Real Options, Intangible Resources and Performance of Franchise Networks

Managerial and Decision Economics 34: 183-194 (2013)

Wiley Online Library, January 28, 2013

12 Pages Posted: 25 Jul 2013

See all articles by Nina Gorovaia

Nina Gorovaia

Frederick University; University of Vienna

Josef Windsperger

University of Vienna

Date Written: January 2013

Abstract

This study investigates the performance of franchise networks through the lens of the resource-based and real options theory. First, according to the resource-based view, we argue that the intangible resources of the franchisor (system-specific know-how and brand name) and the intangible outlet-specific resources of the franchisees (exploration and exploitation capabilities) positively impact the performance of the franchise system. Second, on the basis of the real option perspective, we show that the franchisor’s use of an explicit call option in the franchise contract — as a clause that gives him or her the right to acquire franchise units — increases the franchisor’s managerial flexibility and incentives for intangible investments and hence improves the performance of the franchise network. We test the hypotheses with cross-sectional data from the franchise sector in Germany. The data provide some support of the hypotheses. Our study contributes to the franchise and inter-organizational network literature as no prior study has applied the real option perspective to franchising.

Suggested Citation

Gorovaia, Nina and Windsperger, Josef, Real Options, Intangible Resources and Performance of Franchise Networks (January 2013). Managerial and Decision Economics 34: 183-194 (2013), Wiley Online Library, January 28, 2013, Available at SSRN: https://ssrn.com/abstract=2298201

Nina Gorovaia (Contact Author)

Frederick University ( email )

7, Y. Frederickou Str.
Pallouriotisa
Nicosia, 1036
Cyprus

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090
Austria

Josef Windsperger

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A1090
Austria

HOME PAGE: http://im.univie.ac.at

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