Growth Through Franchises in Knowledge-Intensive Industries: Interplay of Routine Program and Expansion Mode

Moren Lévesque, Young Rok Choi, Juliana Hsuan

Research output: Contribution to journalJournal article

Abstract

Thanks to technological developments produced by scientists and engineers, franchising has grown to become a business model of choice for firm expansion in knowledge-intensive industries. We propose a formal model to explore to what degree franchisors should adapt their business practices or routines to successfully expand their franchises in newly targeted markets. By simultaneously considering the franchise’s need to adapt locally in a new market and the level of business routine tacitness at the time of expansion, we integrate previously separate agency cost logics into one model. We offer refinements to the belief that expanding through a franchisee is the best when the business routines need adaptation, but expanding through a company-owned unit is best when these routines can be replicated.
Original languageEnglish
JournalIEEE Transactions on Engineering Management
Volume66
Issue number4
Pages (from-to)496-513
Number of pages18
ISSN0018-9391
DOIs
Publication statusPublished - Nov 2019

Bibliographical note

Published online: 8. August 2018

Keywords

  • Agency problems
  • Franchise expansion
  • Franchising
  • Routine adaptation
  • Routine replication
  • Utility maximization

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