The strategy/governance structure fit relationship: theory and evidence in franchising arrangements
Article first published online: 24 FEB 2004
Copyright © 2004 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 25, Issue 4, pages 365–383, April 2004
How to Cite
Yin, X. and Zajac, E. J. (2004), The strategy/governance structure fit relationship: theory and evidence in franchising arrangements. Strat. Mgmt. J., 25: 365–383. doi: 10.1002/smj.389
- Issue published online: 24 FEB 2004
- Article first published online: 24 FEB 2004
- Manuscript Revised: 13 OCT 2003
- Manuscript Received: 26 FEB 2002
- strategy/structure fit;
Despite widespread recognition of the importance of strategy–structure fit, e.g., diversification and divisionalization, research has yet to address the possibility of similar fit issues for other structural forms of organization, such as the choice of franchised vs. company-owned governance structures. In this study, we depart from the usual debates regarding the superiority of one governance structure over another and argue that performance differences between these two alternative governance structures may be attributable more to the matching of one structure with a correspondingly appropriate strategy. Specifically, we posit that stores will act in fit-enhancing ways by pursuing strategies that are more congruent with their governance structure; i.e., that franchised stores, with their more flexible and decentralized structures, will be more likely to pursue strategies that emphasize flexibility and local adaptation, whereas company-owned stores will tend to pursue strategies that emphasize predictability and control. We also argue that those stores acting in such a manner will enjoy subsequent performance benefits. We develop these ideas around strategy/governance structure fit and test our hypotheses using longitudinal data from over 6000 stores within one of the biggest U.S. restaurant chains from 1991 to 1997. Copyright © 2004 John Wiley & Sons, Ltd.