International Franchise Expansion: The Role of Institutions and Transaction Costs

Richard C. Hoffman, Jonathan Munemo and Sharon Watson

Journal of International Management, 2016, vol. 22, issue 2, 101-114

Abstract: In this study, we examine how a country's institutional environment affects the international expansion activities of U.S. franchise companies. We draw on institutional and transaction cost theories to develop a model and a set of hypotheses regarding the effect of political, regulatory and infrastructural institutions, as well as economic instability, on international franchise expansion. Using a sample of U.S. franchise firms and data from a combination of secondary sources, we test these hypotheses by estimating a panel regression model. Our results demonstrate for the first time that, in addition to favorable political governance, a country's business climate, including entry regulations, taxes, and communications infrastructure, is an important predictor of foreign franchise firms' expansion into that country. Implications for practice and future research also are discussed.

Keywords: International expansion; Franchise companies; Institutional theory (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intman:v:22:y:2016:i:2:p:101-114

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DOI: 10.1016/j.intman.2016.01.003

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