Abstract

This paper examines franchising from the social networks perspective. The franchising network makes it possible for organizations to interconnect with others through social and economic relationships which result in a social network. Participants of a network typically profit from sharing financial, institutional, knowledge and informational resources. Expansion through franchising allows companies to evaluate potentially valuable partnering opportunities and expand its network. The benefits obtained from being a part of the network are expected to contribute to better firm performance. On the other hand, heavy reliance on franchising may result in a loss of product quality and diminishing brand value. The inverted U curvilinear relationship between the firms proportion of franchising and performance is tested within a contingency framework with size and competitive intensity within an industry as moderators. Based on the data from 56 franchising firms representing 10 industries, the findings support not inverted curvilinear relationship.