The Role of entrepreneurial orientation in franchisee performance: A case study in the machinery industry

Abstract

Franchise research has been limited in explaining performance discrepancies between franchisees. Conversely, firm performance is a central topic for Entrepreneurial Orientation (EO) researchers. Thus, an intersection of Entrepreneurial Orientation (EO) and franchise research has recently emerged providing a new approach to understand firm performance in franchising. Following up to this intersection, this study sets out to understand why there are discrepancies in franchisee performance and what the role of EO and its individual dimensions are in retail franchisee performance in the agricultural machinery industry in a developed market.

Based on a review of previous franchise and EO research, this study develops a conceptual franchisee performance framework outlining the theoretical applicability of the EO-performance relationship to franchisees with local market adaptation being a potential mediator. Franchise-specific antecedents to EO as well as various moderating factors are also depicted. Next the empirical research uses a multiple case study approach to analyze six franchisees from the same franchise system to gain an in depth understanding about the dynamics of EO and franchisee performance.

The results of this study are summarized in a franchisee performance framework that emphasizes the importance of intangible factors in franchisee performance and further supports the positivity of the EO-performance relationship. Moreover, the results indicate that the EO-performance relationship is highly complex as the distinct dimensions of the EO construct prevail in a unique constellation in the franchisee context. In particular, competitive aggressiveness is identified to have a direct and proactiveness both a direct and an indirect effect on franchisee performance. Local market adaptation appears to mediate the effects of innovativeness and risk taking on franchisee performance, while the role of autonomy is left open. Finally, this research contributes to the understanding of the relationship between EO and performance in a new context, while building another link between entrepreneurship and franchise research.