Regional development and the institutional environment for franchise chains: frontiers of small and medium-sized cities

Abstract

PurposeThe purpose of this paper is to understand and identify the various characteristics of the institutional environment and the factors that propitiate the attraction of franchise chains to cities in the interior, using Brazil as an analysis.Design/methodology/approachSecondary data from the Brazilian Institute of Geography and Statistics were used. It comprised a sample of 1,683 Brazilian cities with commercial outlets featuring franchise brands. It was limited to cities with populations of up to 100,000 inhabitants that did not constitute metropolitan regions. The statistical technique performed was multiple regression.FindingsThe results of the multiple regression confirm the explanatory power of R² = 36% for the analyzed model. Such presence of franchise chains is based on four institutional dimensions and their environmental characteristics: demographic (demographic density); economic and financial (average monthly salary of formal workers and number of banking agencies); business (number of active companies and presence of shopping centers); and human resources (presence of higher education units).Research limitations/implicationsThe main contribution of the study encompasses the call that regional institutional characteristics are part of knowledge guidelines on regional development and institutional environments for entrepreneurship. In this sense, the paper contributes to studies on regional development in particular, by punctuating the characteristics of the institutional environment of cities that are related to the existence of franchise chain brands.Practical implicationsSuch contributions are addressed to managers and directors of expanding franchise chains, given the choice of locations that best enable the concept of their franchises. The fact that only 20% of franchises have a presence in these cities, even if it is admitted that for 70% of these chains, their businesses have the capacity to make these locations viable, shows the importance of this contribution.Social implicationsThis study is addressed to public managers, represented by secretaries of municipal developments, in view of the construction of an institutional environment conducive to entrepreneurial activity, in this specific case, by franchises. It is an important mechanism for attracting new businesses and creating a virtuous cycle of regional development.Originality/valueSpecifically, knowledge is generated about the insertion of ventures based on the franchise business model in small- and medium-sized regional markets. A second feature involves the understanding of the insertion of enterprises in a large and heterogeneous emerging market.