Human Capital Intangibles and Performance of Franchise Networks: A Complementary View between Agency and Critical Resource Perspectives

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Abstract

This article examines the impact of human capital intangibles on the governance structure of franchise networks (i.e., proportion of franchised outlets) and the joint impact of human capital intangibles and governance on the performance of franchisors. Agency theory focuses on the free-riding hazard and the costs associated with franchising in the context of high human capital intangibles. The critical resources theory highlights the weakness of company ownership and the advantages of using franchising in this context. Tests of the hypotheses derived from these theoretical frameworks indicate that these complementarily explain the governance structure and financial performance of franchise networks. Copyright © 2013 John Wiley & Sons, Ltd.

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