Competitive advantages of franchising firms and the moderating role of organizational characteristics: Evidence from the restaurant industry

Abstract

This study investigates the effects of a firm's involvement in franchising on efficiency and differentiation as defined in Porter's generic competitive strategy framework. The study further examines the moderating effects of organizational characteristics (prior experience in franchising and business type) on the relationship between franchising and efficiency and between franchising and differentiation. Results indicate that as a firm increases its involvement in franchising, differentiation increases, but efficiency does not. Furthermore, prior experience enhances the effects of franchising on efficiency and differentiation, while business type only enhances effects on differentiation. The findings suggest that as an interconnected governance structure, franchising offers benefits to franchisors by helping them develop competitive advantages and outperform their competitors in the market. By discovering the detailed channels through which hospitality firms could achieve business success, this study contributes to existing literature on franchising and hospitality management and provides guidance for industry practitioners.