Does Ownership Structure Influence Regulatory Behavior? The Impact of Franchising on Labor Standards Compliance

Promotional Reviews: An Empirical Investigation of Online Review Manipulation

“…In this regard, our analysis is related to Blair and Lafontaine (2005) and Jin and Leslie (2009) who examine the incentive eects of reputational spillovers among co-branded entities. Our analysis is also related to Pierce and Snyder (2008), Bennett et al (forthcoming), and Ji and Weil (2009). Bennett et al (forthcoming) show that competition leads vehicle inspectors to cheat and pass vehicles that ought to fail emissions testing.…”

“…Pierce and Snyder (2008) show that larger chains appear to curb cheating behavior from their inspectors; inspectors at a large chain are less likely to pass a given vehicle than are inspectors who work for independent shops. Similarly, Ji and Weil (2009) show that company-owned units of chains are more likely to adhere to labor standards laws than are franchisee-owned units. While our analysis is related to this prior literature, we exploit the rich dierences in organizational form (chain vs. independent, large owner vs. small owner, and large management company vs. small management company) particular to the hotel industry.…”

Rethinking the Regulation of Vulnerable Work in the USA: A Sector-based Approach

“…Conditions leading to workforce vulnerability arise because employment policies for the millions of workers in these sectors reflect the interdependent decisions of relatively small, local employers facing significant product market competition yet having a lower stake in reputation than the multinational brands of which they are a part. Ji and Weil (2009) show that this complex interaction of ownership and management result in about 40 percent non-compliance with minimum wage and overtime regulations among fast food outlets associated with the top 20 national chains in the USA. Other industries employing franchising models of ownership (auto rental; segments of food retailing; and, various service providers) have similar dynamics.…”

“…That means even well-known employers (to say nothing of the 'garden' variety workplace) face little chance of seeing an investigator: for example, the likelihood that one of the top 20 fast food restaurants (e.g. McDonalds; Burger King; Subway) is about 0.8 percent in a given year (Ji and Weil, 2009). But the more pernicious impact is that employers operate under an expectation where government inspectors or other regulatory agents like unions are simply not seen as a matter of first order concern.…”

“…On average, franchisees owe US$800 more in back wages (wages below the required statutory minimum) per worker found in violation than comparable company-owned units (Ji and Weil, 2009).…”