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Entrepreneurial orientation in franchising systems: A franchisee perspective
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]

Despite the importance of entrepreneurial activities and the role of franchisees in the generation of new ideas and innovations in the franchise system, there are limited studies on the conduct of the entrepreneurial orientation (EO) within the context of franchising and from the franchisee perspective. Although in a franchise system, the franchisor always tries to develop the standardization across the system to take advantage of cost minimization, different local environments require some flexibilities and adaptation in a franchisor policy (Falbe et al., 1999). Therefore, the franchisor should balance between standardization and adaptation, and display the entrepreneurial behaviors to take advantage of local market opportunities (Bradach, 1997). Given the important role of franchising in global wealth creation, understanding the extent to which an EO is desirable in franchise systems is an area which merits attention (Dada and Watson, 2012). Therefore, this study examines the entrepreneurial orientation in the franchised outlets. Findings from this study show that innovativeness in a franchise system is different in the core and peripheral elements of a product or service. The franchisor in a franchise system restricts the franchisees for innovation in "peripheral" elements of products. In addition, the franchisor concentrates on the innovation in the "core" elements. Both the franchisor and franchisee equally share the risk in a franchise system, and the franchisee takes even more risk in entering the new market and bearing the financial risk. The franchisee's autonomy in a franchise system is limited to the decision making about the peripheral elements. The franchisor almost always thinks about the future and seeks new opportunity in the industry; in fact, the franchisor in a system proactively looks for new opportunities. In contrast, the franchisees in a franchise system aggressively react to local competitors and apply the proper strategy to overcome them.

Place, publisher, year, edition, pages
2013. Vol. 2, no 1
Keyword [en]
Franchising, entrepreneurial orientation, innovativeness, proactiveness, competitive aggressiveness
National Category
Engineering and Technology Economics and Business
URN: urn:nbn:se:liu:diva-103323OAI: diva2:688375
The European Entrepreneurship: How Entrepreneurs (Should) Act in Global Business Environment, Fifth Anniversary International Conference , 9 -11 September 2013, Albena, Varna, Bulgaria
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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