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Enhancing SMEs competitive advantage by franchising
Linköping University, Department of Management and Engineering, Industrial Economics. Linköping University, The Institute of Technology.
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.
Series
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1637
National Category
Engineering and Technology
Identifiers
URN: urn:nbn:se:liu:diva-103334Local ID: LiU-TEK-Lic 2013:71ISBN: 978-91-7519-436-3 (print)OAI: oai:DiVA.org:liu-103334DiVA: diva2:688503
Presentation
2014-01-24, Sal A1, A-huset, Campus Valla, Linköpings universitet, Linköping, 10:15 (English)
Opponent
Supervisors
Available from: 2014-01-17 Created: 2014-01-17 Last updated: 2014-01-17Bibliographically approved
List of papers
1. Enhancing the franchisees’ performance: A resource-based view
Open this publication in new window or tab >>Enhancing the franchisees’ performance: A resource-based view
2012 (English)In: The Business & Management Review, ISSN 2047-2854, Vol. 3, no 1, 220-232 p.Article in journal (Refereed) Published
Abstract [en]

Identifying the influential factors in business’ performance is an important cornerstone in business research. Although the study of franchise failure and success has received significant attention among researchers, the lack of knowledge about influential factors on franchisees’ performance as an integral part of the franchise system, as well as the consequences of franchising, has resulted in a gap in the franchise literature. According to previous literature, business success and failure results from the three major elements of resources, capacity and competency. Given the firm’s resources have a considerable share in explaining the variation of firms’ performance, the resource-based view provides an outstanding theoretical explanation for varying performance of the firms, and it looks to be promising for analyzing the franchisee’s performance. In franchising systems, provided services by the franchisor have a crucial role in franchisees’ performance. Therefore, this research was conducted to show how provided services by the franchisor, through impact on product and services’ quality, consistency, price and customer awareness, could enhance the franchisee’s performance.

Place, publisher, year, edition, pages
Harrow, London, UK: The Academy of Business & Retail Management, 2012
Keyword
Franchising, franchisees’ performance, resource-based view, food industry
National Category
Engineering and Technology Economics and Business
Identifiers
urn:nbn:se:liu:diva-103320 (URN)
Conference
International Trade & Academic Research Conference (ITARC), 7–8th November, 2012, London, UK
Available from: 2014-01-16 Created: 2014-01-16 Last updated: 2014-03-13Bibliographically approved
2. Franchisees’ Activities as Entrepreneurship
Open this publication in new window or tab >>Franchisees’ Activities as Entrepreneurship
2013 (English)Conference paper, Published 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.

Keyword
Franchisee, entrepreneurship, innovation, entrepreneurial opportunities, risk-taking
National Category
Engineering and Technology Economics and Business
Identifiers
urn:nbn:se:liu:diva-103321 (URN)
Conference
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
3. Entrepreneurial process in franchised outlets
Open this publication in new window or tab >>Entrepreneurial process in franchised outlets
2013 (English)In: Journal of WEI Business and Economics, E-ISSN 2166-7918, Vol. 2, no 1, 59-71 p.Article in journal (Other academic) Published
Abstract [en]

Although in recent years the study of franchise systems has been the subject of many academic studies, most of them have studied franchise systems from the franchisor's point of view, and the franchisee point of view has received only limited attention. Researchers in business fields have adopted four main perspectives in the study of franchising: strategy, economics, marketing, and entrepreneurship. From an entrepreneurship perspective, while there is no doubt about considering a franchisor's business as an entrepreneurial firm, considering the franchisee's activities during the running and managing of an outlet as an entrepreneurial firm is disputed. An entrepreneurial firm includes involvement in product innovation, commitment to calculated risk, proactiveness and aggressiveness. While the diversity of definitions about entrepreneurship has caused a problem to understand what an entrepreneurial firm is, a process-focused approach offers much unexplored potential for understanding the nature of entrepreneurship in entrepreneurial firms. Therefore, due to the pivotal role of an entrepreneurial process in the nature of entrepreneurship, and considering the entrepreneurial process as the core unit of analysis in entrepreneurial firms, this article aims to study what happens during the entrepreneurial process in a franchised outlet. This study shows, although franchisees are restricted about product innovation, and franchisor reduces the risk of business for them, the franchisor never can omit the risk for franchisee. Moreover, many product innovations in the franchise system stem from the franchisee's ideas, and the franchisor will never be able to eliminate the risk for the franchisees. The franchisee's business also encompasses all dimensions of the entrepreneurial process as the unique features of entrepreneurial firms.

Keyword
Franchising, entrepreneurial firm, entrepreneurial opportunity, entrepreneurial process, risk-taking
National Category
Engineering and Technology Economics and Business
Identifiers
urn:nbn:se:liu:diva-103322 (URN)
Available from: 2014-01-16 Created: 2014-01-16 Last updated: 2017-04-11Bibliographically approved
4. Entrepreneurial orientation in franchising systems: A franchisee perspective
Open this publication in new window or tab >>Entrepreneurial orientation in franchising systems: A franchisee perspective
2013 (English)Conference paper, Published 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.

Keyword
Franchising, entrepreneurial orientation, innovativeness, proactiveness, competitive aggressiveness
National Category
Engineering and Technology Economics and Business
Identifiers
urn:nbn:se:liu:diva-103323 (URN)
Conference
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

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Asgharian Bourkheili, Ehsan

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