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An empirical study on contractual heterogeneity within the firm: the 'vertical integration-franchise contracts' mix

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  • Luisa Affuso

Abstract

This paper tests a discrete choice model on the mix of franchised and company owned outlets (contractual heterogeneity) within the firm. This is often explained by the existing literature as due to heterogeneous characteristics of the outlets. However, correspondence between outlets and contracts characteristics is not often observed in reality. An explanation is proposed which suggests that contract mixing is driven by the contractual choice of both principal and agents, and that heterogeneous agents will choose contracts that match their characteristics. This hypothesis is supported by econometric results, based on outlet level microdata collected by means of a survey of UK firms.

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  • Luisa Affuso, 2002. "An empirical study on contractual heterogeneity within the firm: the 'vertical integration-franchise contracts' mix," Applied Economics, Taylor & Francis Journals, vol. 34(8), pages 931-944.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:8:p:931-944
    DOI: 10.1080/00036840110065817
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    References listed on IDEAS

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    1. Francine Lafontaine & Kathryn L. Shaw, 1999. "The Dynamics of Franchise Contracting: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 1041-1080, October.
    2. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    3. Francine Lafontaine, 1995. "Pricing Decisions in Franchised Chains: A Look at the Restaurant and Fast-Food Industry," NBER Working Papers 5247, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Brookes, Maureen & Roper, Angela, 2012. "Realising plural-form benefits in international hotel chains," Tourism Management, Elsevier, vol. 33(3), pages 580-591.
    2. Muriel Fadairo & Cintya Lanchimba, 2014. "Organizational choices and performance in distribution systems," Applied Economics, Taylor & Francis Journals, vol. 46(14), pages 1609-1623, May.
    3. Maruyama, Masayoshi & Yamashita, Yu, 2010. "The logic of franchise contracts: Empirical results of Japan," Japan and the World Economy, Elsevier, vol. 22(3), pages 183-192, August.
    4. Masayoshi Maruyama & Yu Yamashita, 2012. "Franchise Fees and Royalties: Theory and Empirical Results," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(3), pages 167-189, May.
    5. Matthew Sveum & Michael Sykuta, 2016. "Making a Motivated Manager: A Census Data Investigation into Efficiency Differences Between Franchisee and Franchisor-Owned Restaurants," Working Papers 16-54, Center for Economic Studies, U.S. Census Bureau.

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