Knowledge Transfer Capabilities and Owning vs. Franchising Decision for Hospitality Chains

Abstract

Employing longitudinal data on U.S. hospitality franchisors for the decade 1995 to 2005, my findings suggest that these chains continuously involve in two different knowledge transfer processes, first while transferring their knowledge to company owned and operated units and then while transferring their knowledge to units ran by franchisors. I argue that franchisors need distinct capabilities for each transfer as both processes involve different levels of stickiness. I also investigate the effect of these different firm capabilities on firm's portfolio growth actions, or their governance by offering alternative explanations for how organizations that simultaneously own and franchise their properties decide on efficient firm boundaries for better performance. My findings suggest that if chains effectively transfer their service offerings to company-owned or franchised units they typically grow their portfolio in the direction where they are more capable, and these two distinct capabilities impact each other over-time.

Keywords: Franchising, knowledge transfer, Knowledge Based View, Capabilities