Finding the right mix: franchising, organizational learning, and chain performance

Abstract

Franchising provides an increasingly important vehicle for entrepreneurial wealth creation and accounts for a large and growing share of business in the retail and service sectors. Chains—which operate in dispersed markets—most frequently use this form of governance. These firms must balance the centralization and standardization required for efficiency with the adaptation needed for success in varied local markets. By adopting an organizational learning perspective, we argue that the mix of company‐owned and franchised units affects this balance, thereby influencing chain performance. In particular, the different incentives facing company managers and the entrepreneurs that manage franchises encourage distinct patterns of organizational learning. Franchised establishments provide better opportunities for the firm to learn through experimentation; however, companies find it easier to diffuse this information and enforce standards through their company‐owned units. Analyses of franchised restaurant chains in the United States provide empirical evidence of this trade‐off. Copyright © 2001 John Wiley & Sons, Ltd.

Mergers & acquisitions and innovation performance in the telecommunications equipment industry

“…Thus, a disruption in the innovation activity of firms may force them to turn outward to external technology source. Nevertheless, distinctive knowledge bases of internal and external sources can be particularly valuable under conditions of technological uncertainty (Sorenson and Sorensen, 2001) and might be of use in creating knowledge complementarities.…”

Examining the Relationship between Organizational Identification and Learning Organization Dimensions: A Study of a U.S. Franchise

“…Not surprisingly, knowledge flowed between the locations under one owner, but did not flow into the franchisor or other franchisee owners at nearly the same speed. Sorenson and Sorensen (2001) also found this lack of systems when evaluating the comparison between franchise and locally owned locations in the same market. They found that "chains also monitored franchisee behavior, but less stringently and less systematically" than company-owned locations (p. 715).…”

“…Studies explored the development of knowledge within the franchise network and migration of that knowledge throughout the network both among the franchisees and between a franchisee and franchisor (Darr, Argote, & Epple, 1995;Hoy, 2008;Kalnin & Mayer, 2004;Knot & McKelvey, 1999;Lindblom & Tikkanen, 2010;Sorenson & Sorensen, 2001;Watson et al, 2005). These studies showed how information originates and flows throughout the network; however, the perception of a presence of the dimension of a learning organization across the franchise network is underexplored.…”

Evolution in franchising: Trends and new perspectives

“…Franchisors intangible assets are related to brand name and system specific know-how (Norton, 1988;Windsperger & Dant, 2006), while franchisees intangible assets are related to the local know-howcustomer service, quality control, human resource management, product innovation (Sorenson & Sorensen, 2001;Windsperger, 2001;Windsperger & Dant, 2006).…”