Handbook of Research on International Entrepreneurship
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Handbook of Research on International Entrepreneurship

Edited by Léo-Paul Dana

This unique reference book provides an array of diverse perspectives on international entrepreneurship, a new and emerging field of research that blends concepts and methodologies from more traditional social sciences. The Handbook includes chapters written by top researchers of economics and sociology, as well as academic leaders in the fields of entrepreneurship and international business. State-of-the-art contributions provide up-to-date literature reviews, making this book essential for the researcher of entrepreneurship and the internationalisation of entrepreneurs.
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Chapter 38: A Model for the Choice of Organizational Form in International Franchising

V. Nilakant, Callum J. Floyd and Mary Ellen Gordon


V. Nilakant, Callum J. Floyd and Mary Ellen Gordon Franchising has become ubiquitous, not only locally but also globally (Quinn, 1999). Over one-third of all retail sales in the United States pass through franchises, making franchising a dominant mode of retail entrepreneurship in the United States (Bradach, 1997; Shane, 1998). The growth rate of franchising is comparable to that of the US economy as a whole since 1986, with more than 200 new franchises appearing each year (Lafontaine and Shaw, 1998; Shane and Spell, 1998). As the franchise business arrangement is also a government-supported form of international involvement, business format franchising is becoming a preferred method of entry into foreign markets (Alon and McKee, 1999; Eroglu, 1992; Welch, 1989). Despite its increased use, franchising is a complex phenomenon (Bradach and Eccles, 1989). It can be simultaneously viewed as an organizational arrangement, a governance mechanism or a resource exchange process. Outwardly, the franchise chain may seem like a simple organizational form seeking to provide a standardized product or service. McDonald’s exemplifies this replication of a simple business concept, providing stringent selection, training, operating and monitoring practices, so that customers receive a similar experience at over 8000 restaurants in the United States and 26000 worldwide. While units of this franchise system and many others appear strikingly similar, beneath may reside complex strata of heterogeneous organizational arrangements. Franchise systems often comprise both company-owned and franchised units (Brickley and Dark, 1987; Caves and Murphy, 1976; Lafontaine and Kaufmann, 1994; Rubin, 1978; Shane, 1996)...

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