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2012).

franchisees' business expansion) means sharing benets and costs

determine rm performance. The resource-based view examines rms

ory that explains howts (Dyer, 1997; Dyer

Journal of Business Research 68 (2015) 15811588

Contents lists available at ScienceDirect

Journal of Busin& Singh, 1998). Relationship-marketing theory recognizes inter-rm re-lations' importance and explains how franchisees determine their fran-chise intention (Kim, 2007).

The author thanks Arch Woodside (Boston College), Domingo Ribeiro (University ofValencia), Kun Huang Huarng (Feng Chia University), and other researchers at the 3rdGlobal Innovation and Knowledge Academy Conference for comments on an earlierening franchisorfranchisee relationships (e.g., through individual marketing theory is a competitive advantage therms' inter-rm relational resources create proFranchisees exist because of their operation's size and the type ofcontractual agreement with the franchisor (Altinay & Brookes, 2012;Altinay & Okumus, 2010). Franchisorfranchisee relationships repre-sent a relational exchange partnership (Dyer & Singh, 1998). Strength-

rather than cooperative organizational forms like franchises. However,strategic resources such as organizational trust and organizationallearning capability are important success predictors among cooperativeorganizational forms (Bhasin, 2012; Dyer & Chu, 2003). Relationship-draft of this manuscript. The author thanks the two anonycomments on earlier versions of this work. The author ackfrom the National Science Council (101-2410-H-005-046sponsible for any remaining errors. Tel./fax: +886 4 22840392/752.

E-mail address: chihwwu@dragon.nchu.edu.tw.

http://dx.doi.org/10.1016/j.jbusres.2015.01.0550148-2963/ 2015 Elsevier Inc. All rights reserved.e economy (Lee, Hwang, 1998b; Siegel & Renko,

(2010), and Trainor, Andzulis, Rapp, & Agnihotri (2014) suggest thatrms' abilities to convert resources into business-enhancing capabilities& Choi, 2012; Lee, Olson & Trimi, 2012; ShaneEntrepreneurship studies offer imping research (Anderson, Dodd, & Jack, 2chising research must become moreLassen, 2012; Renko, Shrader, & Simon,relationship via a licensing agreement bFranchising has two primary forms: proneurship franchising (Altinay & Broo2010). Franchising entrepreneurship isular with strategic management reseaGalindo & Mndez-Picazo, 2013; GaMurillo-Luna, 2012; Renko et al., 2012;dretsch, 2012), but fran-ically robust (Nielsen &Franchising is a businesstwo independent rms.

istribution and entrepre-12; Altinay & Okumus,nchising form most pop-(Chaston & Scott, 2012;yerbe, Rivera-Torres, &, 1998a). Franchising en-

are legally independent, economically interdependent, and operational-ly indistinguishable (Brown, Cobb, & Lusch, 2006; Parsa, 1996, 1999).However, research on franchisees' perceptions of their franchising in-tention strategy and performance is scant. This study aids the under-standing of franchisees' perceptions of their franchising intentionstrategy and performance.

The resource-based view (Barney, 1991) and the relationship-marketing theory (Dyer & Singh, 1998; Lewin & Johnston, 1997) arethe primary theories that explain franchisees' franchise strategy andperformance. Paniagua & Sapena (2014), Rapp, Trainor, & Agnihotriortant implications for franchis-(Madhok, 2002). Franchise systems represent unique entrepreneurialbusiness structures because they comprise different organizations that1. IntroductionAntecedents of franchise strategy and perf

Chih-Wen Wu Department of Marketing, National Chung Hsing University, College of Management, Taichung

a b s t r a c ta r t i c l e i n f o

Article history:Received February 2014Received in revised form October 2014Accepted January 2015Available online 19 February 2015

Keywords:Knowledge sharingTrustConict managementBrand reputationFranchise strategyFirm performance

Franchising is an importantmance is scarce. This study achising strategy and performfranchisees' performance anthow franchisees' strategies rformance in chain stores. TheTaiwan. Data analysis uses s(fsQCA). Results show that kin reinforcing franchisees' inends with a discussion of themous referees for their valuablenowledges the nancial support-) in Taiwan. The author is re-mance

, Taiwan

of entrepreneurship, but literature explaining franchising strategy and perfor-ts the resource-based view and relationship-marketing theory to explain fran-e differences in chain stores. This study develops and tests a model explainingdents and their intention to remain in the franchise system. Themodel describese to knowledge sharing, trust, conict management, brand reputation, and per-dy uses data from 246 active franchisees from a chain-store franchise system intural equation modeling (SEM) and fuzzy set qualitative comparative analysisledge sharing, trust, conict management, and brand reputation are key factorsion to remain and nancial performance within the franchise system. The studytical and managerial implications.

2015 Elsevier Inc. All rights reserved.

ess ResearchThis study makes three strategic management contributions toresearch in franchising and entrepreneurshipmanagement. First, the re-search uses the resource-based view and relationship-marketing theoryto explain key success factors. This study thus has theoretical implica-tions that differ from those of previous studies. Second, research in

position relative to major rivals (Barthlemy, 2008; Combs, Ketchen,Shook, & Short, 2010; Ferguson & Ketchen, 1999). However, researchersand practitioners must agree on acceptable performance measures tocapture any effect of franchisees' performance initiatives in chain stores.

However, franchise relationships are difcult to manage. Research onfranchising's consequences for franchisees is scarce (Combs, Michael, &Castrogiovanni, 2004). Studies concentrate on survival rates for franchi-sees with independent businesses (Altinay, Brookes, Madanoglu, &Aktas, 2014) or focus onwhy individuals select franchising over indepen-dent entrepreneurship (Shane, 2001). Few researchers, however, seek tounderstandwhat factors contribute to franchisee performance. Literature

(Aaker, 1997; Weaven, Grace, & Manning, 2009). A franchise shares

1582 C.-W. Wu / Journal of Business Research 68 (2015) 15811588strategic management must explain performance. However, littleresearch examines franchisees' performance. Consequently, this studydetermines the relative effect of franchisors' strategic resource andinter-rm relational exchange on franchisees' franchising strategy andrm performance. Third, this study develops a new scale and validatesthis scale using exploratory analysis.

2. Literature review

Researchers emphasize social interactions (i.e., trust and relationalnorms) in franchising as a way to attenuate agency problems (Cochet,Dormann, & Ehrmann, 2008). Grace & Weaven (2011) report thatresearchers should focus on how and why franchisees exit. Chiou,Hsieh, & Yang (2004) focus on relationship-building behaviors thatreduce conict and develop strong franchising partnerships. Gillis &Castrogiovanni (2012), Lee, Hwang, et al. (2012) and Lee, Olson et al.(2012) report that franchisees are entrepreneurs because they embracerisk in joining a franchise system. Entrepreneurship is a broad eld thatencompasses high-risk, high-return projects in the franchising eld (DeCleyn & Braet, 2012; Fernndez-Mesa, Alegre-Vidal, Chiva-Gmez, &Gutirrez-Gracia, 2013; Mousa & Wales, 2012).

The resource-based view suggests that rms with valuable, rare,difcult to imitate, and non-substitutable resources will sustain aboveaverage performance (Barney, 1991; Combs & Ketchen, 1999a). Theresource-based view explains how franchisees and franchisors convertresources and capabilities to improve their competitive advantage(Madhok, 2002). Firms' franchising decisions reect which resourcesthey should use (Schilling& Steensma, 2002;Williamson, 1991). Gover-nance structure can include hybrid organizational forms such as jointventures, alliances, or franchising (Ping, 1995; Poppo & Zenger, 1998;Williamson, 1991) to use the resource.

Marketers use relationship-marketing theory to maximize relation-ship buildingwith customers, which is important for a franchise system(Dwyer, Schurr, & Oh, 1987; Morgan & Hunt, 1994). Relationship-marketing theory posits that relational exchange may lead to competi-tive advantage (Falbe, Dandridge, & Kumar, 1998). Relational resourcesincorporate joint investments and relational capital. Joint investmentsimprove organizational performance and spread inter-rm knowledge(Dyer & Singh, 1998). In contrast, relational capital, mutual trust, re-spect, and friendship stem from close interaction between alliance part-ners (Kale, Singh, & Perlmutter, 2000).

Brand reputation is a strategic asset that leads to good performance(Park, Jaworski, & MacInnis, 1986). According to the resource-basedview, franchisors possess and use strategic assets like brand reputationto improve rm performance (Amit & Schoemaker, 1993; Shocker,Rajendra, & Ruekert, 1994). Kim & Chung (1997) nd that rms withbrand reputation improvements have greater market share, which fun-damentally indicates franchising performance (Michael, 2000a,b; Yoo &Donthu, 2001).

Franchising research depicts franchisor management as a functionthat supports franchisees (Doherty, 2009; Doherty & Alexander,2004). Franchisors can refer to the relationshipwith franchisees primar-ily in contractual terms that franchisors use during negotiation and co-ercion to achieve contract adherence (Dant, Weaven, Baker, & Jeon,2013). Accordingly, franchisors can view the relationship as an opportu-nity to invest in mutually benecial relational resources that encouragecooperation, trust, and learning (Dyer & Singh, 1998; Gassenheimer,Baucus, & Baucus, 1996). Higher knowledge ows and transfers be-tween franchisees and franchisors, effective enforcement of contractualobligations, and willing cooperation in promotions and other programsto build the brand (Dyer & Singh, 1998; Gmez et al., 2011; Lin & Lee,2004).

Numerous management studies use return on investment (ROI),sales, sales growth, and nancial performance as company performanceindicators (Venkatraman & Ramanujam, 1986; Zou & Cavusgil, 2002).

Strategic performance refers to a rm's market share and competitivecommon brand reputation with its franchisor, and so the franchise ben-ets directly from franchisors' investments in brand. Building on theresource-based view, this research suggests that rms utilize theirunique resources to develop and implement strategic actions to en-hance success (Barney, 1991; Paniagua & Sapena, 2014; Rapp et al.,

Knowledge share

Trust

Conflict Intention to

remain

Brand

Reputation

H5

H3

H2

H4

H1Performanceshows a signicant gap regarding factors affecting franchisee's strategyand performance. Advancing knowledge on factors affecting franchisees'strategy and performance could help franchisors adopt more supportivepolicies and help potential franchisees choose among competing fran-chise opportunities.

3. Theoretical model and research hypotheses

Franchisors' resources and relational variables are antecedent con-structs that relate theoretically to franchise strategy and rm perfor-mance. Fig. 1 presents a franchisee response model of the followingvariables franchisors' brand reputation, knowledge sharing, trust, con-ict management, franchisees' intention to remain, and franchisees'performance.

Empirical evidence implies that improvements in brand reputationrelate to greater intention (Combs & Ketchen, 2003; Lafontaine &Kaufmann, 1994). A competitive franchise system gives franchisees astrong brand, scale economies, and efcient franchise system execution(Falbe et al., 1998). A franchise's brand reputation is themost signicantadvantage for a potential franchisee because of franchisors' brand trans-fers (Morhart, Herzog, & Tomczak, 2009; Norton, 1988). Merrilees &Frazer (2013) place franchise brand among top three franchise advan-tages. Keller & Aaker (1992) and Low & Fullerton (1994) indicate thatconsumer brand recognition is a majormotive for franchisees to choosea franchise chain. Research on franchise brands traditionally adopts abroad management focus and rarely discusses branding issues in fran-chisees' strategy.

H1. Brand reputation affects franchisees' intention to remain in thefranchise system.

In franchising, franchisors provide at least two important resources:brand (Jeng, 2011; Michael, 2000a) and operational routines (Knott,2003). Brand is critical to competitive advantage in industries that fran-chise (Combs & Ketchen, 1999b; Ulrich & Smallwood, 2007). Brands arestrategic resources, and investments in brand building have cumulativeeffects and inhibit new competitors' building parity in brand awarenessFig. 1. Research framework.

time, money, and effort (Yilmaz & Kabadayi, 2006). Active communica-tion fosters trust by assisting in resolving conicts and by aligning percep-

1583C.-W. Wu / Journal of Business Research 68 (2015) 158115882010; Trainor et al., 2014;Winter, 2000). However, resources' contribu-tion to rm success remains unclear.

H2. Brand reputation affects franchisees' performance in the franchisesystem.

Researchers recognize that organizational decisions can affect rmperformance (Leiblein, 2003; Madhok, 2002). Although theories positthat governance structure (e.g., franchising strategy or ownership)affects performance, previous studies rarely investigate franchise deci-sions' performance implications for franchisees (Poppo & Zenger,1998; Schilling & Steensma, 2002). Franchisees make their strategicdecisions through their intention to franchise. These decisions affectperformance. Accordingly, balancing franchisees' payments to the fran-chisor (franchisee costs) and rewards (franchisee benets) is a concernfor franchise owners (Fladmoe-Lindquist & Jacque, 1995; Lee &Cavusgil,2006; Michael, 2000a). Additionally, according to partnership theory(Dant & Kaufmann, 2003; Garbarino & Johnson, 1999), franchisees re-main in the relationship as long as they receive adequate value fromtheir contributions to the franchisor.

H3. Franchisees' intention to remain in the franchise system positivelyrelates to franchisees' performance.

Franchising strategy research covers three relational resources:knowledge sharing, inter-rm trust, and conict management in fran-chising issues. Knowledge sharing refers to regular patterns of inter-rm interactions that permit asset and resource transfer, recombina-tion, or creation (Dyer & Singh, 1998; Fan & Ku, 2010). A relationalexchange is the effective use of knowledge sharing (Szulanski, Cappetta,& Jensen, 2004). Knowledge sharing can create value that safeguardsinter-rm agreements, minimizes transaction costs, and helps increasecompetitive advantage (Dyer & Singh, 1998; Hernandez-Maestro &Gonzalez-Benito, 2011).

Relationships in a franchise system are complex and conicting. Thequantity of benets and costs franchisors share with their franchiseescan result in cooperation or conict (Pech & Slade, 2004). Conicts ofinterests of different power sources are very common in the franchisesystem. Therefore, establishing a strong partnership in the franchise sys-tem to reduce drawbacks of relationship conicts is essential (Yilmaz,Sezen, & Kabadayi, 2004). Academic literature documents conicts be-tween franchisors and their franchisees (Kaufmann & Rangan, 1990;Lee, 2001).

Morgan & Hunt (1994) dene trust as willingness to rely on anotherparty and act in circumstances where reliance makes one party vulner-able to the other party (Doney & Cannon, 1997; Mayer, Davis, &Schoorman, 1995). Recent research on inter-rm alliances shows thattrust is an important informal governance mechanism that saves trans-action costs and increases transactional value (Dyer & Chu, 2003; Dyer &Singh, 1998; Ganesan, 1994; Gulati, 1995; Poppo & Zenger, 2002).Davies, Lassar, Manolis, Prince, & Winsor (2011) and Lui, Ngo, & Hon(2006) argue that trust enhances franchisees' condence in franchisors'competence and integrity, thereby leading to a greater number of coop-erative partnerships.

Research implies that franchisors' knowledge-sharing, trust, andconict management in the system are major reasons that franchiseeswillingly join and remain in the franchise system.

H4. Relational resources positively affect franchisees' intention to re-main in the franchise system.

H4a. Franchisors' knowledge sharing positively affects franchisees' in-tention to remain in the franchise system.

H4b. Franchisees' perceived inter-rm trust in a franchisor positivelyaffects franchisees' intention to remain in the franchise system.

H4c. Conict management by franchisors positively affects franchisees'

intention to remain in the franchise system.tions and expectations (Morgan & Hunt, 1994). Conict managementmechanisms let franchisors reduce costs and add value (Michael, 2000a;Pech & Slade, 2004).

Accordingly, inter-rm trust results in better rm performance(Singh & Sirdeshmukh, 2000; Zaheer, McEvily, & Perrone, 1998). Trusthas real economic value (Dyer & Chu, 2003; Zaheer et al., 1998) and isespecially important for high-relational customers as opposed toweak-relational customers (Garbarino & Johnson, 1999). Therefore,trust is essential to maintain continuity in an exchange relationship(Doney & Cannon, 1997; Ganesan, Brown, Mariadoss, & Ho, 2010)because parties who seek to commit to the relationship value trust(Chua, Ingram, & Morris, 2008; Jeffries & Reed, 2000).

Empirical studies support the relational resourcesperformance re-lationship. Reducing costs ofmaintaining relationships between alliancepartners positively affects performance (Dyer & Chu, 2003). Effective re-lational exchange adds value and generates competitive advantage byminimizing transaction costs and maximizing transaction value (Fan &Ku, 2010). Franchisors develop policies for managing franchisees to re-duce agency costs and increase franchisees' performance (Shane, 1996).Research posits that franchisor investment in strategic resources in-creases franchisee performance.

H5. Relational resources positively affect franchisees' performance.

H5a. Franchisors' knowledge-sharing positively affects franchisees'performance.

H5b. Franchisees' perceived inter-rm trust in a franchisor positivelyaffects franchisees' performance.

H5c. Conict management by franchisors positively affects franchisees'performance.

4. Research method

The study uses data from a survey of executive franchisees inTaiwan. Between January and July 2012, 996 franchisees from 2 indus-tries in the Taiwan Annual Chain Store and Franchise Guide (2011) re-ceived survey questionnaires. Franchisees were from a major chainstore comprising a convenience store and a chain restaurant in Taiwan.

The nal sample sizewas 246, representing a response rate of 25.2%.The sampling method used personal and rm characteristics. Respon-dents varied in sex (female 48% and male 52%), age (b29 years of age16.9%, 3039 years of age 71.2%, and40 years of age 8.5%), and educa-tion (high school diploma 0.8%, senior high school 49.2%, college 41.5%,and university 8.5%). Franchisees' years of franchise experience varied(b3 years 55.1%, 47 years 26.3%, 810 years 12.7%, and 11 years3.4%). Industry varied (convenience store 45.2% and restaurant chainKnowledge sharing is a strategic resource that enhances rms' long-term competitive advantage (Day, Shocker, & Srivastava, 1979;Sorenson & Srensen, 2001). Cooperative arrangements between partnerrms can contribute tormperformance because knowledge sharing andeffective franchising strategies generate value from the franchisor's re-sources (Hernandez-Maestro & Gonzalez-Benito, 2011). Quality of rela-tions between franchisor and franchisee has real economic value andimproves performance (Dyer & Singh, 1998; Lavie, 2006; Madhok &Tallman, 1998). Franchisors can effectively transfer innovations and gen-erate competitive advantage as knowledge is shared.

Conict, as the perceived level of tension between two parties, is in-evitable in exchange relationships (Dwyer et al., 1987). Some level ofconict can be functional especially if parties have adequate conictmanagement with one another (Dant & Schul, 1992). Maintaining rela-tionships with opportunistic partners and keeping them in check costs54.8%).

4.8 1.7 0.854.4 1.8 0.89

usto

im

all

e)

ee a

er f

yea

1584 C.-W. Wu / Journal of Business Research 68 (2015) 15811588Measures captured franchisees' perceptions of the relationship withtheir franchisors. All measures in the model appear in Table 1. Several

Table 1Measures used with mean and standard deviation and measurement model.

Construct and scale item loadings

Brand reputation (7-point scales anchored by strongly disagree and strongly agree)1. My franchisor is the best brand in the industry2. My franchisor enjoys higher brand recognition than do competitors3. My franchisor's brand has good reputation nationally4. My franchisor is the rst choice when considering the product or service from my c

Trust (7-point scales anchored by strongly disagree and strongly agree)5. The franchisor will act according to the agreement in the contract6. My franchisors and franchisees treat each other fairly7. The information provided by the franchisor by the franchisor is credible.8. The franchisor always takes our store into consideration when it wants to make any

Knowledge-sharing (7-point scales anchored by strongly disagree and strongly agree)9. Franchisor encourage franchisees to express their ideas with my company10. There are established ways for franchisors' or franchisee's innovations to shared to11. My franchisor help us identify and develop good ideas12. If a franchisee nds a better way to do, we will share about it quickly

Conict management (7-point scales anchored by strongly disagree and strongly agre13. My franchisor have a fair process for resolving differences with franchisees14. My franchisor works hard to resolve disagreements with franchisees15. My franchisor communicates with franchisees without difculty

Franchising strategy (intention to remain) (7-point scales anchored by strongly disagr16. It is my pleasure to introduce my franchisor to others.17. I am willing to collaborate with this franchisor in the future18. I still consider the current franchisor as my rst priority although I can look for oth

Performance (7-point scales anchored by low-high)Please compare your rm's performance to your competitors' performance over last 519. Market share20. Quality of service/product21. Sales growth22. Satisfaction of customersscales from prior research composed the survey instrument. Pre-testing of the questionnaire increased face validity. Ten franchiseesgave feedback on all survey items to improve questionnaire clarity.

The study used SPSS 14.0 for all correlations, covariance matrices,and initial reliabilities. Structural equation modeling (SEM) and fsQCAassessed conrmatory factor analysis and item-level partitioning of var-iance extracted. The present study used adapted measures validated inprevious studies. Most research scales were measured on a 7-pointLikert scale with anchors of 1 (strongly disagree) and 7 (strongly agree).

4.1. Franchising strategy

Franchising strategy measures intention to remain in the franchisesystem (Chiou et al., 2004; Merrilees & Frazer, 2013). This dependentvariable captures intention, resistance, and word-of-mouth. Reliabilityof this measure is 0.83.

4.2. Firm performance

Performance is a multi-dimensional construct (Combs, Nakarni, &Combs, 2005). Franchisor performance reects four self-report mea-sures of franchisees' performance adapted from Aas & Pedersen(2011) and Pyo (2010). Four performance items (i.e., sales growth, cus-tomer satisfaction, product/service quality, and market share) measurefranchiser performance. The reliability of this measure is 0.94.

4.3. Brand reputation

Brand reputation refers to strategic assets that create a competitiveadvantage. Brand reputation consists of four items adapted fromBarthlemy (2008), Griessmair, Hussain, & Windsperger (2014), andMerrilees & Frazer (2013). The reliability of this measure is 0.84.4.4. Relational resources

4.2 1.6 0.854.4 1.6 0.774.1 1.4 0.85

nd strongly agree)4.5 1.7 0.894.3 1.9 0.85

ranchisors 4.9 1.4 0.86

rs4.6 1.7 0.854.5 1.5 0.824.1 1.4 0.844.4 1.7 0.91mer perspective 4.9 1.6 0.77

4.6 1.4 0.844.4 1.6 0.774.5 1.2 0.75

portant decision. 4.7 1.3 0.74

4.7 1.4 0.82stores 4.6 1.6 0.77

4.5 1.2 0.784.3 1.6 0.75MEAN S.D. standardized

4.7 1.2 0.83The research uses three constructs representing resource types.Knowledge sharing is the rst construct. Knowledge sharing comprisesfour items from Sarkbar, Echambadi, Cavusgil, & Aulakh (2001) thatcapture knowledge exchange intensity. The reliability of these items is0.82. The second construct is trust, which consists of all three itemsfromGarbarino & Johnson (1999), andMorgan & Hunt (1999). The reli-ability of these items is 0.87. The third construct is conictmanagement,comprising three items from Shane (1996) and Knott (2003). The reli-ability of these items is 0.78.

All 22 standardized loadings are high and have signicant t-values(p b 0.01) (Table 1). All standard errors are small and acceptable.Thus, all indicators relate to their specied constructs. Hence, resultsconrm empirical relationships among research constructs.

5. Empirical results

This research provides a conrmatory technique that assessesresearch constructs' reliabilities and validities. The research uses conr-matory factor analysis (CFA) and path analysis on all research constructsusing AMOS 7. CFA is a good t for the theoretical model. Averagevariance extracted (AVE) from constructs exceeds the minimum re-quirement of 0.50. The convergent validity of each construct and dis-criminant validity for all constructs appear in Table 2.

5.1. Overall model t

Relevant overall t indices for themodels appear in Table 3. The chi-squared test yields values of 646.47 for samples (each with 175 degreesof freedom, p= .00). Considering chi-squared values, root mean squareerror of approximation (RMSEA) (0.064), and comparative t index

Table 2Construct measurement in the study.

Measures construct Cronbach's AVE

Knowledge share 0.82 0.85Trust 0.87 0.68Conict management 0.78 0.82Brand reputation 0.84 0.81Franchise strategy 0.83 0.72Performance 0.94 0.84

1585C.-W. Wu / Journal of Business Research 68 (2015) 15811588(CFI) (0.94) is vital to assess model t. Fit indices yield values that sup-port a good model t for the data set.

5.2. Measurement model t

Reliability estimates for each construct using Cronbach's alpha(Cronbach, 1951) and composite reliabilities all exceed the thresh-old of 0.70. Average variance extracted shows indicators' degree ofshared representation with the constructs. The lowest value for av-erage variance extracted is 0.68. All shared variances extracted foreach construct are acceptable because they exceed the recom-mended 0.50 value (Bagozzi & Yi, 1988; Fornell & Larcker, 1981).

5.3. Structural model t

Table 3 presents results of analyses of causal paths in the structuralmodel. Results support all ve hypotheses: brand reputation affectsfranchisees' intention to remain in the franchise system (H1); brandreputation affects franchisees' performance in the franchise system(H2); franchisees' intention to remain in the franchise system positivelyrelates to franchisees' performance (H3); franchisors' knowledge-sharing, trust, and conictmanagement positively affect franchisees' in-tention to remain in the franchise system (H4a, H4b andH4c); and fran-chisors' knowledge-sharing, trust, and conict management positivelyaffect franchisees' performance (H5a, H5b and H5c) (Table 4).

5.4. The fsQCA model

Woodside (2013) suggests including only a small number of vari-ables in multiple regression analysis (MRA) or reporting ndings fromsimpler methods. This study presents results from empirical analysesusing SEM and fsQCA. FsQCAuses fuzzy-set theory and differs from con-ventional statistical methods. Ragin (2008) and Woodside & Zhang(2013) provide more detail on performing calibrations in fsQCA. Todemonstrate predictive validity, this study conducts prediction analysisfor fsQCA. Consistency and coverage test results reveal relationships be-tween the variables in Table 5. Empirical results (Table 5) show thatfsQCA captures relationships better and has better predictive capabili-ties than SEM.

6. Discussion and implications

Empirical results enrich current explanations of differences in strategyand performance. Results have implications for relationship-marketingtheorists, resource-based view researchers, franchisors, and franchi-

sees. This study explains franchisee success by extending the logic of

Table 3Overall model t.

Chi-square 646.47d.f. 175p-Value 0.000RMSEA 0.065CFI 0.92NFI 0.93GFI 0.94relationship-marketing theory and the resource-based view and by nd-ing support in empirical data. Organizational success is interesting for en-trepreneurship researchers, and franchising is an important source ofentrepreneurial activity. Furthermore, research results have direct impli-cations for franchisors and franchisees. Empirical data suggest thatrelationship-marketing theory and the resource-basedviewprovide com-plementary explanations for franchisee success.

According to the resource-based view and relationship-marketingtheory, franchisors' strategic resources increase franchisee success.Brand reputation, knowledge sharing, trust, and conict managementpositively affect franchisees' intention to remain in the system and fran-chisees' performance. Results imply a simple additive effect of resource-based variables on franchisee success.

While this research marks an important rst step, researchers couldseek greater theoretical synthesis. One possibility is that relationship-marketing and resource-based variables have additive effects on fran-chisee success. Franchisees with more strategic resources and relation-ship exchange factors would thereby enjoy better performance. Asecond opportunity for further research is to investigate interactionsbetween relationship exchange and resource variables. Franchisees'intention to remain is set so that franchisors can earn returns on priorinvestments in their franchise system (Lafontaine & Shaw 1999). Al-though such strategic investments aid franchisors, research nds thatinvestments in brand or other relational network accompanying highintention to remain rates.

This study demonstrates that knowledge sharing, trust, conictmanagement, and brand reputation are indeed important in reinforcingfranchisees' intention to remain and their performance within the fran-chise system. Bymonitoring how franchisees perceive them, franchisorscan manage franchisorfranchisee relationships more effectively. Forexample, if franchisors understand franchisees' perceptions of franchi-sor value, franchisors can convey a positive image to franchisees andthereby achieve greater cooperation.

Brand reputation plays a surprisingly broad role in relationshipbuilding processes and deserves attention in academic research. Resultsnot only corroborate research in the practical eld, but also provide rea-sons explaining franchisees' effect on franchisors' commitment re-source. Franchisors with well-known brands are likely to enjoy strongintention to remain from their franchisees. Likewise, franchisees ensuresurvival by seeking a franchisor that possesses an emerging brand rep-utation. Results are reassuring for practitioners and professors. Thisstudy focuses on how franchisors' strategically valuable resources affectfranchisee success. Results are consistent with studies suggesting thatstrategic resources from two ormore independent rms combine to en-hance success in cooperative relationships (Dyer, 1997). Results showthe value of brand reputation as having a signicant association withbetter rm performance. Results support the resource-based view inthat brand reputation is an important resource that directly affectsperformance.

Knowledge sharing, trust, and conict management positively affectfranchisees' perceived franchising strategy and franchisees' overall per-formance. More importantly, knowledge sharing, trust, conict manage-ment, and brand reputation are important antecedents for franchisees'intention to remain in the franchise system. In summary, franchisorsshould understand that relational factors are the foundation for soundrelationship building in a franchise system. Findings offer evidence thatrelational theory has managerial implications for understanding fran-chising. Hypotheses posit that relational factors improve franchisees'performance and increase franchisees' intention to remain. Concerningrelational resources, main ndings of this study show that franchisorswith greater knowledge-sharing, trust, and conict management capa-bilities cause franchisees to have greater intention to remain. Accord-ingly, such franchisors positively affect franchisees' performance.Results show that franchisors with valuable knowledge-sharing, trust,and conict management capabilities can use these capabilities to in-

crease franchisees' performance.

business model (specically relationship and performance drivers) is

ndings. Further research should test the applicability of the theories in

Table 4Path analysis results.

Path Standardized

H1: Brand reputation franchising intention 0.37

H2: Brand reputation performance 0.32

H3: Franchising intention performance 0.34

H4a: Knowledge share franchising intention 0.72

H4b: Trust franchising intention 0.56

H4c: Conict management franchising intention 0.38

H5a: Knowledge share performance 0.24

H5b: Trust performance 0.45

H5c: Conict management performance 0.48

ns = not signicant; s = signicant; t values all signicant at p b 0.05. signicant at p b 0.05. signicant at p b 0.01.

1586 C.-W. Wu / Journal of Business Research 68 (2015) 15811588critical because of franchising's importance in the domestic economy,especially given small businesses' recent hardships. This urges re-searchers to discern relationship nuances, noting relational variablesthat will be insightful for potential benets gained from stronger rela-tionships in the franchising context.

7. Conclusions and research limitations

This study applies the resource-based view and relationship-marketing theory to franchising. This study also establishes franchisors'resources and relationships with franchisees to explain franchisees'strategy choices for franchisees performance. Existing franchising liter-ature offers scarce theoretical explanations for how franchisees deter-mine their franchise strategy and what factors affect franchisees'performance. This study provides an initial step toward explaining fran-chising strategy and performance. The study also provides support forthe resource-based view and relationship-marketing theory as explana-tions for franchisees' performance in chain stores. Understanding whyFindings have managerial implications for franchisors and franchi-sees. Franchisors should manage trust, conict management, andknowledge sharing to ensure franchisees have greater intention to re-main and better performance. Firms with more inter-rm trust havehigher intention to franchise, which suggests franchisors have an inter-est in building trust with franchisees. Furthermore, franchisors benetfrom developing a strong brand reputation, which is an importantinvestment in chain stores. Firms can benet from developing brandreputation with franchisees. Thus, developing and maintaining brandreputation is a priority.

As a franchisor, the goal of collaborative communication with fran-chisees is to ensure franchisees remain. Understanding the franchisingfranchisees succeed is important because franchising is important for

Table 5FsQCA results.

Items Analysis Consistency Rawcoverage

Combined

Outcome Performance

1 Knowledge share trust conictmanagement brand reputation franchise strategy

0.929114 0.804735 0.883512

2 Brand reputation performance 0.841887 0.871465 0.8757223 Franchising strategy performance 0.879550 0.875327 0.9070874 Brand reputation 0.892191 0.862268 0.9050725 Knowledge share 0.871446 0.960035 0.9448986 Trust 0.840335 0.873352 0.8766707 Conict management 0.842275 0.916355 0.8979948 Franchising strategy 0.830415 0.908985 0.884135other countries. Future studies should broaden this study's scope to in-clude different categories of franchise system. Second, the size of thesample means that ndings have little generalizability. With more re-sources, further research could increase sample size and considerother types of rms or industries. Third, this is a cross-sectional study:all information comes from a mail survey. Therefore, causal attributionof relationships is weak. Future research should consider using a longi-tudinal design to test causal relationships. Finally, further researchshould explore the relevance of other external and internal factors forexamining antecedents of franchisees' franchising strategy and perfor-mance. Despite efforts, response rate is relatively low. This potentiallyundermines ndings' external validity. The model assumes unidirec-tional relationships among constructs, yet bidirectional linkages mayexist and may need further investigation. This study relies on self-report data from key informants, but future research should employ ob-jective data to triangulate subjective measures and reduce uncommonmethod biases.

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Antecedents of franchise strategy and performance1. Introduction2. Literature review3. Theoretical model and research hypotheses4. Research method4.1. Franchising strategy4.2. Firm performance4.3. Brand reputation4.4. Relational resources

5. Empirical results5.1. Overall model fit5.2. Measurement model fit5.3. Structural model fit5.4. The fsQCA model

6. Discussion and implications7. Conclusions and research limitationsReferences