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The Determinants of Dual Distribution Revisited

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  • Philippe Cyrenne

Abstract

This paper examines the use of what has been called dual distribution by firms. Dual distribution involves a firm using both company owned stores and independently owned franchises to sell its product or service. Using panel data from 1048 companies for the years 2005 to 2009, I use a variety of estimators to determine the factors that influence the relative use of franchising by companies. A key focus of the paper is to control for the possible endogeneity of the franchise fee, royalty rate and franchise ratio for the companies in the respective industries. Using a panel date estimator and lagged values of the franchise fee and royalty rate as instruments, I find that one reason the franchise fee and royalty rate do not appear to influence the relative use of franchising by companies is due to industry and firm level fixed effects which capture the variation in royalty rates and franchise fees at the company level.

Suggested Citation

  • Philippe Cyrenne, 2015. "The Determinants of Dual Distribution Revisited," Departmental Working Papers 2015-04, The University of Winnipeg, Department of Economics.
    • Handle: RePEc:win:winwop:2015-04
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    1. Ying Fan & Kai-Uwe Kühn & Francine Lafontaine, 2017. "Financial Constraints and Moral Hazard: The Case of Franchising," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 2082-2125.
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