The choice of destination country of international franchise networks: the case of Mexican franchisors

Abstract

PurposeThis article examines the influence of market opportunity, risk, and distance on the choice of destination country for Mexican franchises.Design/methodology/approachThe research hypotheses are developed under the theoretical approaches of institutional theory, agency theory, and transaction costs theory and were contrasted on the data obtained from 52 Mexican international franchisors operating in 37 countries as of 2016. This study uses linear regression with ordinary minimums using the STATA 13.1 software.FindingsThe results reveal that a larger market size, a greater level of economic freedom, and a smaller geographic distance are determining factors in the choice of destination country. No statistical significance was found in the variables GDP per capita, level of democracy and cultural distance.Originality/valueThis research contributes to the theoretical and practical field. On the theoretical side, this study integrates institutional theory, agency theory, and transaction cost theory to evaluate the factors of the destination country that influence the internationalization process of the franchise. Another contribution of this study is to apply theories and models of developed economies to the process of internationalization of franchises in an emerging economy. Additionally, this study is based on a model that considers the distance, opportunities and risks that are considered by Mexican franchisors in the selection of the international markets in which they maintain operations. This study contains important practical implications that can serve as relevant information for decision-making in the franchise sector and its internationalization. This data is valuable for new models of Mexican franchises that decide to start their internationalization process.