Abstract
Although management scholars recognize that intention of formalization influences the manner in which formal controls are applied within organizations, this issue has been largely overlooked in research on strategic alliances including franchise networks. We investigate formalization intent (the way in which controls are initiated and executed) by asking: How do franchisor formal controls promote trust and brand-supportive behavior among franchisees? On the basis of case study research involving retail franchises, we develop a framework that explains how formal controls counter-intuitively promote franchisee brand-supportive behavior via trust-building. Our study contributes to understanding the complementary relationship between formal and social control on promoting partner trust and co-operation. These insights move research beyond the present preoccupation with the complementary influence of formalization degree and content.
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