Multinational Business Review · 2008 · 16 citations · 60 references
BusinessInternational BusinessInternational ManagementEconomic GeographyInternational EconomicsInternational MarketingCross-border FranchisingFranchise ManagementInternational ExpansionInternational FranchisingInternationalization ProcessInternationalization StrategyExpansionFranchise InternationalizationFranchising ExpansionInternational Franchise ExpansionInternationalizationMarket Entry For FranchisesMarket Penetration DynamicsModified Gravity Theories
Traditional internationalization theory posits that firms use franchising to penetrate markets and that market propinquity or similarity matters. This study examines whether market propinquity influences franchise expansion when firms choose franchising for market penetration. A modified gravity model incorporating six country characteristics was applied to data from 39 nations to assess franchise flow. The analysis shows that franchise expansion is greatest between nations that are similar in geography, culture, media availability, and political risk, confirming that market propinquity drives franchise flow.
Consistent with traditional internationalization theory, we argue that, when a firm chooses franchising to achieve market penetration, market propinquity/similarity matters. Using a modified gravity model, we examine six country characteristics believed to enhance the flow of franchise activity among 39 nations. Our findings support the notion that market propinquity facilitates the flow of franchises between nations. Franchise expansion is greatest when the home and host nations are similar in terms of geography, culture, media availability, and political risk. The management implications of these findings are discussed in detail.
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