Susana López-Bayón

Partner Empowerment and Relationship Failure in Franchising

Franchisors must empower franchisees to take decisions on a package of peripheral elements in response to pressure for local adaptations and for entrepreneurial autonomy. However, little is known about which specific elements should be decentralized and to what extent adaptation of such elements affects disputes between franchisor and franchisees. This study explores these issues by analyzing which decision rights should be franchisees’ responsibility to reduce early terminations instigated by the franchisor. The results show that delegating decision rights on local advertising and personnel reduces early terminations while delegation of pricing tends to increase them, regardless of the size of the system. Interestingly, successful delegation in other decision‐areas is contingent on the brand‐name value. More specifically, only larger chains seem to benefit from delegating assortment and decoration decisions.

Delegation and Autonomy in Franchising

This article provides evidence on the determinants of delegation of decision rights in franchise relationships. We suggest that the franchisor chooses the level of delegation to leverage the intangible assets of the franchisees and the franchisor and, simultaneously, to preserve the value of the brand name. While the empirical literature on franchising has studied these effects separately, we consider them together in a model on decentralization. The results show that the franchisee’s autonomy varies negatively with the franchisor’s intangible assets and brand name and positively with the inter-firm trust and the franchisees’ intangible assets. Finally, autonomy also varies negatively with the specific investments of the franchisees.

Contract Duration in Subcontracting Agreements: Evidence from the Electronics Industry

This paper examines factors explaining the duration of inter-firm contracts from the transaction costs perspective, using a sample of subcontracting agreements in the Spanish electronics industry. We particularly consider the influence of transactional attributes, such as specificity and uncertainty, along with other safeguards, in duration clauses. Results show that the probability of signing an indefinite duration contract is related positively to the specificity of the activity and negatively to the uncertainty regarding future demand and to the degree of formalization of the contract. Contrary to some classical arguments, these findings suggest that an explicitly long-term contract is not always needed to protect against contractual hazards. Indefinite duration contracts, working as relational contracting, also provide protection and, additionally, improve flexibility for adjusting the relationship to the changing environment.