Knowledge management and franchise systems

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Abstract

Knowledge management is generally recognized as a resource for sustainable competitive advantage. Many organizations have approached knowledge management through the use of information technology. However, results are mixed, primarily because (1) information is merely one aspect of knowledge management, (2) some types of knowledge are difficult to transfer effectively and (3) the structure and culture of organizations may inhibit knowledge transfer. In this study, we examine knowledge management in a franchising context because franchisors and franchisees are independent entities linked together in a contractual (some even use the word hybrid) relationship. In addition, the ’product or service’ offered by a franchise organization is an outcome of knowledge resources and the success of a franchise system depends on how well the parties involved in a franchise system leverage their knowledge resource. Specifically, we explicate types of knowledge, discuss the differences between traditional and network franchise organizations and develop a framework for knowledge management in franchise systems.

Section snippets

Overview of knowledge management literature

Many companies recognize that knowledge which resides in their organizations may be leveraged for competitive advantage, however many do not exploit its full potential for varied reasons (cf. Cross et al., 2001, McCann and Buckner, 2004). Some have implemented information technology (IT) systems that are supposedly designed to harness and transfer knowledge throughout the organization. Success has been limited because while information is easily transferred through information technology

Knowledge and sustainable competitive advantage

One of the primary reasons that researchers and practitioners have taken such an interest in knowledge management is that knowledge is viewed as a resource with significant potential of contributing to firms' positions of competitive advantage (cf. Cross et al., 2001, Grant, 1996, Hunt and Morgan, 1995, McCann and Buckner, 2004, Quinn, 1992). Firms are able to leverage the knowledge residing within individuals as well as the knowledge held by the organization. While firms may have difficulty

Traditional franchise systems

Traditional franchise systems are a hybrid form of organization — somewhere between market and hierarchy (Bercovitz, 1999). It is a collection of independent economic entities each specializing in specific tasks and/or skills. For example, franchisors provide expertise in setting up and running a franchise unit while franchisees, in turn, provide financial and managerial resources for the system. Firms are committed to the relationship through detailed contractual obligations and success is

Network franchise systems

The conceptual foundations of the network perspective in the context of marketing has been detailed by Achrol, 1996, Achrol, 1997, Snow (1997), Walker (1997) and Achrol and Kotler (1999) among others. Some may argue that social network perspective (Burt, 1992) might be more suitable. We believe that these two frameworks do have significant convergence and overlap (Jones et al., 1997, Oliver and Ebers, 1998). One perspective examines the relationships between firms or units in a value chain

Knowledge management in traditional and network franchise organizations

Relying on extant studies on knowledge management [such as Cross et al., 2001, Kwok and Gao, 2005/2006, Lord, 2006, Malmborg, 2004, McCann and Buckner, 2004, Reich, 2007, Vainio, 2005, Yeh et al., 2006], we argue that knowledge management in franchise systems will be significantly impacted by three key factors — governance structure (traditional versus network franchise systems in this study), information technology, and the perceived risk and rewards associated with creation and sharing of

In closing

In this manuscript we posit that knowledge and information flows differ in traditional and network franchise organizations. In the traditional franchise system information flows is primarily linear and unidirectional — between franchisor to franchisee. “New” knowledge flows from franchisor to franchisee and, since the relationship is primarily governed by contract, the franchisee has little incentive to share information and new knowledge other than what is required.

We hold that explicit

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