The Role of Relational Contracts in Inter-Firm Relationships: Theory and Evidence on Multiunit Franchising

43 Pages Posted: 2 Aug 2016

See all articles by Nicholas Argyres

Nicholas Argyres

Washington University in St. Louis

Janet Bercovitz

University of Illinois at Urbana-Champaign - College of Business

Giorgio Zanarone

CUNEF

Date Written: July 31, 2016

Abstract

This paper develops a model of relational contracting to help explain the prevalence of multiunit franchising; a phenomenon not fully understood in the literature. The model is used to derive a key prediction, which is that franchise systems with a greater propensity to engage in multiunit franchising will feature greater mutual cooperation between franchisor and franchisees. Evidence for this prediction is found in data on franchisee-franchisor litigation outcomes from a sample of franchise disclosures.

Keywords: Relational contracting; multiunit franchising

JEL Classification: D22; L14

Suggested Citation

Argyres, Nicholas and Bercovitz, Janet and Zanarone, Giorgio, The Role of Relational Contracts in Inter-Firm Relationships: Theory and Evidence on Multiunit Franchising (July 31, 2016). Available at SSRN: https://ssrn.com/abstract=2816591 or http://dx.doi.org/10.2139/ssrn.2816591

Nicholas Argyres (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Janet Bercovitz

University of Illinois at Urbana-Champaign - College of Business ( email )

Champaign, IL 61820
United States

Giorgio Zanarone

CUNEF ( email )

Leonardo Prieto Castro 2
Madrid, Madrid 28040
Spain

HOME PAGE: http://gzanarone.cunef.edu

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