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Delegation and Autonomy in Franchising

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New Developments in the Theory of Networks

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

Abstract

This article provides evidence on the determinants of delegation of decision rights in franchise relationships. We suggest that the franchisor chooses the level of delegation to leverage the intangible assets of the franchisees and the franchisor and, simultaneously, to preserve the value of the brand name. While the empirical literature on franchising has studied these effects separately, we consider them together in a model on decentralization. The results show that the franchisee’s autonomy varies negatively with the franchisor’s intangible assets and brand name and positively with the inter-firm trust and the franchisees’ intangible assets. Finally, autonomy also varies negatively with the specific investments of the franchisees.

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Notes

  1. 1.

    Cochet et al. (2008) also examine the relationship between relational governance and decentralization in franchise chains, but their econometric model is constructed to explain relational governance instead of delegation.

  2. 2.

    Relational governance has been examined from a wide array of disciplinary viewpoints. For a review of this diverse literature, see, e.g., Milgrom and Roberts (1992), Goldberg (1980), Baker, Gibbons and Murphy (2002), Levin (2003).

  3. 3.

    See also Dyer and Singh (1998), Poppo and Zenger (2002), Gulati and Nickerson (2008), Mesquita and Brush (2008).

  4. 4.

    The distinction between the roles of expected future trade and social norms as alternative forces supporting trust (i.e. relational governance) has produced a theoretical distinction between a “calculative” and a “non-egoist” form of trust respectively (Williamson 1993; Nooteboom et al. 1997).

  5. 5.

    Other authors suggest a complementary relationship between the relational and the formal modes of governance (Klein 1996, 2002; Poppo and Zenger 2002; Lazzarini et al. 2004, 2007). From this point of view, a firm will not abandon legally enforceable safeguards even though it is increasingly embedded in a relationship of trust with another firm. Nevertheless, we agree with Gulati and Nickerson (2008) and Mesquita and Brush (2008) that unless inter-firm trust can always complement any mode of governance so as to improve exchange performance, relational governance is also a good substitute for a more hierarchical (formal) governance mode.

  6. 6.

    The results of a principal component factor analysis confirmed that these characteristics were part of single higher-order construct (decision-making authority). All variables had a loading in excess of 0.51. The total amount of variance explained by the factor solution is 43.81%.

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Acknowledgments

This research has received support from the MCYT, through grant SEJ2007–63706/ECON, and from the EU’s Framework Programme for Research and Technological Development through grant CIT3–513420.

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Authors and Affiliations

  1. Facultad de Economía y Empresa, Universidad de Oviedo, Avda. del Cristo, s/n, 33071, Oviedo, Spain

    Susana López-Bayón

Authors
  1. Begoña López-Fernández
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  2. Susana López-Bayón
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Correspondence to Susana López-Bayón .

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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López-Fernández, B., López-Bayón, S. (2011). Delegation and Autonomy in Franchising. 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_3

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