Skip to main content
SpringerLink
Log in

Quality signaling through ex-ante voluntary information disclosure in entrepreneurial networks: evidence from franchising

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

This paper examines antecedents of ex-ante voluntary information disclosures for standardized contracts in entrepreneurial networks. Entrepreneurs (e.g., franchisors) may make such disclosures to prospective business partners in order to signal profitability of partnering, attract financial and managerial resources, and develop their entrepreneurial networks. In practice, only a fraction of franchisors make financial performance representations (FPRs), an ex-ante voluntary information disclosure to prospective franchisees. We address gaps in the signaling, voluntary information disclosure, franchising, entrepreneurship, and small- and medium-enterprise (SME) literatures. We draw on signaling theory to develop a theoretical framework and investigate factors that influence a franchisor’s disclosure decision. We evaluate hypotheses from our theoretical framework through econometric analyses of multi-sector panel data for the US franchising industry. We estimate a logit model and use lagged independent variables to address our dichotomous independent variable and potential endogeneity, respectively. Our results support the view that firms signal their quality through FPRs to attract potential business partners and expand their entrepreneurial networks. Beyond the extant literature, we find that rigorous partner qualification is another driver of voluntary information disclosure in franchising. Our findings also provide empirical support for the complementary role played by multiple quality signaling mechanisms used by franchisors and yield public policy implications for franchising.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. An earnings claim (an example of voluntary information disclosure by franchisors) is a document that franchisors use to provide some financial information to prospective franchisees. As of July 2007, the Uniform Franchise Offering Circular (UFOC) has been renamed as Franchise Disclosure Document (FDD) and earnings claims have been renamed as Financial Performance Representation (FPR) by the Federal Trade Commission (FTC). In this paper, when we refer to previous studies, we use the term “earnings claim” instead of FPR to be consistent with the original source.

  2. We replicate this study for two reasons. First, many scholars submit that replication is a necessary procedure to verify theoretical insights from empirical studies (Honig et al. 2014; Hubbard et al. 1998; Tsang and Kwan 1999). Second, Michael (2009) empirically tested his model using cross-sectional data from the restaurant industry. Research has shown significant differences between service and retail-type franchise chains (Barthélemy 2008; Perrigot 2006) and across different franchising sectors (Blair and Lafontaine 2005). Our multi-industry multi-year dataset helps to test whether Michael’s (2009) results are supported for other industries.

  3. Price (2000) examines the effect of contractual payments on the likelihood of making an earnings claim. She reports a positive relationship between contractual payments (including the royalty rate) made by franchisees to the franchisor and the franchisor’s likelihood of making an earnings claim. It should be noted that she views contractual payments (including ongoing fees) as a measure of the franchisee’s investment risk rather than as an indicator of franchisor quality. This perspective may not fully recognize the initial and ongoing services (provided by the franchisor to franchisees) that correspond with initial and ongoing contractual payments.

  4. This approach of using competing hypotheses has been used in extant research in franchising (e.g., Hendrikse et al. 2015) and entrepreneurship (e.g., Strotmann 2007) and enhances the objectivity and rigor of theory testing (Armstrong, Brodie, and Parsons 2001). It has its roots in the “strong inference” model of inductive reasoning-based scientific inquiry (Platt 1964) and recognizes the limitations of scientific inquiry grounded in single hypotheses (Chamberlin 1897).

  5. We used this measure since it is suggested as a better measure by Golan et al. (1996) and Kwoka (1979) and allows us to be consistent with Michael (2009). To assess the robustness of our model, we also estimated it using the more common four-firm-concentration measure. Our estimation results revealed that the empirical support for our hypotheses was not affected by this change.

  6. We thank an anonymous reviewer for this insight.

  7. Note that some of our hypotheses (H1a, H5a, H5b) are similar to hypotheses first developed and presented by Michael (2009).

  8. Michael (2009) measured cost of signal and ongoing fees with the number of owned units and royalty rate, respectively.

  9. We thank an anonymous reviewer for this suggestion.

  10. Given the results in our replication model, it can be claimed that the differences between the findings in our enhanced model and those in Michael (2009) are not because of the data used but on account of the augmentation of antecedents included and the amended operationalization of constructs in our enhanced model.

  11. We thank an anonymous reviewer for this insight.

References

  • Akerlof, G. (1970). The market for lemons: quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500.

    Article  Google Scholar 

  • Aldrich, H., & Auster, E. R. (1986). Even dwarfs started small: liabilities of age and size and their strategic implications. In B. M. Staw & L. L. Cummings (Eds.), Research in organizational behavior (Vol. 8, pp. 165–186). Greenwich: JAI Press.

    Google Scholar 

  • Antia, K. D., Zheng, X., & Frazier, G. L. (2013). Conflict management and outcomes in franchise relationships: the role of regulation. Journal of Marketing Research, 50(5), 577–589. doi:10.1509/jmr.11.0144.

    Article  Google Scholar 

  • Armstrong, J., Brodie, R., & Parsons, A. (2001). Hypotheses in marketing science: literature review and publication audit. Marketing Letters, 12(2), 171–187. doi:10.1023/A:1011169104290.

    Article  Google Scholar 

  • Arthurs, J. D., Busenitz, L. W., Hoskisson, R. E., & Johnson, R. A. (2009). Signaling and initial public offerings: the use and impact of the lockup period. Journal of Business Venturing, 24(4), 360–372. doi:10.1016/j.jbusvent.2008.02.004.

    Article  Google Scholar 

  • Asoni, A., & Sanandaji, T. (2016). Identifying the effect of college education on business and employment survival. Small Business Economics, 46(2), 311–324. doi:10.1007/s11187-015-9686-5.

    Article  Google Scholar 

  • Backes-Gellner, U., & Werner, A. (2007). Entrepreneurial signaling via education: a success factor in innovative start-ups. Small Business Economics, 29(1), 173–190. doi:10.1007/s11187-006-0016-9.

    Article  Google Scholar 

  • Bagwell, K., & Riordan, M. H. (1991). High and declining prices signal product quality. American Economic Review, 81(1), 224–239.

    Google Scholar 

  • Baltagi, B. (2008). Econometric analysis of panel data. Hoboken: Wiley.

    Google Scholar 

  • Barthélemy, J. (2008). Opportunism, knowledge, and the performance of franchise chains. Strategic Management Journal, 29(13), 1451–1463. doi:10.1002/smj.719.

    Article  Google Scholar 

  • Bates, T. (1995). A comparison of franchise and independent small business survival rates. Small Business Economics, 7(5), 377–388.

    Article  Google Scholar 

  • Benoliel, U. (2017). Are Disclosures Really Standardized? An Empirical Analysis. Villanova Law Review, 62, 1–26.

  • Blair, R. D., & Lafontaine, F. (2005). The economics of franchising. New York: Cambridge University Press.

    Book  Google Scholar 

  • Brickley, J. A., Misra, S., & Van Horn, R. L. (2006). Contract duration: evidence from franchising. Journal of Law and Economics, 49(1), 173–196. doi:10.1086/501081.

    Article  Google Scholar 

  • Calderon-Monge, E., & Huerta-Zavala, P. (2014). Brand and performance signals in the choice of franchise opportunities. The Service Industries Journal, 34(9–10), 772–787. doi:10.1080/02642069.2014.905920.

    Article  Google Scholar 

  • Certo, S. T., Daily, C. M., & Dalton, D. R. (2001). Signaling firm value through board structure: an investigation of initial public offerings. Entrepreneurship Theory and Practice, 26(2), 33–50.

    Article  Google Scholar 

  • Chamberlin, T. C. (1897). Studies for students: the method of multiple working hypotheses. The Journal of Geology, 5(8), 837–848. doi:10.2307/30054868.

    Article  Google Scholar 

  • Cheong, I., & Kim, J. Y. (2004). Costly information disclosure in oligopoly. The Journal of Industrial Economics, 52(1), 121–132. doi:10.1111/j.0022-1821.2004.00218.x.

    Article  Google Scholar 

  • Chow, C. W., & Wong-Boren, A. (1987). Voluntary financial disclosure by Mexican corporations. The Accounting Review, 62(3), 533–541.

    Google Scholar 

  • Chung, W., & Kalnins, A. (2001). Agglomeration effects and performance: a test of the Texas lodging industry. Strategic Management Journal, 22(10), 969–988. doi:10.1002/smj.178.

    Article  Google Scholar 

  • Clarkin, J. E., & Rosa, P. J. (2005). Entrepreneurial teams within franchise firms. International Small Business Journal, 23(3), 303–334. doi:10.1177/0266242605052075.

    Article  Google Scholar 

  • Combs, J. G., Michael, S. C., & Castrogiovanni, G. J. (2009). Institutional influences on the choice of organizational form: the case of franchising. Journal of Management. doi:10.1177/0149206309336883.

  • Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: a review and assessment. Journal of Management, 37(1), 39–67. doi:10.1177/0149206310388419.

    Article  Google Scholar 

  • Crocker, K. J., & Masten, S. E. (1988). Mitigating contractual hazards: unilateral options and contract length. The Rand Journal of Economics, 19(3), 327–343. doi:10.2307/2555660.

    Article  Google Scholar 

  • Diamond, D. W. (1985). Optimal release of information by firms. The Journal of Finance, 40(4), 1071–1094. doi:10.2307/2328395.

    Article  Google Scholar 

  • Dye, R. A. (1985). Strategic accounting choice and the effects of alternative financial reporting requirements. Journal of Accounting Research, 23(2), 544–574. doi:10.2307/2490826.

    Article  Google Scholar 

  • Fadairo, M., & Lanchimba, C. (2013). Signaling the quality of a business concept; Evidence from a structural equations model with Brazilian data. Paper presented at the 40th Annual Conference of the European Association for Research in Industrial Economics.

  • Filatotchev, I., & Bishop, K. (2002). Board composition, share ownership, and ‘underpricing’ of U.K. IPO firms. Strategic Management Journal, 23(10), 941–955. doi:10.1002/smj.269.

    Article  Google Scholar 

  • Gallini, N. T., & Lutz, N. A. (1992). Dual distribution and royalty fees in franchising. Journal of Law, Economics, and Organization, 471–501.

  • Gao, H., Darroch, J., Mather, D., & MacGregor, A. (2008). Signaling corporate strategy in IPO communication a study of biotechnology IPOs on the NASDAQ. Journal of Business Communication, 45(1), 3–30. doi:10.1177/0021943607309349.

    Article  Google Scholar 

  • Gillis, W. E., Combs, J. G., & Ketchen, D. J. (2014). Using resource-based theory to help explain plural form franchising. Entrepreneurship Theory and Practice, 38(3), 449–472. doi:10.1111/etap.12008.

    Article  Google Scholar 

  • Golan, A., Judge, G., & Perloff, J. M. (1996). Estimating the size distribution of firms using government summary statistics. The Journal of Industrial Economics, 44, 69–80. doi:10.2307/2950561.

    Article  Google Scholar 

  • Gonzalez-Diaz, M., & Solis-Rodriguez, V. (2012). Why do entrepreneurs use franchising as a financial tool? An agency explanation. Journal of Business Venturing, 27(3), 325–341. doi:10.1016/j.jbusvent.2011.03.001.

    Article  Google Scholar 

  • Grossman, S. J. (1981). The informational role of warranties and private disclosure about product quality. Journal of Law and Economics, 24, 461–483.

    Article  Google Scholar 

  • Grünhagen, M., & Dorsch, M. J. (2003). Does the franchisor provide value to franchisees? Past, current, and future value assessments of two franchisee types. Journal of Small Business Management, 41(4), 366–384. doi:10.1111/1540-627X.00088.

    Article  Google Scholar 

  • Guilloux, V., Gauzente, C., Kalika, M., & Dubost, N. (2004). How France’s potential franchisees reach their decisions: a comparison with franchisers’ perceptions. Journal of Small Business Management, 42(2), 218–224. doi:10.1111/j.1540-627X.2004.00107.x.

    Article  Google Scholar 

  • Hayes, A. F., & Krippendorff, K. (2007). Answering the call for a standard reliability measure for coding data. Communication Methods and Measures, 1(1), 77–89. doi:10.1080/19312450709336664.

    Article  Google Scholar 

  • Hendrikse, G., & Windsperger, J. (2011). Determinants of contractual completeness in franchising. In M. Tuunanen, G. Cliquet, G. Hendrikse, & J. Windsperger (Eds.), New developments in the theory of networks (pp. 13–30). Heidelberg: Physica-Verlag.

    Chapter  Google Scholar 

  • Hendrikse, G., Hippmann, P., & Windsperger, J. (2015). Trust, transaction costs and contractual incompleteness in franchising. Small Business Economics, 44(4), 867–888. doi:10.1007/s11187-014-9626-9.

    Article  Google Scholar 

  • Hershman, S., & Mazero, J. G. (2008). Financial performance representations: the new and updated earnings claims (1st ed.). Illinois: American Bar Association.

    Google Scholar 

  • Honig, B., Lampel, J., Siegel, D., & Drnevich, P. (2014). Ethics in the production and dissemination of management research: institutional failure or individual fallibility? Journal of Management Studies, 51(1), 118–142. doi:10.1111/joms.12056.

    Article  Google Scholar 

  • Hsiao, C. (2014). Analysis of panel data (3rd ed.). New York: Cambridge university press.

    Book  Google Scholar 

  • Hsieh, C., Lazzarini, S. G., Nickerson, J. A., & Laurini, M. (2010). Does ownership affect the variability of the production process? Evidence from international courier services. Organization Science, 21(4), 892–912. doi:10.1287/orsc.l090.0482.

    Article  Google Scholar 

  • Hubbard, R., Vetter, D. E., & Little, E. L. (1998). Replication in strategic management: scientific testing for validity, generalizability, and usefulness. Strategic Management Journal, 19(3), 243–254. doi:10.1002/(SICI)1097-0266(199803)19:3<243::AID-SMJ951>3.0.CO;2-0.

    Article  Google Scholar 

  • IHS-Economics. (2016). Franchise business economic outlook for 2016: International Franchise Association Educational Foundation.

  • Janney, J. J., & Folta, T. B. (2006). Moderating effects of investor experience on the signaling value of private equity placements. Journal of Business Venturing, 21(1), 27–44. doi:10.1016/j.jbusvent.2005.02.008.

    Article  Google Scholar 

  • Justis, R. T., & Chan, P. S. (1991). Training for franchise management. Journal of Small Business Management, 29(3), 87.

    Google Scholar 

  • Kacker, M., & Wu, R. (2013). Specific investments in franchisor–franchisee relationships: a model. Journal of Marketing Channels, 20(1–2), 120–140. doi:10.1080/1046669X.2013.747863.

    Article  Google Scholar 

  • Kacker, M., Dant, R. P., Emerson, J., & Coughlan, A. T. (2016). How firm strategies impact size of partner-based retail networks: evidence from franchising. Journal of Small Business Management, 54(2), 506–531. doi:10.1111/jsbm.12155.

    Article  Google Scholar 

  • Kaufmann, D. (1995). The case against mandatory earnings claim disclosure. Franchise Law Journal, 15(1), 3.

    Google Scholar 

  • Kaufmann, P. J., & Dant, R. P. (2001). The pricing of franchise rights. Journal of Retailing, 77(4), 537–545. doi:10.1016/S0022-4359(01)00053-7.

    Article  Google Scholar 

  • Keasey, K., Short, H., & McGuinness, P. (1992). New issues on the U.K. unlisted securities market: the ability of entrepreneurs to signal firm value. Small Business Economics, 4(1), 15–27. doi:10.1007/bf00402212.

    Google Scholar 

  • Kirmani, A., & Rao, A. R. (2000). No pain, no gain: a critical review of the literature on signaling unobservable product quality. Journal of Marketing, 64(2), 66–79. doi:10.1509/jmkg.64.2.66.18000.

    Article  Google Scholar 

  • Kosová, R., & Lafontaine, F. (2010). Survival and growth in retail and service industries: evidence from franchised chains. The Journal of Industrial Economics, 58(3), 542–578. doi:10.1111/j.1467-6451.2010.00431.x.

    Article  Google Scholar 

  • Kwoka, J. E. (1979). The effect of market share distribution on industry performance. The Review of Economics and Statistics, 61, 101–109. doi:10.2307/1924836.

    Article  Google Scholar 

  • Lafontaine, F. (1992). Agency theory and franchising: some empirical results. The Rand Journal of Economics, 23(2), 263–283. doi:10.2307/2555988.

    Article  Google Scholar 

  • Lafontaine, F. (1993). Contractual arrangements as signaling devices: evidence from franchising. Journal of Law, Economics, and Organization, 256–289.

  • Lafontaine, F., & Blair, R. D. (2009). The evolution of franchising and franchise contracts: evidence from the United States. Entrepreneurial Business Law Journal, 3(2), 381–434.

    Google Scholar 

  • Lafontaine, F., & Shaw, K. L. (1998). Franchising growth and franchisor entry and exit in the US market: myth and reality. Journal of Business Venturing, 13(2), 95–112. doi:10.1016/S0883-9026(97)00065-7.

    Article  Google Scholar 

  • Lafontaine, F., & Shaw, K. L. (1999). The dynamics of franchise contracting: evidence from panel data. Journal of Political Economy, 107(5), 1041–1080. doi:10.3386/w5585.

    Article  Google Scholar 

  • Lafontaine, F., & Shaw, K. L. (2005). Targeting managerial control: evidence from franchising. RAND Journal of Economics, 36(1), 131–150. doi:10.2307/1593758.

    Google Scholar 

  • Lardon, A., & Deloof, M. (2014). Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext free market. Small Business Economics, 42(2), 361–385. doi:10.1007/s11187-013-9484-x.

    Article  Google Scholar 

  • Lee, P. M. (2001). What’s in a name. Com?: the effects of ‘. com’name changes on stock prices and trading activity. Strategic Management Journal, 22(8), 793–804. doi:10.1002/smj.177.

    Article  Google Scholar 

  • Leland, H. E., & Pyle, D. H. (1977). Informational asymmetries, financial structure, and financial intermediation. The Journal of Finance, 32(2), 371–387. doi:10.2307/2326770.

    Article  Google Scholar 

  • López-Bayón, S., & González-Díaz, M. (2010). Indefinite contract duration: evidence from electronics subcontracting. International Review of Law and Economics, 30(2), 145–159. doi:10.1016/j.irle.2010.03.001.

    Article  Google Scholar 

  • Luangsuvimol, T., & Kleiner, B. H. (2004). Effective franchise management. Management Research News, 27(4/5), 63–71. doi:10.1108/01409170410784482.

    Article  Google Scholar 

  • Lucia-Palacios, L., Bordonaba-Juste, V., Madanoglu, M., & Alon, I. (2014). Franchising and value signaling. Journal of Services Marketing, 28(2), 105–115. doi:10.1108/JSM-09-2013-0253.

    Article  Google Scholar 

  • Michael, S. C. (1999). The elasticity of franchising. Small Business Economics, 12(4), 313–320. doi:10.1023/A:1008019418231.

    Article  Google Scholar 

  • Michael, S. C. (2000). The effect of organizational form on quality: the case of franchising. Journal of Economic Behavior and Organization, 43(3), 295–318. doi:10.1016/S0167-2681(00)00125-6.

    Article  Google Scholar 

  • Michael, S. C. (2003). First mover advantage through franchising. Journal of Business Venturing, 18(1), 61–80. doi:10.1016/S0883-9026(01)00085-4.

    Article  Google Scholar 

  • Michael, S. C. (2009). Entrepreneurial signaling to attract resources: the case of franchising. Managerial and Decision Economics, 30(6), 405–422. doi:10.1002/mde.1460.

    Article  Google Scholar 

  • Michael, S. (2014). Can franchising be an economic development strategy? An empirical investigation. Small Business Economics, 42(3), 611–620. doi:10.1007/s11187-013-9500-1.

    Article  Google Scholar 

  • Milgrom, P. (1981). Good news and bad news: representation theorems and applications. The Bell Journal of Economics, 12(2), 380–391. doi:10.2307/3003562.

    Article  Google Scholar 

  • Milgrom, P., & Roberts, J. (1986). Price and advertising signals of product quality. Journal of Political Economy, 94(4), 796–821. doi:10.1086/261408.

    Article  Google Scholar 

  • Mishra, D. P., Heide, J. B., & Cort, S. G. (1998). Information asymmetry and levels of agency relationships. Journal of Marketing Research, 35(3), 277–295. doi:10.2307/3152028.

    Article  Google Scholar 

  • Mitsuhashi, H., Shane, S., & Sine, W. D. (2008). Organization governance form in franchising: efficient contracting or organizational momentum? Strategic Management Journal, 29(10), 1127–1136. doi:10.1002/smj.702.

    Article  Google Scholar 

  • Montiel, I., Husted, B. W., & Christmann, P. (2012). Using private management standard certification to reduce information asymmetries in corrupt environments. Strategic Management Journal, 33(9), 1103–1113. doi:10.1002/smj.1957.

    Article  Google Scholar 

  • Nelson, P. (1970). Information and consumer behavior. Journal of Political Economy, 78(2), 311–329. doi:10.1086/259630.

    Article  Google Scholar 

  • Perrigot, R. (2006). Services vs retail chains: are there any differences? International Journal of Retail & Distribution Management, 34(12), 918–930. doi:10.1108/09590550610714648.

    Article  Google Scholar 

  • Platt, J. R. (1964). Strong inference: certain systematic methods of scientific thinking may produce much more rapid progress than others. Science, 146, 347–353.

    Article  Google Scholar 

  • Price, R. (2000). Who reports earnings when reporting is optional? The market for new franchises. Journal of Accounting and Economics, 28(3), 391–423. doi:10.1016/S0165-4101(00)00009-4.

    Article  Google Scholar 

  • Riley, J. G. (1975). Competitive signaling. Journal of Economic Theory, 10(2), 174–186. doi:10.1016/0022-0531(75)90049-6.

    Article  Google Scholar 

  • Rostamkalaei, A., & Freel, M. (2016). The cost of growth: small firms and the pricing of bank loans. Small Business Economics, 46(2), 255–272. doi:10.1007/s11187-015-9681-x.

    Article  Google Scholar 

  • Sen, K. C. (1993). The use of initial fees and royalties in business-format franchising. Managerial and Decision Economics, 14(2), 175–190. doi:10.1002/mde.4090140209.

    Article  Google Scholar 

  • Seshadri, S. (2002). Outlet ownership in franchising systems: an agency based approach. Managerial and Decision Economics, 23(6), 355–369. doi:10.1002/mde.1073.

    Article  Google Scholar 

  • Shane, S. (1998). Research notes and communications: making new franchise systems work. Strategic Management Journal, 19(7), 697–707. doi:10.1002/(SICI)1097-0266(199807)19:7<697.

    Article  Google Scholar 

  • Shane, S., Shankar, V., & Aravindakshan, A. (2006). The effects of new franchisor partnering strategies on franchise system size. Management Science, 52(5), 773–787. doi:10.1287/mnsc.1050.0449.

    Article  Google Scholar 

  • Sorenson, O., & Sorensen, J. B. (2001). Finding the right mix: franchising, organizational learning, and chain performance. Strategic Management Journal, 22(6/7), 713–724. doi:10.1002/smj.185.

    Article  Google Scholar 

  • Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355–374.

    Article  Google Scholar 

  • Spence, M. (2002). Signaling in retrospect and the informational structure of markets. American Economic Review, 92(3), 434–459. doi:10.1257/00028280260136200.

    Article  Google Scholar 

  • Srinivasan, R., & Sihi, D. (2012). Marketing information disclosures: a review and research agenda. In S. Ganesan (Ed.), Handbook of marketing and finance (pp. 108–126). Cheltenham: Edward Edgar Publishing Limited.

  • Stanworth, J., & Kaufmann, P. (1996). Similarities and differences in UK and US franchise research data: towards a dynamic model of franchisee motivation. International Small Business Journal, 14(3), 57–70. doi:10.1177/0266242696143003.

    Article  Google Scholar 

  • Strotmann, H. (2007). Entrepreneurial survival. Small Business Economics, 28(1), 87–104. doi:10.1007/s11187-005-8859-z.

    Article  Google Scholar 

  • Stump, R. L., & Heide, J. B. (1996). Controlling supplier opportunism in industrial relationships. Journal of Marketing Research, 33(4), 431–441. doi:10.2307/3152214.

    Article  Google Scholar 

  • Terlaak, A. (2007). Order without law? The role of certified management standards in shaping socially desired firm behaviors. The Academy of Management Review, 32(3), 968–985. doi:10.2307/20159344.

    Article  Google Scholar 

  • Tsang, E. W. K., & Kwan, K.-M. (1999). Replication and theory development in organizational science: a critical realist perspective. The Academy of Management Review, 24(4), 759–780. doi:10.2307/259353.

    Google Scholar 

  • Verrecchia, R. E. (1983). Discretionary disclosure. Journal of Accounting and Economics, 5, 179–194. doi:10.1016/0165-4101(83)90011-3.

    Article  Google Scholar 

  • Wathne, K. H., & Heide, J. B. (2000). Opportunism in interfirm relationships: forms, outcomes, and solutions. Journal of Marketing, 64(4), 36–51. doi:10.1509/jmkg.64.4.36.18070.

    Article  Google Scholar 

  • Williams, D. R., Duncan, W. J., & Ginter, P. M. (2010). Testing a model of signals in the IPO offer process. Small Business Economics, 34(4), 445–463. doi:10.1007/s11187-008-9130-1.

    Article  Google Scholar 

  • Windsperger, J. (2001). The fee structure in franchising: a property rights view. Economics Letters, 73(2), 219–226. doi:10.1016/S0165-1765(01)00491-8.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. DeGroote School of Business, McMaster University, Hamilton, ON, Canada

    Farhad Sadeh & Manish Kacker

Authors
  1. Farhad Sadeh
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Manish Kacker
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Farhad Sadeh.

Additional information

We thank the Editor, two anonymous referees, Josef Windsperger, and Sreelata Jonnalagedda for their comments on a previous version of this article. This article has benefited from feedback received during presentations at the 2015 EMNet Conference, the 2015 ISOF Conference, the 2015 Empirical and Theoretical Symposium on Marketing Strategy, the 2016 Summer AMA Conference, the 2016 ISBM Biennial Academic Conference, and research seminars at the Indian Institute of Management (Bangalore) and McMaster University. This article is based on the first author’s doctoral dissertation research. We acknowledge financial support from the Franchise and Dealer Management Initiative (FDMI), McMaster University. This research was supported by the Social Sciences and Humanities Research Council of Canada.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Sadeh, F., Kacker, M. Quality signaling through ex-ante voluntary information disclosure in entrepreneurial networks: evidence from franchising. Small Bus Econ 50, 729–748 (2018). https://doi.org/10.1007/s11187-017-9892-4

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-017-9892-4

Keywords

JEL classifications

Search

Navigation