International franchising: Capabilities and development

Over the last 25 years, franchising has exploded internationally. A 1992 survey by the International Franchise Association reported that one-half of the the franchisors without foreign units planned to expand internationally, and 93% of those with international operations intended to increase the size of their international operations (IFA 1992). The growth in global franchising has created a pressing need to better understand the capabilities needed to franchise internationally (Shane 1996a, Shane 1996c). However a fundamental problem for the entrepreneur is how to balance the ever-increasing demands and constraints on his or her time and contend with the increasing spatial dispersion of operations (Norton 1988b). The development of such capabilities is nob however an easy task. Lack of experience in key areas and entrepreneurial capacity problems constrain the ability of franchisors to acquire much needed skills. Consequently, this paper has two main objectives. First, it discusses specific capabilities of the international franchisor identified in franchising research and ties them to the administrative efficiency and risk management theories. Second, it integrates these capabilities into a two-dimensional framework of international franchisor types based on the dynamic capabilities perspective of resource-based theory (Barney 1991; Conner 1991; Teece, Pisano, and Shuen 1990; Mahoney 1993). This study proposes that the combination of existing capabilities and the capacity to develop new skills produce four general types of international franchisors. This article makes two principal contributions. First, for researchers in international entrepreneurship, this framework supports the contention (Shane 1996a) that the capabilities needed to franchise internationally are different from those required in the domestic context. This suggests that an important aspect of success internationally may depend on the entrepreneur's awareness of the need to develop skills and capabilities that ave outside his or her areas of expertise. Second, for franchisors the inclusion of international contextual variables in this framework should help identify which specific capabilities are needed for successful international expansion. In addition, the dynamic aspect of capability development also helps to understand the variation in approaches among international franchisors. The development of international franchising capabilities is not a one-time event but requires learning and relearning over the lifetime of the franchisor.