Ownership structure, organisational flexibility and store performance in retail chains

Abstract

Drawing on agency and flexible capability perspectives, the authors develop a theoretical framework explaining the impact of ownership structure on organisational flexibility and store performance in retail chains. The researchers argue that franchised stores attract more entrepreneurial managers with more flexible capabilities and they have a stronger incentive to align their flexible capabilities with the demands of the business environment. A sample of 105 franchised and company-owned stores of an optical retail chain is used to test the hypotheses. Furthermore, the study found strong support for the hypotheses that 'Franchised stores have a higher structural flexibility than company-owned stores', but only weak support for operational and strategic flexible capabilities. Furthermore, in line with the study's theoretical framework, it has been found that in a highly turbulent business environment, franchised stores perform better than company-owned stores. The paper concludes with a discussion of the implications for theory development and management of ownership structures in retail chains.