution of services to development: The role of regulation and trade liberalisation. ODI project briefings (Vol. 17). London, UK: Overseas Development Institute.
Carree, M., van Stel, A., Thurik, R., & Wennekers, S. (2002). Economic development and business ownership: An analysis using data of 23 OECD countries in the period 1976–1996. Small Business Economics, 19(3), 271–290.
Carree, M., van Stel, A., Thurik, R., & Wennekers, S. (2007). The relationship between economic development and business ownership revisited. Entrepreneurship and Regional Development, 19(3), 281.
Caves, R. E. (1998). Research on international business: Problems and prospects. Journal of International Business Studies, 29(1), 5–19.
Caves, R. E., & Murphy, W. F. (1976). Franchising: Firms, markets, and intangible assets. Southern Economic Journal, 42(April), 572–586.
Christensen, L., Lehr, D., & Fairbourne, J. (2010). A good business for poor people. Stanford Social Innovation Review, 8(3), 44–49.
Combs, J. G., Michael, S. C., & Castrogiovanni, G. J. (2004). Franchising: A review and avenues to greater theoretical diversity. Journal of Management, 30(6), 907–931.
Dicke, T. S. (1992). Franchising in America: The development of a business method, 1840–1980. Chapel Hill, NC: University of North Carolina Press.
Fladmoe-Lindquist, K. (1996). International franchising: Capabilities and development. Journal of Business Venturing, 11, 419–438.
Fladmoe-Lindquist, K., & Jacque, L. L. (1995). Control modes in international service operations: The propensity to franchise. Management Science, 41(7), 1238–1249.
Granger, C. W. J., & Newbold, P. (1977). Forecasting economic time series. New York: Academic.
Grunhagen, M., & Witte, C. L. (2005). The role of franchising as a driver of economic development for emerging economies. Journal of Business, Industry and Economics, 5(1), 27–45.
Heskett, J. L. (1986). Managing in the service economy. Boston: Harvard Business School.
Hoy, F., Stanworth, J., & Purdy, D. (2000). An entrepreneurial slant to franchise research. In D. L. Sexton & H. Landstrom (Eds.), The Blackwell handbook of entrepreneurship (pp. 408–432). Malden, MA: Blackwell Publishers.
Hunt, S. D. (1972). The socioeconomic consequences of the franchise system of distribution. Journal of Marketing, 36(3), 32–38.
Huszagh, S. M., Huszagh, F. W., & McIntyre, F. S. (1992). International franchising in the context of competitive strategy and the theory of the firm. International Marketing Review, 9(5), 5–18.
Kaufmann, P. J., & Leibenstein, H. (1988). International business format franchising and retail entrepreneurship: A possible source of retail know-how for developing countries. Journal of Development Planning, 18, 165–179.
Kilby, P. (1971). Entrepreneurship and economic development. New York: Free Press.
Knott, A. M. (2003). The organizational routines factor market paradox. Strategic Management Journal, 24(10), 929–943.
Lafontaine, F. (1992). Agency theory and franchising: Some empirical results. RAND Journal of Economics, 23(2), 263–283.
Levine, R., & Renelt, D. (1992). A sensitivity analysis of cross-country growth regressions. The American Economic Review, 82(4), 942–963.
Love, J. F. (1986). McDonald’s: Behind the arches. New York: Bantam.
Mahoney, J. T. (1992). The adoption of the multidivisional form of organization: A contingency model. Journal of Management Studies, 29(1), 49–72.
Michael, S. C. (1999). The elasticity of franchising. Small Business Economics, 12(4), 313–320.
Michael, S. C. (2003). Determinants of the rate of franchising among nations. Management International Review, 43(3), 267–290.
Michael, S. C., & Moore, H. J. (1995). Returns to franchising. Journal of Corporate Finance, 2(1–2), 133–155.
Michael, S. C., & Pearce, J. A. (2009). The need for innovation as a rationale for government involvement in entrepreneurship. Entrepreneurship and Regional Development, 21(3), 285–302.
Organization for Economic Cooperation and Development. (2000). The service economy. Paris, France: Organization for Economic Cooperation and Development.
Preble, J. F. (1995). Franchising systems around the globe: A status report. Journal of Small Business Management, 33(2), 80.
Rubin, P. H. (1978). The theory of the firm and the structure of the franchise contract. Journal of Law and Economics, 21(1), 223–233.
Shane, S. (1996). Why franchise companies expand overseas. Journal of Business Venturing, 11(2), 73–88.
Shook, C., & Shook, R. L. (1993). Franchising: The business strategy that changed the world. Englewood Cliffs, NJ: Prentice Hall.
Stock, J. H., & Watson, M. W. (2001). Vector autoregressions. The Journal of Economic Perspectives, 15(4), 101–115.
van Stel, A., Carree, M., & Thurik, R. (2005). The effect of entrepreneurial activity on national economic growth. Small Business Economics, 24(3), 311–321.
Watson, J. L. (1997). Golden arches east: McDonald’s in east Asia. Stanford, CA: Stanford University Press.
Welsh, D. H. B., Alon, I., & Falbe, C. M. (2006). An examination of international retail franchising in emerging markets. Journal of Small Business Management, 44(1), 130–149.
I thank Pat Kaufmann, Marko Grunhagen, and the editor and referees for helpful comments and suggestions. The remaining errors are mine alone.
About this article
Cite this article
Michael, S.C. Can franchising be an economic development strategy? An empirical investigation. Small Bus Econ 42, 611–620 (2014). https://doi.org/10.1007/s11187-013-9500-1
- Economic development
- Organizational form
- International business