Social Innovation Through Development Franchising: Compensating for a Lack of Entrepreneurial Expertise and Connecting to Formal Supply Chains

Promoting entrepreneurship through microenterprise has become a popular strategy for poverty alleviation and economic development. However, not all would-be entrepreneurs have the necessary skills and expertise to succeed in new venture creation. Furthermore, microenterprises often function within the confines of the informal economy, with limited access to formal supply chains. As one potential solution for overcoming these two major challenges, we propose that development franchising – franchising that begins at a micro scale in developing economies – can be employed as a social innovation. Regarding entrepreneurial expertise, recent research has shown that franchisees in the United States more closely resemble non-entrepreneurs than entrepreneurial experts, implying that the franchise business model may compensate for a franchisee’s lack of entrepreneurial expertise. In a development context, franchising can also serve as an effective means of helping subsistence entrepreneurs access formal supply chains – increasing opportunities for scaling, growth, and further job creation. Two case examples illustrate the potential of development franchising in overcoming some of the major challenges faced by traditional microenterprise strategies.