International franchise expansion: The role of institutions and transaction costs
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Author/Creator ORCID
Date
2016-06
Type of Work
Department
Management and Marketing
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Citation of Original Publication
Hoffman, R. C., Munemo, J., & Watson, S. (2016). International franchise expansion: The role of institutions and transaction costs. Journal of International Management, 22(2), 101-114.
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Embargoed until June 2017
Abstract
In this study, we examine how a country’s institutional environment affects the international expansion activities of U.S. franchise companies. We draw on institutional and transaction cost theories to develop a model and a set of hypotheses regarding the effect of political, regulatory and infrastructural institutions, as well as economic instability, on international franchise expansion. Using a sample of U.S. franchise firms and data from a combination of secondary sources, we test these hypotheses by estimating a panel regression model. Our results demonstrate for the first time that, in addition to favorable political governance, a country’s business climate, including entry regulations, taxes, and communications infrastructure, is an important predictor of foreign franchise firms’ expansion into that country. Implications for practice and future research also are discussed.