Opportunism in an emerging market – franchisee perspective

Abstract

PurposeAlthough multiple forms of governance mechanisms have been studied to address the opportunistic behavior in franchising, research has not shed light on franchise systems operating in emerging markets despite exponential growth in these markets. To address this gap, this study aims to test the direct effects of different governance mechanisms on franchisee’s opportunism and moderating effects of franchisee’s relationship satisfaction on the relationship between different governance mechanisms and franchisee’s opportunism.Design/methodology/approachSurvey data from 151 franchise owners were used to test the conceptual model and research hypotheses. The confirmatory factor model and structural equation model were tested by using AMOS.FindingsFindings suggest that formalization and solidarity in franchising relationships negatively affect franchise opportunism. By contrast, franchisees, who are otherwise satisfied with their franchisor, find centralization and formalization oppressive and, therefore, engage in opportunistic activities.Research limitations/implicationsThe study makes important contributions related to franchising in emerging markets. It addresses opportunistic behavior by franchisees in emerging markets and the role played by different governance mechanisms in curbing such behavior. The study has some limitations related to its cross-sectional design and its focus on a single emerging country, among others.Originality/valueThis study is among the first to examine the role of governance mechanisms to address franchisee’s opportunism in an emerging market context. The study’s findings have important theoretical and practical implications for governance design in business-to-business relationships in emerging markets.