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Effect of New Regulation on Franchising Performance: An Exploratory Study in Spain

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New Developments in the Theory of Networks

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

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Abstract

Compulsory franchising regulation in Spain was introduced in 1998. Until then, franchising had had no specific regulation and was regulated by general commercial laws. This paper examines the effect of the change from a general regulation to a franchise-specific legislation on survival rates and discontinuance rates in the Spanish market. We use a descriptive methodology and a comparison between survival curves. After controlling for time-in-market, results suggest that, after regulation, there is an increase in the organizational failure rates but a decrease in discontinuance rates. Furthermore, regulation affects foreign franchisors slightly more negatively than domestic ones and the reaction of growing firms is different from that of firms with negative growth.

This research was financed by a proyect from the regional governemt GENERES (S09) and PI 138/08; and from the Spanish Government (ECO 2008-04704).

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Notes

  1. 1.

    In these studies, franchisor failure and network failure are used synonymously.

  2. 2.

    Organizational mortality might imply bankruptcy, liquidation of the firm or moratorium on payments. The status of the firm was provided by SABI, a database for all the Spanish and Portuguese firms. In this paper, any status other than active was considered as organizational mortality. Franchise discontinuance is defined when the franchise network was not listed in any franchise sourcebook or in the Spanish Franchise Register for at least two consecutive years but when the firm was still considered active in the SABI and presented its financial documents. In both organizational failure and franchise discontinuance, the franchise network disappears from the franchise sourcebooks but, in the case of franchise discontinuance, the firm continues its entrepreneurial activity while, in organizational failure, the firm is not active any more.

  3. 3.

    BOE, n° 283, pp. 38859–38862. I General regulations. Ministry of Economy and Taxes.www.boe.es

  4. 4.

    The failure rates and the analysis of the survival curves have also been tested using calendar time instead of experience in franchising. This analysis is normally applied in survival research when the macroeconomic environment is more important than the firm-specific factors. The results obtained were similar and we reached the same conclusions.

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Authors and Affiliations

  1. Marketing Department, University of Zaragoza, Huesca, 50005, Spain

    Laura Lucia-Palacios

Authors
  1. Victoria Bordonaba-Juste
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  2. Laura Lucia-Palacios
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  3. Yolanda Polo-Redondo
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Corresponding author

Correspondence to Laura Lucia-Palacios .

Editor information

Editors and Affiliations

  1. , School of Business and Economics, University of Jyväskylä, MaE, Jyväskylä, 40014, Finland

    Mika Tuunanen

  2. Fak. Sozial-u.Wirtschaftswiss., Inst. BWL / LS Organisation, Universität Wien, Brünner Str. 72, Wien, 1210, Austria

    Josef Windsperger

  3. Centre Recherche en Economic et, Management (CREM), Universite de Rennes 1, rue Jean Macé 11, Rennes CX, 35708, France

    Gérard Cliquet

  4. School of Management, Erasmus University Rotterdam, Burg. Oudlaan 50, Rotterdam, 3000 DR, Netherlands

    George Hendrikse

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Bordonaba-Juste, V., Lucia-Palacios, L., Polo-Redondo, Y. (2011). Effect of New Regulation on Franchising Performance: An Exploratory Study in Spain. In: Tuunanen, M., Windsperger, J., Cliquet, G., Hendrikse, G. (eds) New Developments in the Theory of Networks. Contributions to Management Science. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2615-9_12

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