The Quality of Institutions and Organizational Form Decisions: Evidence from Within the Firm

Francine Lafontaine (), Rozenn Perrigot () and Nathan Wilson ()
Additional contact information
Rozenn Perrigot: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: In many retail and service sectors, firms have to establish a physical presence in a geographic market to access customers there. In countries where the quality of institutions is low, this can put assets at risk. We use data on the operations of a multinational, multibrand hotel company to show that in environments where local institutions are weaker—as proxied mainly by the World Bank's Checks index—the company eschews direct ownership. Rather than increasing its reliance on franchising, as predicted by some models, the company relies more on another form of organization commonly used in this industry, namely management contracts. We explain these patterns by emphasizing how the quality of the institutional environment affects the cost of using equity‐based organizational forms, per arguments in the current literature, but also the cost of enforcing the terms of franchise contracts.

Date: 2017-06
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Economics & Management Strategy, 2017, 26 (2), pp.375 - 402. ⟨10.1111/jems.12185⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The Quality of Institutions and Organizational Form Decisions: Evidence from Within the Firm (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01615109

DOI: 10.1111/jems.12185

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().