Social Business Franchising: A Stewardship Perspective

Abstract

Social businesses increasingly use franchising to scale their operations. Social businesses combine the social mission of non-profit-organizations with financial self-sustainability of businesses. Moreover, they deliberately suppress ownership incentives through profit reinvestment, market wage and non-dividend policies. To explain social business franchising, most researchers use agency theory. However, we challenge its usefulness to explain important noneconomic aspects of social business franchising. Rather, we propose stewardship theory as a means to understand goal alignment in situations of ineffective economic ownership incentives. We draw on the psychological factors of stewardship theory – motivation and identification – to suggest how social businesses franchisors and franchisees select each other to generate goal alignment and on the situational factors– management philosophy and culture – to suggest how social businesses franchisors manage franchisees to maintain goal alignment. Based on our propositions, we further contribute to research by drawing two sets of implications. First, we extend stewardship theory by identifying stewardship costs that limit the performance potential of mutual stewardship relationships due to high goal alignment. Second, we suggest that reported failures of social business franchises may have occurred because of mixed-motive choices. Here, one party chooses to at out agency behavior while the other chooses stewardship behavior. Hence, goal alignment fails.