Design and Management of Interfirm Networks

This paper deals with the role of organizational forms in the innovation activities of retail and service chains and more specifically within plural form networks where franchised and company-owned units (e.g., stores, hotels, restaurants) coexist. The main purpose of this study is to predict the influence of the organizational form of franchise networks by assessing the effect of plural form organization on the innovation climate of these networks. This paper examines how the degree of organizational mix, measured by the PCO (proportion of company-owned outlets) chosen by network operators, can influence the innovation climate considered as important criterion for innovative organization evaluation. It is hypothesized that the effects of plural form on the innovation climate are mediated by the mutual learning between franchised and company-owned outlets. Results from French networks support the mediation hypothesis and provide evidence that equilibrium in the proportion of franchised and company units is related to a high level of mutual learning, thereby positively influencing the network climate for innovation. Overall, this study contributes to the franchise literature by exploring the role of plural form as governance mechanism for creating a positive innovation climate in the franchise network.

Trust is an important topic in franchising research. However, research has neglected franchisees’ trust in their fellow franchisees or ‘peers’ within the network (‘peer trust’). Peer trust may facilitate cooperation among franchisees and hence increase unit or network performance. However, it may also negatively affect the franchisor and the network as it may facilitate franchisee coalition formation and collective actions against the franchisor. Managing peer trust within the network is therefore an important issue for franchisors. We contribute to franchising research by developing an integrative theoretical framework on antecedents and consequences of peer trust. We conduct a systematic literature review on the antecedents and consequences of coworker trust within organizations and translate these insights to a franchising context to propose our own integrative framework on antecedents and consequences of franchisees’ peer trust. Our framework distinguishes four types of antecedents of peer trust: franchisee (i.e. trustor) characteristics, peer (i.e. trustee) characteristics, franchisor characteristics and franchise network characteristics. Moreover, we distinguish three types of consequences of peer trust: perceptual/attitudinal outcomes, behavioural outcomes and performance outcomes. We also discuss avenues for future scientific research on peer trust in franchise networks and potential implications for franchisors regarding the management of peer trust.

This paper deals with the economic rationality underlying organizational innovations in franchising and the rationale behind them. Using Brazilian primary data, we obtain evidence that spatial distribution of microfranchised units is sensitive to the sector of activity. Our results suggest that labor-intensive activities are suitable for microfranchised units in less populated municipalities. In addition, we provide evidence that the spatial distribution of microfranchising reflects network growth. Indeed, larger networks, in terms of number of units as well as territorial extension, are more likely to be present in smaller markets than smaller networks. Older networks (incumbents) that had a business experience prior to franchising tend to concentrate their franchised units in densely populated areas, while entrants that adopted microfranchising from their foundation target unexplored markets in less populated municipalities.

Although corporate social responsibility (CSR) is a widely researched topic, there is a lack of its application in the franchise literature. The integration of CSR into the franchise business model is vital as it affects the franchise firm’s growth and survival. Based on resource-based and organizational capabilities theories, our study explains how CSR strategy impacts the creation of intangible brand name assets as critical source of sustainable competitive advantage and, hence, increased financial performance. We adopt a multi-stakeholder-oriented CSR construct of economic, legal, ethical, and philanthropic responsibility dimensions. Using data from Austrian franchise firms, our results show that those CSR dimensions have a positive impact on brand name asset creation. Specifically, philanthropic responsibility strategy has the greatest impact on brand name assets, followed by legal, ethical, and economic responsibility strategies. Overall, this is the first study in franchising which explains the strategic role of CSR.

This paper uses insights from the institutional theory to study the competitiveness of the healthcare clinics in Spain. The environment of the healthcare services is highly institutionalized: professional associations are state agents responsible for the extensive regulation. Recently emerged franchise chains become subject for imitation by creating institutionalized routines from within and increasing competitive pressures for other industry players. While the sector is dominated by the independent doctors, franchise organizations are becoming more popular and show steady growth rates. The franchise business model in healthcare is evolving: while the core activity—provision of a healthcare service—cannot be standardized, as the independent judgment of a healthcare professional is legally protected, franchise chains standardize management of the healthcare clinics to achieve efficiency and economies of scale. The survey of the healthcare professionals in Spain shows how professional associations and franchise chains impact the field and provide empirical support to the hypotheses.

Franchise Advisory Councils (FACs) form an important managerial instrument for franchisors to create and/or maintain franchisees’ trust in the fair and effective functioning of their franchising networks. We build on procedural fairness theory and insights from articles in trade journals to develop a theoretical framework with seven core principles that affect franchisees’ perceptions regarding the fair management of their FACs. These core principles are the consistency principle, the bias suppression principle, the accuracy principle, the correctability principle, the representativeness principle, the ethicality principle, and the interactional principle. For each core principle, we distinguish specific managerial principles that help in fulfilling it. This discussion results in an extensive framework with principles for the design and management of fair FACs (“the fair FAC framework”). We end the chapter by discussing theoretical implications and avenues for future research.

This paper proposes and develops a decision model that allows fast-food restaurants to be located in urban areas. This decision model starts by preselecting a city as the study area, calculates the centre of gravity of the points of interest that positively affect the restaurant’s demand in the busiest thoroughfares and runs an analytic hierarchy process (AHP) to evaluate the location alternatives. Finally, it selects the most appropriate alternative for this type of restaurant in the chosen city. The proposed methodology has been applied and validated in a real case study and compared with alternative approaches.

Though horizon and portfolio problems are commonly thought to limit cooperatives’ ability to capitalize on investment opportunities, empirical inquiry into the existence of these constraints is sparse, and recent conceptual arguments suggest that the horizon problem in particular may be less severe than commonly believed. Using surveys of members of three cooperatives, this study investigates the extent to which indicators of potential horizon and portfolio problems influence members’ preferences for cooperative investment in value-added processing technology. The evidence points to the existence of three types of horizon problems and two types of portfolio problems influencing cooperative members’ investment preferences.

Members of cooperatives are becoming increasingly diverse and heterogeneous. Scholars have argued that this is problematic for cooperatives. Therefore, one might expect that many members leave the cooperative. However, this conclusion does not fit with the reality in which cooperatives continue to exist. Based on the work of Hirschman as well as different theories of collective action, fairness, and identity, a theoretical framework is developed to account for this observation. The identified factors provide starting points for cooperatives to retain their members even with increasing heterogeneity.

Increases in food demand, product differentiation, and agribusiness growth provide new market opportunities for smallholders in Africa. Yet, smallholders face challenges of meeting quality, volume, and timing requirements to capture these opportunities. Cooperatives have been identified as a strategy to improve smallholder linkage to evolving food systems, by providing various supply chain services. However, empirical evidence is sparse on the performance of cooperatives in commercializing farm products and coordinating supply chain integration. In addition, a debate exists on which farmers are more likely to be member of a cooperative. In other words, do all smallholders have an equal chance of benefitting from the activities of cooperatives? Ethiopian malt barley cooperatives are used as an empirical case. Mixed methods were used to collect and analyze primary data. Our case study analysis shows that cooperatives provide diverse services, including contract brokerage, output marketing, input supply, and provision of technical assistance. Our empirical results also show that the members of these marketing cooperatives have larger landholdings, better farm resources, and better access to extension services compared to non-member farmers.

The rising concern of European consumers for pesticides residues left on fruit and of some far distant countries in Asia and Americas for quarantine organisms has turned compliance with SPS requirements into one of the main challenges of the French apple industry. Using transaction cost and cognitive governance theories, we investigate how differences in property rights structures, inter-firm arrangements, and mechanisms of firm governance may impact the modalities of SPS risk management. Our case study of two leading groups of the French fresh apple industry with different property rights structures (cooperative vs. private) and different marketing strategies (customers with more or less stringent SPS requirements) highlight the role of cognitive governance mechanisms (knowledge sharing) in the management of SPS risks. This paved the way for integrating governance structures, cognitive resources, and transaction attributes into a single model.

We examine how clients and suppliers govern vertical relationships for knowledge work. Collocation—having supplier personnel interact with the client’s personnel and systems at the client’s site—is a contractual mechanism that facilitates coordination for knowledge co-creation. Using a sample of 1609 credit unions’ relationships with 50 IT suppliers during the rise of Internet-based banking from 2000 to 2004, we examine the initial development of arrangements for online share account and loan processing. Results show that client positioning and task complexity partially determined the choice of collocation vis-a-vis a supplier delivering standard services from a remote location. However, as broadband communications reduced the costs of remote service, clients moved away from collocation.

Industry-university (IU) alliances are often subject to tensions caused by the dissimilarities between industry and university partners. Interestingly, due to a honeymoon effect, these tensions may not necessarily emerge immediately. However, shortly after the alliance is initiated, the likelihood of tension seems to increase rapidly. Thus, early detection of potential tensions seems crucial to the success of IU alliances. This paper explores how these tensions emerge and can be effectively managed through an exploratory study of two IU alliances in the energy sector. Based on our cases, we identified four types of dissimilarities (i.e., orientation-based, routine-based, administrative, and personal) that may lead to different types of tensions (i.e., orientation, routine, transaction, and distinctive), which in turn may be addressed through different governance mechanisms (i.e., communication, flexibility, contracts, and hierarchy). Beyond contributing to the literature on IU alliances, our exploratory study may help managers of these alliances in identifying potential tensions and effective governance practices.

In this paper, we explore trans-local relationships and their changing dynamics over time, particularly emphasizing their knowledge flows. The underlying proposition is that the clusters are not isolated entities and that inter-cluster ties are as significant as local ties in sustaining the co-evolution of clusters. We use historical and retrospective analyses to study the inter-linkages between the NASCAR cluster and the UK motorsport industry. Our findings highlight that the structure of the inter-firm ties between the two clusters has evolved over time with a marked increase in the number of linkages established and the transfer of more sophisticated knowledge and components. At the same time, the research highlights some impediments that have delayed the transition of the NASCAR cluster to a more open entity. The authors propound that co-location and proximity are poor indicators of the structure of clusters and that the inter-cluster linkages play an important role in their co-evolution.

The objective of the study is to investigate the effects of cluster cooperation which might affect company value creation. The study has been developed among companies cooperating and competing within two Polish business clusters: aviation and fish products. Due to the fact that the data used was from the questionnaire in which the authors attempted to measure latent variables, such as competitiveness or cluster awareness, the results of the survey were subject to the partial least squares (PLS) analysis. In conclusion, cooperation between specialised and geographically concentrated entities shows benefits affecting the increase in productivity. However, the enterprises’ awareness of them benefiting from cluster cooperation and the formalisation of a cluster are not essential factors in the process of achieving additional benefits affecting company value creation.

The decision over exports vs. foreign direct investment (FDI) is usually discussed in an extension of the so-called Melitz model where firms with heterogeneous costs compete in a monopolistically competitive industry. The present paper starts from a situation where a potential foreign entrant would be just indifferent between exports and FDI in such a setting. However, by assuming oligopolistic interaction, strategic considerations are also taken into account. It is shown how the strategic impact of lower marginal cost makes FDI more attractive in a Cournot setting while exports are preferable under price competition in a market with differentiated goods. Beyond that it is also explored how a strategic alliance with a local incumbent could be a superior alternative for market entry.

The decision whether to invest is usually a very delicate one, and it requires the analysis of several aspects, first and foremost the risks associated with the investment. This is even more necessary when large infrastructure projects are at stake, as they require the identification of innovative strategies and tools for designing, financing and management activities. Consequently, the public sector has modified its financing methods, going from traditional debt instruments to new tools based on partnerships with the private sector. These are relatively new “alliances” between the public and the private sector referring to infrastructure investments, where the private sector partner cooperates in providing, managing and financing services and structures. These collaborations are called “public-private partnerships” (PPPs), and they have now become a commonly used investment strategy for all public administrations.

At international level, healthcare sector represents a promising field for the development of PPP. Latin American countries, after experimenting with public-private cooperation in several sectors, are now designing new healthcare infrastructures by using these innovative financing tools. This paper will analyse public-private partnerships, first at a more general level, and then by considering their application to the healthcare sector, providing a state of the art of relevant experiences in Latin America.

The final section will discuss future research perspectives, and it will introduce public network governance and management approaches as a theoretical framework to analyse existing experiences.