Franchising in Government

Abstract

In 1995, the federal government started five pilot Franchise Funds (FF), to study their feasibility for improving productivity through the introduction of competition and capitalizing on specialization and economy of size. This paper describes the current approach to the use of FT. It suggests that the relationship between the FF and those that contract them for service resemble what economists call “principal‐agent relations” and what they study as “agency theory.” The paper concludes that the vast research on agency relations may help the development of a theory or a conceptual framework for studying and managing FF and contracts with them.

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