How and Why Does Franchise Ownership Affect Human Resource Practices? Evidence from the US Hotel Industry

Abstract

This study investigates the relationship between ownership form and human resource (HR) practices in a franchise system. Using data from a unique establishment-level survey of a US-based limited service hotel chain, the author examines how HR practices vary between franchisee- and company-owned hotels, and among franchisees with diverse ownership structures. Consistent with agency theory predictions of franchisee profit motives and free-riding behavior, franchisee-owned hotels are associated with lower investments in HR practices compared to company-owned hotels. The results of this study suggest that ownership structures influence HR investments.