Choice Of Governance Mode Research Articles

Do stakeholders matter in entry mode decisions? An investigation of international franchise governance mode choice

This article aims to analyse decisions about international entry modes from the stakeholder perspective, delving into different configurations of governance modes. A quantitative analysis is employed using data on 463 observations of Brazilian companies operating in foreign markets. We find that business group affiliation, support from institutional partners, and the characteristics of host market networks all influence company decisions to adopt lower control modes in international markets. The article contributes to international entry mode and franchising literature by applying stakeholder theory to choices about foreign entry modes. It shifts the focus away from the profit- and cost-related aspects of rational choice models towards recognizing the substantial impact of stakeholders, enriching our comprehension of this complex decision-making process. Our study further offers a more nuanced understanding of mode choice by investigating modes of international franchise governance with varying levels of commitment, control, and risk.

Digital technologies as a driver of resilience and institutional transformation: The case of Ukrainian agroholdings

Abstract The present paper explores how implementation of digital technologies (DTs) assists firms in transition economies in addressing weaknesses of the institutional environment surrounding them, in particular via establishment of collective governance systems. Based on case studies of three large-scale agroholdings operating in Ukraine, the paper aims to fill the research gaps with regard to the following: motivation of the firm to initiate DT-enabled collective governance systems; the rules these systems are based on; and the reasons behind the firm’s choice of a particular governance mode – closed, shared or open – for these systems. The findings generally support the institutional theory argument that complex technology enables coordination of exchange relationships not only within but also outside firm boundaries. At that, the choice of a governance mode between closed, shared or open institutional infrastructure is likely to depend on the firm’s ownership concentration, corporate transparency, availability of resources and social embeddedness.

The Effect of Nationalism on Governance Choices in Cross-Border Collaborations

We examine how nationalism influences governance choice in cross-border collaborations. While nationalism has historically been within the purview of political scientists, we demonstrate its relevance to management scholars by theorizing how nationalist attitudes and behaviors among decision-makers might shape strategic decisions about collaborations with foreign partners. Drawing on insights from the social psychology literature, we theorize how two attitudes commonly associated with nationalism, that is, lower levels of trust and an unwillingness to work with foreigners, may increase decision-makers’ concerns about opportunistic behavior and invasiveness in cross-border collaborations. Integrating these insights into two key theories of governance choice—transaction cost economics (TCE) and resource dependence theory (RDT)—we derive two competing effects of nationalism: TCE suggests that a heightened concern about opportunistic behavior will make equity alliances preferable, whereas RDT predicts that a greater sensitivity to invasiveness would prioritize non-equity alliances. Examining 11,469 cross-border collaborations over a 25-year period, we find, in line with the RDT-based prediction, that firms from countries with stronger nationalist sentiments prefer non-equity alliances. We also find that cross-country dissimilarities and prior conflict between the firms’ home countries strengthen this negative association. Our findings advance research on cross-border collaborations by demonstrating why and when nationalism may influence governance mode choice. We also contribute to efforts to establish nationalism, specifically in the form of nationalist sentiments, as an important theoretical concept within the management literature.

How to achieve entrepreneurial enterprise performance in entrepreneurial scenario? - Based on the case study of China new energy passenger car company A.

With the rapid development of China in recent decades, entrepreneurial scenarios are constantly changing, greatly promoting entrepreneurial practice. The characteristics of China's entrepreneurial scene, such as institutional differences, economic differences and cultural differences, make it unique. This research is based on a Chinese new energy vehicle start-up. Focus on how to achieve entrepreneurial enterprise performance in this unique entrepreneurial scenario. Based on the development process from 2014 to 2021, using entrepreneurial scenario and entrepreneurial performance theory, focusing on the two themes of "what to do" and "how to do", and adopting exploratory case study methods, the performance of entrepreneurial enterprises was studied. The study found that in the context of Chinese entrepreneurship, cultural background has the most significant impact on the performance of entrepreneurial enterprises. The accurate prediction of institutional scenarios by entrepreneurial enterprises can improve enterprise performance, while economic scenarios have a negative impact on entrepreneurial enterprise performance. The research shows that in the development process of entrepreneurial enterprises based on China's entrepreneurial scenario, the governance mode and strategic choice of entrepreneurial enterprises should match the scenarios at different stages. At different stages of development, entrepreneurial enterprises should flexibly adapt to entrepreneurial scenarios and adopt different strategies to reflect their advantages in entrepreneurial scenarios and improve the success rate of entrepreneurship.

The choice of master international franchising – A modified transaction cost model

This study develops and tests a novel transaction cost model of master international franchising. Based on data from international franchise firms headquartered in six countries, we show that master international franchising is the franchisor’s preferred governance mode under the following conditions: large bilateral franchisor’s and franchisees’ transaction-specific investments, high institutional uncertainty and high behavioral uncertainty. Our model extends the literature by presenting a modified transaction cost model of master international franchising that investigates the bonding effect of bilateral transaction-specific investments and environmental uncertainty as determinants of the franchisor’s choice of international governance mode. In addition, by using primary data from international franchise companies, our study contributes to the transaction cost literature in international business and international franchising that is mainly based on secondary data.

Governance of international franchise networks: Combining value creation and value appropriation perspectives

This study develops a new perspective on the franchisor’s choice of international governance modes as a value creation and value appropriation mechanism. Value creation refers to knowledge creation from the joint use of the franchisor’s intangible system-specific knowhow and foreign partners’ intangible local market knowhow; value appropriation refers to efficient knowledge exploitation based on transaction cost savings under conditions of uncertainty and transaction-specific investments. Based on primary data from 162 international franchise systems headquartered in eight countries, the results highlight the importance of intangible knowledge-based resources (franchisor’s system-specific knowhow and franchise partners’ local market knowhow) and transaction cost factors (transaction-specific investments, environmental uncertainty, and cultural uncertainty) for the franchisor’s choice between equity modes, such as wholly-owned subsidiaries, and joint venture franchising, and non-equity modes, such as single-unit franchising, area development franchising, and master franchising.

Are governance mode and foreign location choices independent?

AbstractResearch SummaryThis article explores the relationship between organizational governance and location choices. While the existing literature provides significant intuition regarding the factors that influence these choices, it often assumes that governance and location choice are independent from one another. This article tests the veracity of this assumption in the global semiconductor industry. We report evidence of significant correlations across choices regarding how to govern and where to locate production, evidence of a reciprocal relationship between governance and location choices, and evidence suggesting how interdependence between governance and location choices affects the stability of relationships highlighted by extant theories. We conclude with implications for future theoretical and empirical research based on the existence of these interdependent effects.Managerial SummaryManagers face difficult choices when deciding how to organize the performance of an activity. They must choose whether to outsource an activity by balancing the potential benefits of a supplier's lower costs or knowledge against the costs of diminished coordination and control. They must also choose where to perform an activity by considering the benefits of locally bound expertise as well as potential costs associated with cultural, legal, and social barriers. While prior research has often addressed these issues by assuming that these choices are independent, this paper demonstrates that governance and location choices are interdependent and that each choice reciprocally affects the other. It concludes by suggesting managers utilize an expanded governance‐location choice set when evaluating where and how to manage their core activities.

International governance mode choice: Evidence from Brazilian franchisors

The purpose of this article is to test a novel, integrative theory of governance mode selection in the context of international franchising from Brazil. Given the Brazilian emerging market context, we added and tested another variable in the model relating to environmental distance between the home (Brazil) and host countries. To test the theory, we employed two logistic regression models and representative data from the Brazilian Franchising Association in addition to the World Bank's Doing Business index, and the CEPII (Centre d'études prospectives et d'informations internationales). Findings show that three factors influence Brazilian franchisors' choices regarding international governance modes: the environmental uncertainty of the host countries, their behavioral uncertainty, and the franchisors' financial capacity. However, the environmental distance does not influence internationalization strategies of Brazilian firms. Emerging markets firms' governance modes of entry can be adequately explained with the existing model despite contextual differences.

What Drives Different Governance Modes and Marketization Performance for Collective Commercial Construction Land in Rural China?

The collective commercial construction land (CCCL) reform in China has attracted considerable attention worldwide, but studies on the influencing factors and performance of governance modes for CCCL marketization are still in their infancy. First, by deconstructing CCCL, this study developed a conceptual framework from the perspective of transaction cost economics. Based on a series of surveys, interviews, and closed questionnaires in two pilot areas, this study determined the influencing factors for governance mode choice for CCCL marketization through comparative case studies and compared the performance of the government-led and self-organized modes. This study concluded that asset specificity, uncertainty, and frequency were the main influencing factors for transaction costs, which could influence the choice of governance mode for CCCL marketization. Moreover, the characteristics of the two aforementioned governance modes, transaction costs, and specific revenue distribution resulted in different marketization performances.

Environmental and Organizational Antecedents of Plural Sourcing of Public Services

AbstractOrganizations use multiple governance modes (make, buy, ally) to produce their services. We consider plural sourcing as a portfolio of governance mode choices that a public service organization selects to provide its services, and investigate environmental and organizational factors that stimulate plural sourcing of public services. While studies of governance mode have usually relied on insights from theories of organizational economics (transaction cost, public choice, agency), we rely on insights from theories of organization management (strategic adaptation, structural contingency, organizational capability) to construct a theoretical framework and develop propositions on the determinants of plural sourcing. Theory is tested by a four‐panel dataset we constructed by merging data from three different sources within 1992–2007. The results using multilevel (hierarchical) logit identify conditions under which organizations choose to externalize, internalize, or co‐produce their services. We discuss the implications of our findings for sourcing of organizational activities and suggest ideas for future research.Evidence for Practice Plural sourcing is a governance form when an organization combines the three governance choices of make, buy, and ally in producing and delivering its products or services. Environmental and organizational characteristics variably influence government organizations’ choice of three service delivery modes – internalization, externalization, and cooperation. Organizations tend to choose a service delivery governance mode that is prevalent among members of their organizational population. The decision structure of organizations influences governance choice: when top decision‐makers are elected leaders, internalization tends to be preferred; when professional administrators decide, cooperation is favored; and when elected officials and professional administrators decide jointly, cooperation is more likely and internalization is less likely. Choice of public service provision is driven by both economic factors (community wealth, financial resources, and fiscal pressure) and institutional factors (political leadership, trends in provision mode, and non‐fiscal pressure).

Geopolitical disruptions and the manufacturing location decision in multinational company supply chains: a Delphi study on Brexit

PurposeThis study investigates the impact of geopolitical disruptions on the manufacturing supply chain (SC) location decision of managers in UK multinational firms. The context of study is the UK manufacturing sector and its response to the UK's decision to leave the European Union (EU), or Brexit.Design/methodology/approachThe study adopts an abductive, theory elaboration approach and expands on Dunning's eclectic paradigm of international production. A Delphi study over four iterative rounds is conducted to gather and assess insights into manufacturing SC location issues related to Brexit. The panel consisted of 30 experts and managers from a range of key industries, consultancies, governmental organisations, and academia. The Delphi findings are triangulated using a focus group with 38 participants.FindingsThe findings indicate that the majority of companies planned or have relocated production facilities from the UK to the EU, and distribution centres (DCs) from the EU to the UK. This was because of market-seeking advantages (being close to major centres of demand, ease of access to local and international markets) and efficiency-seeking advantages (costs related to expected delays at ports, tariff and non-tariff barriers). Ownership and internalisation advantages, also suggested by the eclectic paradigm, did not play a role in the location decision.Originality/valueThe study elaborates on the OLI framework by showing that policy-related uncertainty is a primary influencing factor in the manufacturing location decision, outweighing the importance of uncertainty as an influencer of governance mode choices. The authors find that during geopolitical disruptions managers make location decisions in tight time-frames with incomplete and imperfect information, in situations of high perceived uncertainty. The study elaborates on the eclectic paradigm by explaining how managerial cognition and bounded rationality influence the manufacturing location decision-making process.

Modes of governance for market entry by international franchisors: factors affecting the choice

PurposeThis study aims to provide an empirical test of an existing theoretical model depicting the governance modes used by international franchisors when entering international markets.Design/methodology/approachUsing a unique panel data set of 222 market expansions by US firms over a seven-year period, this paper tests hypotheses regarding the factors affecting the franchisors’ choice of governance modes when entering foreign markets.FindingsFranchisors use governance modes with lower levels of control when faced with environmental uncertainties due to corruption, economic downturns and when the geographic distance is large. Moreover, the franchise system assets and its local market assets also affect the choice of governance modes.Practical implicationsFirms need to balance the costs of environmental uncertainty with the need to safeguard the firm’s capabilities and resources using governance modes with appropriate levels of control. This balance changes as the franchise company gains more experience in the local market and as once-emerging markets continue to develop.Originality/valueThis research identified additional governance modes used by franchisors compared to previous studies. Using multiple theoretical perspectives, the study supported significant portions of the Jell-Ojobor and Windsperger (2014) model of franchisor governance mode choice.

An Examination of the Corporate Parent and Divested Unit Governance Mechanisms

The current paper explores the governance mechanisms that are implemented by corporate parents and their divested units after a divestiture event. This study compares the inter-dependencies of stand-alone divested units and their parent companies by leveraging differences in two focal governance modes for stand-alone divested units, i.e., spin-offs and carve-outs, and the specific mechanisms that govern the relationship between the parent company and the divested unit post-divestiture. In this way, this paper recognizes that governance choices span beyond the choice of a discrete governance mode. The current study contrasts the use of divestiture governance mechanisms with the choice of the focal divestiture governance mode, spin-offs or carve-outs. Using a sample of US corporate spin-offs and equity carve-outs, and their innovation outcomes pre- and post-divestiture, this study finds that non-consistent divestitures, e.g., high(low) autonomous divestiture governance mode and low(high) autonomous divestiture governance mechanisms, may not realize the full innovation benefits of either integration or hierarchy.

Strategic Emphasis and a Firm’s Choice of Governance Mode: The Moderating Role of Internal Leadership & External Monitoring

A firm’s strategic emphasis, i.e., its relative focus on value appropriation vs. value creation, provides insights on how the firm expects to position itself for future growth. In addition to organizing activities in-house, firms also rely on external modes of governance such as alliances, joint ventures (ventures), and acquisitions in their pursuit of growth. In this paper, the authors investigate how strategic emphasis would influence a firm’s choice of governance mode and find that firms with a greater emphasis on value appropriation (relative to value creation) are likely to prefer acquisitions, followed by ventures and then alliances. The authors further examine the moderating role of internal leadership (marketing presence in the TMT and CEO marketing background) and external monitoring (analyst coverage and institutional investors). The findings shed light on how strategic emphasis impacts governance of interfirm relationships.

Entry and Governance Modes in International Franchising: A case study

This paper analyses the entry and governance mode choices in the internationalisation process of a Brazilian franchisor. The study investigates the factors that helped this company, a supplier of fibreglass swimming pools, to achieve fast international growth and become one of the most internationalised Brazilian franchisors with presence in 40 foreign countries. Six interviews were conducted with the CEO/founder, two directors and three experts from franchising associations (ABF and IFA). The analysis showed that this franchisor's fast internationalisation process was due to trust, relationships and network building, factors that impacted its entry and governance mode choice in the foreign countries. The partnerships established with local players influenced the choice of the governance mode. This study may contribute to decision-making in international franchising by showing the relevance of trust, local relationships and business networks for the internationalisation of franchise chains, considering the uniqueness of each foreign market.

A Behavioral Perspective on the Choice of Alliance Governance Mode

This study provides a behavioral perspective on the firm’s choice of alliance governance mode. We argue that a firm’s choices between equity and non- equity alliances are influenced by two firm-level determinants, namely that firm’s attainment discrepancy and its CEO career horizon. We posit that positive attainment discrepancies motivate firms to engage in non-equity alliances to pursue more flexibility, while negative attainment discrepancies encourage firms to search for alternatives in equity alliances to achieve more performance recovery and growth. Furthermore, we argue that firms that are managed by CEOs with short career horizons may be associated with more behavioral uncertainties as their CEOs near their retirement, and thus become less likely to engage in long-term partnerships, such as equity alliances. In contrast, we posit that firms that are managed by CEOs with long career horizons are more likely to pursue closely related equity alliances to bolster their learning from that alliance. Using a sample of 5,542 alliances conducted between 1995 and 2015 by 202 by publicly-traded U.S. firms, we provide evidence for our arguments.

Synergy and value in economic organisation

Conceptual literature and empirical studies suggest important interdependencies among activities as well as relations between the costs and the rent potential of activities and the governance mode applied. To account for benefits as well as costs of activities simultaneously this paper introduces a value perspective. Furthermore synergies and conflicts within bundles of activities are considered in the choice of appropriate governance modes for these activities. The concepts of synergy and value in of activity bundles are defined for economic organisation and illustrated by a numerical example. Based on the interpretation of the results we present possible applications and limitations of the proposed approach as well as opportunities for future research.

Synergy and value in economic organisation

Conceptual literature and empirical studies suggest important interdependencies among activities as well as relations between the costs and the rent potential of activities and the governance mode applied. To account for benefits as well as costs of activities simultaneously this paper introduces a value perspective. Furthermore synergies and conflicts within bundles of activities are considered in the choice of appropriate governance modes for these activities. The concepts of synergy and value in of activity bundles are defined for economic organisation and illustrated by a numerical example. Based on the interpretation of the results we present possible applications and limitations of the proposed approach as well as opportunities for future research.

Knowledge sharing while managing uncertainty in R&D alliances: An eclectic perspective

Firms do not simply choose an alliance governance mode, but rather they design alliance governance structures to adapt the continuously changing task/external environments and coordinate complex tasks at hand. We develop a model of R&D alliance governance design under uncertain environments by incorporating two critical functions of alliance structure (i.e., task-based interaction and contractual complexity). And we suggest in the model that allies with a more complex task goal such as knowledge creation than knowledge-seeking/accessing design the alliance with a more organizationally integrated structure (e.g., Equity Joint Venture) where the degree of interaction and coordination is greatest. But in the face of exogenous and endogenous uncertainty, allies design the governance structure through a non-equity based contractual mode with the flexibility clauses and contract provisions. This conceptual model further harmonizes theoretical gaps among knowledge-based view, real options theory and transaction cost economics of alliance regarding the puzzled question on the alliance governance mode choice for complex R&D under highly uncertain environments, and provides an eclectic perspective on the design of alliance governance structure.

“Make” or “Buy” the Choice of Governance Modes for Corporate Social Responsibility Projects from a Stakeholder Management Perspective

The organization of corporate social responsibility (CSR) initiatives deals with a “make” or “buy” trade-off among in-house solutions instead of a partial (collaboration) or total (outsourcing) externalization of such activities. This article aims to advance the knowledge of the criteria underlying the governance modes of CSR. In particular, integrating the organizational economics with the insights provided by the stakeholder management, the study deepens the reasons why primary stakeholders, such as human resources (HR) and customers, may affect the choice to internalize the governance of CSR projects. Findings are consistent with the theoretical framework. In fact, internal solutions are more likely for CSR initiatives addressed to HR and customers. Given the direct linkage of these stakeholders with the achievement of the company’s mission, results corroborate the concept of closeness of CSR actions with respect to the firm’s core business as driver of in-house projects.