Clustering, Knowledge Sharing, and Intrabrand Competition: A Multiyear Analysis of an Evolving Franchise System

Abstract

As franchise systems expand, the clustering and resulting proximity of same-brand outlets often become contentious issues. The increased interactions among outlets may facilitate knowledge sharing, even while inducing intrabrand competition. Prior research has considered each possibility—knowledge sharing or intrabrand competition—in isolation, resulting in conflicting recommendations to the central question of whether multiple same-brand outlets should be close to or distant from one another. In this study, the authors take the perspective of the focal outlet and show that the opportunity to share knowledge afforded by clustering-based proximity may or may not be realized, depending on the motivation and ability of the proximal outlets to share knowledge, the focal outlet's ability to absorb knowledge, and the governance context. An analysis of more than 8,000 observations on the 988 outlets of a U.S.-based automotive service franchise system from 1977 to 2012, and corresponding outlet-level sales information from 2004 to 2012, provides support for the authors’ hypotheses.

Design and Governance of Multichannel Sales Systems: Financial Performance Consequences in Business-to-Business Markets

“…In addition, explicit knowledge gained from indirect channel usage might also be lower since sales partners may withhold or distort information (e.g., Williamson 1985). For instance, sales partners may withhold information to prevent a common manufacturer from sharing this information with their competitors (Butt et al 2018). In line with our reasoning, Heide (2003) observes that adding direct channels, but not indirect channels, reduces information asymmetry.…”

“…In addition, competition between indirect channels lowers individual sales partners' incentive to exchange information with the manufacturer in the first place. Sales partners might anticipate "misappropriation of their information" (Baiman and Rajan 2002); that is, the same manufacturer may share sales partner information with competing indirect channels (Butt et al 2018). Therefore, to maintain ongoing information exchange, manufacturers need to invest continuously in the relationship (e.g., granting access to valuable resources to maintain relationships) (e.g., Heide 1994), which lowers financial performance.…”

Threat of Entry and Organizational-Form Choice: The Case of Franchising in Retailing

“…With more granular geographic patterns in franchising over time, we hope our research may spur future work on knowledge spillovers and intrabrand competition when franchisees are close to one another (e.g., Butt et al 2018). For example, do we observe franchised outlets in close proximity to other franchised outlets, and how do these spatial patterns change over time with competition?…”

The Influence of Organizational Cultural Characteristics on Knowledge Transfer Across One Belt – One Road: A Case of Chinese Companies Involved in the China-Pakistan Economic Corridor (CPEC)

“…Since learning is constantly arranged in a specifi c setting, culture and societies inside this setting will infl uence the way information is made, shared and utilized (Samova et al, 2015). In a knowledge sharing system, it is vital that knowledge partaking must occur (Butt et al, 2018). Knowledge resources and information sharing are indispensable for the achievement of successful cooperative systems, especially in a production network setting, where knowledge sharing turns into a key factor in achieving set targets and performance (Um & Kim, 2018).…”