Why Do Entrepreneurs Enter Franchising and Other Share Relationships?1

Abstract

Many entrepreneurs enter long-term relationships such as franchising, an important area of entrepreneurship research. However, franchising is but one version of an underlying organizational form—long-term share relationships—in which both principals and agents receive variable returns. Using two major streams of research that have long remained largely separate from one another—franchising and sharecropping—we build an integrative model of the determinants of share relationships, apply an evolutionary perspective to show how incentives may change, develop explanations for longstanding theoretical conflicts, and generate a fresh set of research propositions.