Articlebronze2005

Resource Scarcity and Agency Theory Predictions Concerning the Continued Use of Franchising in Multi-outlet Networks

Gary J. Castrogiovanni · James G. Combs · Robert T. Justis

206 citations0/0 files storedJournal of Small Business Management

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Franchising Strategies and Performance Entrepreneurship Studies and Influences Innovation and Knowledge Management

Abstract

A study of 439 franchisors was conducted to identify factors influencing changes in their propensity to franchise. Consistent with agency theory, franchisors with wide multinational scope were increasing their proportion of franchised outlets whereas franchisors with large outlets were emphasizing firm ownership. As predicted by resource scarcity theory, franchisors were decreasing their proportion franchised as they grew in size, although most of the decrease occurred while firms were relatively small. In contrast to resource scarcity theory, franchisors increased their proportion franchised over time. Key implications are that both agency and resource scarcity theories are needed to explain franchising, but perhaps future research should look beyond resource scarcities toward resource-based capabilities to better explain franchising decisions.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1991Firm Resources and Sustained Competitive Advantage 2004Firm resources and sustained competitive advantage 1989Agency Theory: An Assessment and Review 1986Research in Organizational Behavior.1970How we should measure "change": Or should we?1966Theory of the Firm 1994The Study of Congruence in Organizational Behavior Research: Critique and a Proposed Alternative

Cited by

2011Franchising Research Frontiers for the Twenty-First Century 2016A Model of Entrepreneurial Autonomy in Franchised Outlets: A Systematic Review of the Empirical Evidence 2011Franchising and the Family Firm: Creating Unique Sources of Advantage through “Familiness”2013Examining the Drivers for Franchised Chains Performance through the Lens of the Dynamic Capabilities Approach 2009Agency and institutional influences on franchising decisions 2018Franchise management capabilities and franchisor performance under alternative franchise ownership strategies

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