THE CONCEPT OF FRANCHISING IN THE STUDY – Project topics materials

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INTRODUCTION

The debate over the ability of dynamic capabilities (Teece, Pisano & Shuen, 1997:509) to align and realign resources (Eisenhardt & Martin, 2000:1106) in a turbulent environment for competitive advantage is rife in research. The rationale is that resource-based view (RBV) has not adequately explained how and why certain firms have competitive advantage (Eisenhardt & Martin, 2000:1106) and dynamic capabilities by which firm managers integrate, build, and reconfigure resources (Teece et al., 1997: 516) to become the source of sustained competitive advantage. Drawing on previous theoretical and empirical studies (for example, Mumdziev & Windsperger, 2011:449; Akremi, Perrigot & Piot-Lepetit, 2015:145; Gillis, Combs & Ketchen, 2013:449, etc) little has been done in franchising. Findings from the cited studies all support the positive impact of resources in franchising. Akremi, Perrigot and Piot-Lepetit (2015:145) found that dynamic capabilities (e.g. training and experience) are some of the independent variables that positively impact on performance of franchised chains. Mumdziev and Windsperger (2011:449) found that innovation assets affect decision rights allocations. Other scholars have established and emphasised the characteristics of a firm’s resources and capabilities as the source of the performance differences among firms. For the purposes of this study, resource-based theory (RBT) and dynamic capabilities are adopted to provide an empirical analysis of their influence on South African franchise outlet performance. South Africa boasts over 600 franchised brands and about 39 000 franchised outlets (FASA, 2016:15).

THE CONCEPT OF VRIN/VRIO AND CAPABILITIES

Value, rareness, inimitability and organization (VRIO) are conceptualised by Barney (1995:49-61) as indispensable resource characteristics that drive enterprise competitiveness and economic rent (Barney, 1986:1231; Peteraf, 1993:180). Exploitation of VRIO resources leads to competitive advantage, enabling a firm to improve its shortterm and long-term performance (Amit & Schoemaker, 1993:33; Barney, 1991:99; Eisenhardt & Martin, 2000:1105; Henderson & Cockburn, 1994:63; Powell, 2001:875; Teece et al., 1997:509). Newbert (2008:745), in his conceptual-level empirical investigation, argues that resources and capabilities are inextricably bound together in the attainment of competitive advantage. Penrose (1959:86) advocates that resources and capabilities are of much use if they are viewed in terms of possible combinations with other resources or capabilities. However, Makadok (2001:387) contends that firms may create rents not only by picking better resources than competing firms, but also by exploiting them more effectively with proper capabilities. Hence, the implication is that capabilities and resources are viewed as inseparable for a firm to realise competitive advantage and superior performance.

ARENESS OF RESOURCES

Barney (1995:52) argues that if a particular resource or capability is controlled by numerous competing firms, then that resource is unlikely to be a source of competitive advantage for any one of them. Bowman and Ambrosini (2003:291) amplify Barney’s notion that the relative scarcity of a resource means a firm’s possession of a rare resource which can generate either superior margins or superior sales volumes from a cost base equivalent to that of competitors. Therefore, a rare resource must create a sustainable competitive advantage, which is not easy to develop or to sustain in the long term.

NIMITABLE RESOURCES

The more difficult it is for competing firms to replicate the resource, the longer-lived will be the rent stream accruing to the resource (Bowman & Ambrosini, 2003:291). Inimitability results from the presence of isolating mechanisms (Rumelt, 1984) such as causal ambiguity, information asymmetries or social complexity (Bowman & Ambrosini, 2003:291). The argument is that the mechanisms do not allow competitors to imitate what the firm does. Barney (1995:53) propounds that imitation can be done in two ways: duplication and substitution. Duplication occurs when an imitating firm builds the same kinds of resources as the firm it is imitating (Barney, 1995:53). For example, if one firm enjoys a competitive advantage of its management skills, the duplicating firm will try to imitate that resource by developing its own management skills. Moreover, firms may substitute some resources for other resources and if the substitute resources have the same strategic implications and are no more costly to develop, then imitation through substitution will lead to competitive parity in the long run (Barney, 1995:53). Thus substitution of a resource involves replacing it with an alternative resource that achieves the same results (Ehlers & Lazenby, 2011:119).

NON-SUBSTITUTABLE RESOURCES

The last requirement for a firm resource to be a source of sustained competitive advantage is that there must be no strategically equivalent valuable resources that are themselves either not rare or imitable (Barney, 1995:111). Such resources are non-substitutable. Bowman and Ambrosini (2003:292) define non-substitutability as a resource that cannot be easily replaced by another resource that delivers the same effect. Economic rents derive from imperfect substitutability (Amit & Schoemaker, 1993:38). For example, the strategic value of a firm’s resources and capabilities is enhanced more if they are difficult to buy, sell, imitate or substitute (Amit & Scheomaker, 1993:39). Moreover, a firm with tacit organisational knowledge or trust between management and labour cannot be traded or easily replicated by competitors, since they are deeply rooted in the organisation’s history (Dierickx & Cool, 1989:1504). This is because such tacit assets (e.g., resources, information and people) which are firm-specific, accumulate slowly over a period of time.

READ EVALUATION IN EDUCATION AND THE IMPLEMENTATION OF WHOLE-SCHOOL EVALUATION

TABLE OF CONTENTS :

1 INTRODUCTION
- 1.1 INTRODUCTION
- 1.2 BACKGROUND TO THE STUDY
- 1.3 LITERATURE OVERVIEW
  - 1.3.1 THE CONCEPT OF VRIN/VRIO AND CAPABILITIES
  - 1.3.2 THE QUESTION OF VALUE
  - 1.3.3 RARENESS OF RESOURCES
  - 1.3.4 INIMITABLE RESOURCES
  - 1.3.5 NON-SUBSTITUTABLE RESOURCES
  - 1.3.6 ORGANISED RESOURCES
  - 1.3.7 FIRM CAPABILITIES
  - 1.3.8 THEORIES ON FRANCHISING
  - 1.3.9 RBV AND FRANCHISING
- 1.4 DEFINING THE CONSTRUCTS
- 1.5 FRANCHISING AS A STRATEGY
- 1.6 RESEARCH PROBLEM
- 1.7 RESEARCH QUESTIONS
- 1.8 RESEARCH OBJECTIVES
  - 1.8.1 PRIMARY OBJECTIVE
  - 1.8.2 SECONDARY OBJECTIVES
- 1.9 HYPOTHESES
- 1.10 RESEARCH DESIGN
  - 1.10.1 SAMPLE SELECTION AND SIZE
- 1.11 IMPORTANCE AND BENEFITS OF THE STUDY
  - 1.11.1 THEORETICAL CONTRIBUTION
  - 1.11.2 MANAGERIAL CONTRIBUTION
- 1.12 OUTLINE OF THE STUDY
2 THEORETICAL FOUNDATIONS AND LITERATURE REVIEW
- 2.1 CHAPTER OVERVIEW
- 2.2 INTRODUCTION
- 2.3 LITERATURE AND THEORY
  - 2.3.1 RESOURCE-BASED VIEW OF THE FIRM (RBV)
  - 2.3.2 VALUABLE RESOURCES
  - 2.3.3 RARE RESOURCES
  - 2.3.4 IMPERFECTLY IMITABLE RESOURCES
  - 2.3.5 NON-SUBSTITUTABILITY OF RESOURCES
  - 2.3.6 ORGANISATION CHARACTERISTIC OF RESOURCES
- 2.4 RESOURCE-BASED THEORY AND FIRM PERFORMANCE
- 2.5 DYNAMIC CAPABILITIES AND PERFORMANCE
  - 2.5.1 COORDINATING CAPABILITY
  - 2.5.2 LEARNING CAPABILITY
  - 2.5.3 INTEGRATING CAPABILITY
  - 2.5.4 SENSING CAPABILITY
- 2.6 THEORETICAL MODELS
- 2.7 THEORETICAL MODEL DEVELOPMENT
- 2.8 SUMMARY
3 FRANCHISING INDUSTRY
- 3.1 CHAPTER OVERVIEW
- 3.2 INTRODUCTION
- 3.3 THE CONCEPT OF FRANCHISING IN THE STUDY
- 3.4 EVOLVEMENT OF FRANCHISING
- 3.5 FRANCHISING IN THEORIES
- 3.6 THE FRANCHISE ASSOCIATION OF SOUTH AFRICA (FASA)
- 3.7 FRANCHISING AND PERFORMANCE
- 3.8 FRANCHISE INDUSTRY CATEGORIES IN SOUTH AFRICA
- 3.9 FAST FOOD AND RESTAURANTS
- 3.10 RETAILING AND DIRECT MARKETING
- 3.11 CHAPTER SUMMARY
4 RESEARCH OBJECTIVES AND HYPOTHESES
- 4.1 CHAPTER OVERVIEW
- 4.2 INTRODUCTION
- 4.3 RESEARCH QUESTIONS AND OBJECTIVES
  - 4.3.1 RESEARCH QUESTIONS
  - 4.3.2 RESEARCH OBJECTIVES
- 4.4 HYPOTHESIS DEVELOPMENT
- 4.4.1 VALUABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 4.4.3 INIMITABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 4.4.4 NON-SUBSTITUTABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 4.4.5 FRANCHISOR/FRANCHISEE VRIN RESOURCES AND DYNAMIC
- CAPABILITIES
- 4.4.6 FRANCHISE OUTLET DYNAMIC CAPABILITIES AND
- PERFORMANCE
- 4.4.7 MEDIATING ROLE OF FRANCHISE OUTLET DYNAMIC
- CAPABILITIES BETWEEN RESOURCES AND PERFORMANCE
- 4.5 SUMMARY
5 RESEARCH PHILOSOPHIES, RESEARCH DESIGN AND ANALYSIS
- 5.1 CHAPTER OVERVIEW
- 5.2 INTRODUCTION
- 5.3 RESEARCH PHILOSOPHIES
- 5.4 ETHICS OF RESEARCH
- 5.5 RESEARCH DESIGN
  - 5.5.1 CLASSIFICATIONS OF RESEARCH DESIGNS
  - 5.5.2 CONCLUSIVE DESIGN
- 5.5.3 QUANTITATIVE RESEARCH STRATEGY
- 5.6 SAMPLING
- 5.6.1 SAMPLING TECHNIQUE
- 5.6.2 SAMPLE SIZE
- 5.7 PRETESTING THE DATA COLLECTION INSTRUMENT
- 5.8 PILOT STUDY
- 5.9 FULL STUDY
- 5.10 DATA COLLECTION INSTRUMENTS
- 5.11 RESPONSE RATE
- 5.12 MEASUREMENT THEORY MODEL
- 5.13 STRUCTURAL EQUATION MODELLING (SEM)
- 5.14 CONSTRUCTS AND MEASURES IN LITERATURE
- 5.15 CONSTRUCTS AND MEASUREMENT SCALES
  - 5.15.1 VRIN RESOURCES
  - 5.15.2 DYNAMIC CAPABILITIES
- 5.15.3 PERFORMANCE
- 5.16 DATA ANALYSIS AND REPORTING
  - 5.16.1 DESCRIPTIVE STATISTICS
  - 5.16.2 FACTOR ANALYSIS
  - 5.16.3 STRUCTURAL EQUATION MODELLING
- 5.17 POTENTIAL SOURCES OF ERRORS IN RESEARCH
- 5.18 RELIABILITY ASSESSMENT
- 5.19 CHAPTER SUMMARY
6 ANALYSIS AND RESULTS
- 6.1 OVERVIEW
- 6.2 INTRODUCTION
- 6.3 SAMPLING AND RESPONSE RATE
- 6.4 QUALTRICS, TELEPHONE AND FACE-TO-FACE IN THIS STUDY
- 6.4.1 QUALTRICS
- 6.4.2 TELEPHONE
- 6.4.3 FACE-TO-FACE
- 6.5 DATA SCREENING
- 6.6 DESCRIPTIVES FOR EACH QUESTION
- 6.7 FACTOR ANALYSIS
- 6.8 STRUCTURAL EQUATION MODELLING
- 6.9 MODEL FITNESS AND POTENTIAL CHALLENGES
- 6.10 PATH MODELS
- 6.11 BOOTSTRAPPING
- 6.12 MEDIATION ANALYSIS
- 6.13 HYPOTHESIS TESTING
  - 6.13.1 Hypothesis
  - 6.13.2 Hypothesis
  - 6.13.3 Hypothesis
  - 6.13.4 Hypothesis
  - 6.13.5 Hypothesis
  - 6.13.6 Hypothesis
  - 6.13.7 Hypothesis
  - 6.13.8 Hypothesis
  - 6.13.9 Hypothesis
  - 6.13.10 Hypothesis
  - 6.13.11 Hypothesis
  - 6.13.12 Hypothesis
- 6.14 SUMMARY OF HYPOTHESIS TESTING
- 6.15 CHAPTER SUMMARY
7 DISCUSSIONS, IMPLICATIONS, LIMITATIONS AND FUTURE RESEARCH
- 7.1 OVERVIEW
- 7.2 INTRODUCTION
- 7.3 CONCLUSIONS ON FINDINGS
- 7.3.1 VALUABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 7.3.2 RARE RESOURCES AND FRANCHISE OUTLET PERFORMANCE
- 7.3.3 INIMITABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 7.3.4 NON-SUBSTITUTABLE RESOURCES AND FRANCHISE OUTLET
- PERFORMANCE
- 7.3.5 CONCLUSIONS ON THE DIRECT RELATIONSHIP BETWEEN VRIN
- RESOURCES AND PERFORMANCE
- 7.3.6 VALUABLE RESOURCES AND FRANCHISE OUTLET’S DYNAMIC
- CAPABILITIES
- 7.3.7 RARE RESOURCES AND FRANCHISE OUTLET’S DYNAMIC
- CAPABILITIES
- 7.3.8 INIMITABLE RESOURCES AND FRANCHISE OUTLET’S DYNAMIC
- CAPABILITIES
- 7.3.9 NON-SUBSTITUTABLE RESOURCES AND FRANCHISE OUTLET’S
- DYNAMIC CAPABILITIES
- 7.3.10 FRANCHISE OUTLET’S DYNAMIC CAPABILITIES AND
- PERFORMANCE
- 7.3.11 THE MEDIATING ROLE OF DYNAMIC CAPABILITIES BETWEEN
- VALUABLE RESOURCES OF A FRANCHISE OUTLET AND ITS
- PERFORMANCE
- 7.3.12 THE MAGNITUDE OF MEDIATED EFFECT
- 7.3.13 OTHER CRITICAL CONCLUSIONS
- 7.4 RECOMMENDATIONS
- 7.4.1 VALUABLE RESOURCES
- 7.4.2 DYNAMIC SENSING CAPABILITY
- 7.4.3 DYNAMIC COORDINATING CAPABILITY
- 7.5 CONTRIBUTIONS OF THE STUDY
- 7.5.1 THEORETICAL CONTRIBUTION
- 7.5.2 MANAGERIAL CONTRIBUTION
- 7.5.3 METHODOLOGY CONTRIBUTION
- 7.6 LIMITATIONS
- 7.6.1 RESPONSE BIAS
- 7.6.2 TAUTOLOGICAL NATURE OF RBT
- 7.6.3 RESOURCE-CAPABILITY COMBINATIONS
- 7.6.4 VRIN AS ONE CONSTRUCT
- 7.6.5 MODEL OPTIONS AND ENDOGENEITY
- 7.7 DIRECTIONS FOR FUTURE RESEARCH
- 7.7.1 TAUTOLOGICAL NATURE OF RBT
8 LIST OF REFERENCES