Social Innovation Through Development Franchising: Compensating for a Lack of Entrepreneurial Expertise and Connecting to Formal Supply Chains

Abstract

Promoting entrepreneurship through microenterprise has become a popular strategy for poverty alleviation and economic development. However, not all would-be entrepreneurs have the necessary skills and expertise to succeed in new venture creation. Furthermore, microenterprises often function within the confi nes of the informal economy, with limited access to formal supply chains. As one potential solution for overcoming these two major challenges, we propose that development franchisingfranchising that begins at a micro scale in developing economies -can be employed as a social innovation. Regarding entrepreneurial expertise, recent research has shown that franchisees in the United States more closely resemble non-entrepreneurs than entrepreneurial experts, implying that the franchise business model may compensate for a franchisee's lack of entrepreneurial expertise. In a development context, franchising can also serve as an effective means of helping subsistence entrepreneurs access formal supply chains -increasing opportunities for scaling, growth, and further job creation. Two case examples illustrate the potential of development franchising in overcoming some of the major challenges faced by traditional microenterprise strategies.

Innovative Qualities of Today’s Young Students (As Exemplified by the Siberian Federal University

“…Gulbrandsen and Aanstad (2015), Hofman (2013), McElroy (2002), Moulaert et al (2007), Wisse et al (2015) and others turn their attention to innovation and the world of the humanities, such as promoting innovation in universities or the arts. Phills et al (2008), Moon et al (2008), Smith and Seawright (2015) study innovative behavior in the aspect of consumer behavior and marketing. Ilbeykina et al (2015) analyze by social innovation in the city of Krasnoyarsk (Central Siberia).…”

Enterprising the rural; Creating a social value chain

“…In Farmstore's case we see how the drive, enthusiasm and local knowledge of the franchisees is able to be used more effectively by incorporating the knowledge of the franchisor. Moreover, when expert knowledge is scarce, the transfer of expertise is particularly beneficial (Smith and Seawright, 2015). Just as a McDonald franchisee is 'trained' to cook good French fries, but has to buy the 'tested' potatoes from McDonalds; Farm Store franchisees learn good practices and are supplied with appropriate quality 'tested' products.…”

Reproductive health services: “Business-in-a-Box” as a model social innovation

“…As a "development franchising" approach it provides the basic infrastructure (credit lending for inventory, access to formal supply chains, and branding) to promote micro-entrepreneurship through scaling up, building skills, and adding into value chains. It can be termed a form of social innovation (Smith and Seawright 2015) when coupled with a strong social objective to protect people at the bottom end of the economic ladder from the credit spiral and help them with some savings (Mehmood, Jamal, and Sriram 2015). A downside of the franchising model is the attachment with particular brands, suppliers or product providers.…”