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Franchisees’ Activities as Entrepreneurship
Linköping University, Department of Management and Engineering. Linköping University, The Institute of Technology.
Linköping University, Department of Management and Engineering, Industrial Economics. Linköping University, The Institute of Technology.
Linköping University, Department of Management and Engineering, Industrial Economics. Linköping University, The Institute of Technology.
2013 (English)Conference paper (Other academic)
Abstract [en]

During the last decades, franchising has turned into one of the fastest-growing business forms. Research in franchising has been viewed through the four major perspectives of economics, strategy, marketing and entrepreneurship. Although there is a consensus that the franchisors’ activities are considered as entrepreneurship, this notion is disputed with regard to franchisees. A paradox in entrepreneurial activities of the franchisee has caused doubt in considering franchisees’ activities as entrepreneurship. On the one hand, in a franchisee context, some believe opportunity is always identified and that the franchisor helps the franchisees in exploitation. On the other hand, the opposing view considers a franchisee as an entrepreneur who focuses on opportunity, risk and innovation. Ignoring the franchisees’ capabilities and abilities in innovation and introducing new products can prevent a franchise system from taking advantage of environmental change. Therefore, due to the importance of identification of unique aspects of entrepreneurship research rather than unique definition of entrepreneurship, and attention to entrepreneurial process as a core unit of analysis, this research will examine whether franchisees’ activities can be considered as entrepreneurship. According to the Shane model, the entrepreneurial process involves the existence of profitbased (objective) opportunities, risk-taking and some kind of innovation. Nature of opportunity in franchised outlets is closer to Kirznerian's view than Schumpeterian's  view. Sources of opportunities in franchised outlets are not so clear, like the introduction of a new restaurant in a storefront where none had existed before. In Schumpeter's view, according to different types of innovation, franchisees’ operations involve product-market  innovativeness to include market research, product design, and innovations in advertising and promotion. Regarding risk-taking as the third dimension of the entrepreneurial process, franchisees risk their capital. Although it seems in franchise systems that risk for the  franchisee is, to some extent, shared with the franchisor, no franchisor will be able to eliminate the financial, business and personal risk of the franchisees. The franchisor also transfers the risk of expanding into new markets to the franchisees. In sum, franchisees do almost all of the functions of other entrepreneurs, except generating new ideas in the initial step of running a business.

Place, publisher, year, edition, pages
Keyword [en]
Franchisee, entrepreneurship, innovation, entrepreneurial opportunities, risk-taking
National Category
Engineering and Technology Economics and Business
URN: urn:nbn:se:liu:diva-103321OAI: diva2:688371
WEI International Academic Conference Proceedings, 94-104, January 14-16, 2013 , Antalya, Turkey
Available from: 2014-01-16 Created: 2014-01-16 Last updated: 2014-01-17Bibliographically approved
In thesis
1. Enhancing SMEs competitive advantage by franchising
Open this publication in new window or tab >>Enhancing SMEs competitive advantage by franchising
2014 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

Although there is a large body of literature on franchising systems that are mainly produced from the franchisor's perspective, looking at franchising from the franchisee's point of view has remained largely uninvestigated. Creating and sustaining competitive advantage is the prerequisite for the franchisee's (as an SME) survival in today's competitive environment. This research's comprehensive literature review shows three major groups of factors influencing the franchisee’s competitive advantage, including the franchisor-related factors, the franchisee-related factors, and factors associated with the franchisor-franchisee relationship. Since the franchisor has a dominant role in the business, it can influence the franchisee in many ways. Therefore, it is crucial to put special emphasis on how the franchisor-related factors may influence the franchisee business success.

In light of the discussion above, this study was carried out to understand how franchisor-related factors, through enhancing/creating competitive advantage, might influence the franchisee’s business success. According to the literature on competitive advantage, three clusters of literature as three perspectives were reviewed and discussed. These include the resource-based view, the industry structure view, and the relational view. In the resource-based view, the firm's resources are considered as a source of competitive advantage, but in the relational view, not only the firm's internal resources, but also the interfirm resources are the source of competitive advantage. Therefore, this perspective has a significant contribution to this study. In addition to services provided services by the franchisor, as the resources, franchisor organizational factors specifically entrepreneurial orientation, and absorptive capacity were found relevant in the franchisee's competitive advantage. Accordingly, an integrative theoretical/analytical framework was built and used throughout the study.

Because of exploratory nature of the study, the qualitative method was chosen and applied. Along with the purpose of the study, a multiple-case study research strategy consisting of seven cases, in two franchising systems, was performed. The results of the analysis confirm that services provided by the franchisor, the franchisors’ entrepreneurial orientation, and the franchisees’ absorptive capacity have a significant role in enhancement of the franchisees’ competitive advantage. Other significant results of the franchisor-related factors enhancing competitive advantage were found to be: the speed of raw material supply, keeping consistency in quality, economy of scale and keeping prices competitive. Furthermore, the franchisor enhances the franchisee's competitive advantage by transferring business know-how and creating collective tacit knowledge, and as well improvement in the franchisee-specific human capital. Intellectual property in a franchise system through transferring the first mover advantage to the franchisee and creating the differentiated position affect the franchisee's competitive advantage. The franchisor’s entrepreneurial orientation creates the first-mover advantage for the franchisee. Similarly, the franchisor's absorptive capacity, through creating the first-mover advantage and improving the franchisee's social capital, enhances the franchisee's competitive advantage.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2014. 112 p.
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1637
National Category
Engineering and Technology
urn:nbn:se:liu:diva-103334 (URN)LiU-TEK-Lic 2013:71 (Local ID)978-91-7519-436-3 (print) (ISBN)LiU-TEK-Lic 2013:71 (Archive number)LiU-TEK-Lic 2013:71 (OAI)
2014-01-24, Sal A1, A-huset, Campus Valla, Linköpings universitet, Linköping, 10:15 (English)
Available from: 2014-01-17 Created: 2014-01-17 Last updated: 2014-01-17Bibliographically approved

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