International Franchising: Market versus Hierarchy

Abstract

A substantial body of literature has accumulated in recent years on one of the so-called ‘frontier issues’ of international business: the selection, by a firm, of an appropriate organisational structure which enables it to service a foreign market in a manner most likely to achieve premeditated objectives. Scholars of this foreign market entry and development literature (surveyed, for example, by Young et al., 1989) describe, individually, the advantages and disadvantages of many of these entry modes, including (in rough order of increasing resource commitment to the local market): exporting; the so-called ‘new forms of investment’ (a range of contractual arrangements falling significantly short of majority entrant ownership and which include, for example, licensing, strategic alliances and management contracts, Oman, 1984); equity joint ventures; and wholly-owned subsidiaries.