Boosting the effectiveness of channel governance options

Abstract

Purpose – The aim of this study is to explore possible contingent variables that might explain these twin contradictory effects of marketing channel governance. Franchisors govern their systems to limit opportunism and enhance performance. However, the exact opposite often occurs. Design/methodology/approach – This paper develops an integrative conceptual model of franchisor governance of its franchisees. This model is tested empirically with data collected from 197 Australian franchisees. Findings – Under strong relational norms, goal congruence and outcome monitoring limit franchisee opportunism; compliance enhances franchisee performance, while opportunism reduces it. With weaker norms, outcome monitoring facilitates compliance, and goal congruence boosts franchisee performance, as does franchisee opportunism. However, norms fail to mitigate behavioral monitoring’s negative impact on opportunism. Research limitations/implications – This research confirms the positive and negative effects of franchisor governance. It also shows that norms can reverse the positive link between franchisee opportunism and performance. It additionally illustrates how goal congruence and compliance can limit opportunism and boost performance. Future research should refine this study’s measures, incorporate additional constructs into the conceptual model and test the generalizability of these findings in lesser-developed economies. Practical implications – This research shows that monitoring has both positive and negative effects on franchisee opportunism and performance. To avoid monitoring’s adverse effects, franchisors are advised to enhance goal congruence, boost franchisee compliance and develop strong relational norms. Originality/value – This paper shows that goal congruence, as well as franchisor outcome monitoring, can mitigate the negative effects of franchisor behavioral monitoring on franchisee opportunism, as do relational norms.