Melih Madanoglu

The Interface between Organizational Learning Capability, Entrepreneurial Orientation, and SME Growth

This paper investigates the interface between organizational learning capability, entrepreneurial orientation (EO), and small business performance. It reports on the findings from 350 small and medium enterprises (SMEs) in North Cyprus operating in the services and retailing sectors. The findings indicate a positive relationship between EO and sales and market share growth, but not between EO and employment growth. There is also a positive relationship between organizational learning capability and EO. This paper contributes to the small business management literature by providing a holistic analysis of the interface between organizational learning capability, EO, and growth.

Franchising and value signaling

Purpose – The purpose of this paper is to demonstrate how signaling support services and contractual arrangements that create value for incumbent franchisees can help to create value for the whole network by attracting prospective franchisees. Design/methodology/approach – Using data from Bonds Franchising Report the study analyses franchisors operating between 1994 and 2008 via a Generalized Method of Moments (GMM) model for an unbalanced panel of 2,474 franchisors. Findings – Training, financial assistance, sub-franchising and restrictions against passive ownership, and the use of area development agreements are found to be valuable for prospective franchisees. Experience and the number of company-owned and franchised units also attract prospective franchisees. Research limitations/implications – Our findings imply that not all value-creating services and contractual arrangements are interpreted in the same way by prospective franchisees. Franchisors should offer training and financial assistance to ne...

Push and pull factors in international franchising

Purpose Using munificence, real options and ambidexterity theories, the purpose of this paper is to demonstrate how the differential between home and host market environmental conditions affects US international franchising expansion. Design/methodology/approach The authors used firm-level panel data for 151 US-based franchising firms, from Bond’s Guide for Franchise Opportunities, for the years 1994-2008 plus macroeconomic data on the environment, to explain the probability of franchising. Findings The paper finds that the differential in economic growth and economic uncertainty impacts franchisors’ desire to expand abroad on a continual basis. Research limitations/implications Researchers in international franchising should not only focus on host market environmental variables (pull factors), but also on conditions in the home market (push factors). Originality/value The paper adds to environmental explanations of international franchising by focusing on the differential in munificence and uncertainty between home and host countries.

Corporate governance provisions and firm financial performance: The moderating effect of deviation from optimal franchising

Purpose Borrowing from arguments of agency theory, the present study aims to investigate the moderating effect of the deviation from optimal franchising on the relationship between corporate governance provisions and firm financial performance. Design/methodology/approach The sample consists of 35 publicly listed US restaurant firms for the 1990-2008 period. The study uses a hierarchical regression with cross-sectional time-series fixed effects. Findings The results show that the deviation from optimal franchising worsens the negative relationship between corporate governance provisions and firm performance. Research limitations/implications The availability of governance data restricts our sample to large publicly listed firms in the US restaurant industry, limiting the ability to generalize results for small and privately held restaurant firms. Practical implications Firm executives should not only pay attention to which corporate governance provisions they adopt but also strive to maintain an optimal level of franchising. Originality/value The key contribution of this study to governance literature is that this study demonstrates how the presence of multiple governance mechanisms influences firm performance.

Developing a competitive international service strategy: a case of international joint venture in the global service industry

Purpose – The purpose of this paper is to examine how an international joint venture (IJV) company can efficiently develop a competitive international service strategy in the competitive global marketplace. Specifically, this study seeks to highlight the key antecedents related to the development of an international service strategy and its implementation through the case of the IJV of Starbucks Korea. Design/methodology/approach – The case study method is used. A series of in-depth personal interviews with the CEO of Starbucks Korea, a marketing manager at Starbucks Korea, and outlet managers of Starbucks Korea were conducted. Furthermore, an array of secondary data and company documentation was reviewed to triangulate the findings of the study. Findings – Several themes illuminating the development and implementation of a successful international service strategy in the case of an international joint venture are identified. It was found that one of the critical antecedents related to the successful inte...

Exiting the Public Scene and Becoming Private: The Magnitude of Bid Premiums in the U.S. Restaurant Industry

This article reports the shareholder wealth effects of restaurant firms going private. In addition, this study uncovers firm characteristics that influence the magnitude of the stock bid premiums. This study includes 27 publicly traded restaurant companies that went private between 1995 and 2004. The findings indicate that shareholders of restaurant firms that were taken private enjoyed a highly positive, abnormal return of 26%. Cluster analysis demonstrated that high-premium restaurant firms had higher market-to-book (MB) ratio and cash holdings, lower debt, and market capitalization. A logistic regression model which consisted of cash holdings and debt-to-equity variables successfully classified more than 75% of firms into low and high-premium firms.

Are the parents to blame? Predicting franchisee failure

Purpose – The purpose of this study is to show how franchisor characteristics influence franchisee failure. To achieve this aim, we developed a heuristic model using the methodology and power of predictive analytics. Design/methodology/approach – The authors use data from the World Franchising Council’s and from the Small Business Administration (SBA). The data cover 271 diverse USA franchise chains that are present in both databases. Findings – The model predicts potential defaults of SBA-backed loans issued to American franchisees, and the authors identify 13 variables that help explain franchisee failure. Practical implications – The authors offer guidance for stakeholder groups – lenders, franchisors and franchisees – to minimize the risk of lending and business failure. Originality/value – The paper contributes to the franchising literature by considering parent firms’ characteristics to predict franchisee failure.

Building a case against strategic equifinality: Hybrid ideal type service organizations in a developing country

Purpose – The purpose of this paper is to build a case against strategic equifinality. This is accomplished by employing hybrid ideal types approach and testing the effect of these strategic types on firm performance among service firms in the context of a developing country. Design/methodology/approach – Data were collected via a self-administered survey. The final sample of this study encompassed 169 ideal type hybrid companies operating in the tourism industry in Mugla, Turkey. Findings – The research findings indicate that prospectors and hybrid prospector-analyzer (PA) orientations outperform defenders based on several financial and non-financial performance measures. However, all other strategic orientations show identical performance. Research limitations/implications – The research findings imply that adopting a hybrid strategy is a viable option. In addition, SMEs in developing countries should exercise some caution when deciding to adopt a defender strategy. Originality/value – This study uses h...

Estimating Cost of Equity in the Restaurant Industry: What IS Your Required Rate of Return?

ABSTRACT Accurate estimation of cost of equity is critical when making capital investment decisions to allocate valuable corporate resources. While the importance of proper estimation of required rate of return of an investment project is well documented, challenges surrounding estimation of the cost of equity still abound. This paper empirically evaluates the viability of common cost of equity models to estimate required rate of return for the U.S. restaurant industry for the 1996–2010 period. The full model, which consists of five risk factors, emerges as the soundest cost of equity model for the U.S. restaurant industry. We recommend that future studies assess the performance of cost of equity models in other countries and other segments of the hospitality industry.

Strategic agility explanations for managing franchising expansion during economic cycles

Purpose This paper aims to demonstrate how franchising firms can manage system expansion by weathering the economic effects of a location (i.e. country-level economic cycles) by shifting their resources. Design/methodology/approach The authors use a comprehensive database of 151 US hybrid franchising organizations, including observations for the years between 2001 and 2008. Data analysis is conducted with count model panel data with a Poisson distribution. Findings The model reveals a curvilinear U-shaped relationship between location (i.e. economic cycles) and franchising expansion. Originality/value This study contributes to competitiveness literature by showing how franchising firms respond to changing local conditions.