In the broad empirical literature on franchising, performance outcomes of location decisions appear to be a largely forgotten issue. Yet franchising represents a rich context to study the impact of geographic entrepreneurial choices. Addressing this "blank spot" in the literature, we deal with the following question: Is it better for a chain to stay in the same geographic area, or to expand via distant franchised units? Our econometric estimations on new and unique Brazilian panel data show that spatial agglomeration of chain outlets leads to higher performance, suggesting that agglomeration gains outweigh cannibalization and spatial monopoly effects.
<p>Dentro de la literatura sobre franquicias, algunos estudios han sido dedicados al impacto de la franquicia en el crecimiento económico, centrándose más en este aspecto en lugar del desarrollo, si bien la investigación empírica ha concluido que la franquicia tiene influencia en el crecimiento económico. Asimismo, algunos artículos han destacado la importancia y la influencia de la franquicia en el desarrollo, pero no se ha proporcionado una prueba empírica sobre su verdadera fluencia. Es bajo este contexto que se proporciona evidencia empírica que muestra la relación entre la franquicia y el desarrollo.</p>
Within the wide literature regarding franchising, a few studies were devoted to the adverse selection phenomena in the franchise relationships, and to the signaling explanation of the franchisors' organizational choices. Previous empirical works concluded that the signaling framework is not well adapted to study franchising. However, most of the empirical literature has focused on developed countries. This empirical paper deals with the case of Brazil. We estimate on recent franchising data a structural equation model capturing the simultaneous influences of a valuable business concept. The paper provides evidence that the signaling theory is adequate to understand the organizational choices regarding the ownership structure of franchised networks in emerging markets. The estimation results suggest indeed that the Brazilian franchisors use signaling devices, and that the necessity to signal the value of a business concept affects the organizational choices at the network level.
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