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.
Bibliographical notePublished online: 8. August 2018
- Agency problems
- Franchise expansion
- Routine adaptation
- Routine replication
- Utility maximization
Lévesque, M., Choi, Y. R., & Hsuan, J. (2019). Growth Through Franchises in Knowledge-Intensive Industries: Interplay of Routine Program and Expansion Mode. IEEE Transactions on Engineering Management, 66(4), 496-513. https://doi.org/10.1109/TEM.2018.2858550