Ownership Rights in Franchising Firms
GEABA - Discussion Paper No. 01-24
30 Pages Posted: 16 May 2002
Date Written: 2001
The paper offers an explanation for the structure of ownership rights in franchising networks which emphasize the role of intangible assets. By applying the incomplete contracting theory of the firm we argue that the structure of ownership rights depends on the distribution of intangible assets between the franchisor and the franchisee. The higher the franchisor's (franchisee's) intangible assets relative to the franchisee (franchisor), the more ownership rights should be transferred to him. This hypothesis was tested by using data from the Austrian franchise sector. The empirical results are supportive of the hypothesis.
Keywords: Franchising, Ownership Rights, Intangible Assets, Residual Income
JEL Classification: D89, G32, L22
Suggested Citation: Suggested Citation