Sibling Rivalry vs. Cousin Solidarity: How Ownership Influences Performance in Franchise Chains.

Abstract

This study applies agglomeration theory to multiunit chains that co- locate corporate and franchised units. We analyze how the performance of a corporate unit is influenced by co-located same-chain units, distinguishing the effects by ownership structure. We argue that corporate ownership and franchising entail different managerial incentives and routine structures that influence the nature of within-chain competition. We predict that a corporate unit’s performance is decreased by co-located corporate sisters but increased by co-located franchised cousins. We support our predictions using data from the hospitality industry. We contribute to the agglomeration and franchising literatures and extend research on managing multiunit chains.