Determinants of a successful cross-border knowledge transfer in franchise networks
| DOI | https://doi.org/10.1108/JABS-05-2015-0052 |
| Date | 03 May 2016 |
| Published date | 03 May 2016 |
| Pages | 148-163 |
| Author | Zaheer Khan |
| Subject Matter | Strategy,International business |
Determinants of a successful
cross-border knowledge transfer in
franchise networks
Zaheer Khan
Zaheer Khan is a
Lecturer (Assistant
Professor) in Strategy &
International Business,
Management School, The
University of Sheffield,
Sheffield, UK.
Abstract
Purpose –Previous research on service multinational corporations (SMNCs) has mainly focused on the
entry mode decisions in foreign markets. The purpose of this paper is to examine the cross-border
knowledge transfer in franchisee networks in Pakistan.
Design/methodology/approach –The qualitative semi-structure interviews approach is used to study
the cross-border knowledge transfer from a franchisor to two local franchisee networks in Pakistan.
Findings –The results show that both explicit and tacit knowledge are transferred in cross-border
franchise networks. The transfer of the knowledge from a franchisor to a franchisee is facilitated through
the use of a variety of transfer mechanisms – both hard and soft transfer mechanisms, that is, video
conferencing, emails, phone calls, seminars, meetings, documents and franchisor agents’ visits. The
knowledge sharing in cross-border franchise networks in Pakistan shows numerous similarities with that
occurring in manufacturing industries. The prior experience of the franchisee and the regional and local
franchisors’ agents – their role as knowledge transfer agents (intermediaries) – facilitate the acquisition
and assimilation of knowledge from the franchisor to a franchisee in the developing economies.
Practical implications –The paper discusses relevant implications for managers of franchisor and
franchisee networks by focusing on the need to engage with both explicit and tacit knowledge transfer.
The experience of the franchisee is important for the acquisition and assimilation of knowledge.
Originality/value –This paper is the first in the context of cross-border knowledge transfer from a
franchisor to a franchisee in the Pakistani context. The author highlights the important role of prior
experience of the franchisee and the regional and local agents of the franchisor in the transfer of
cross-border knowledge transfer under the franchising arrangements.
Keywords Knowledge, Developing countries, Developing economy, Knowledge transfer intermediaries,
Service MNCs
Paper type Research paper
Introduction
In this paper, we investigate the determinants of a successful cross-border knowledge
transfer from a franchisor to their franchisee networks, which has been established in
developing economies. Service multinational corporations (SMNCs) are becoming
important actors in the world economy and have been large contributors of foreign direct
investment (FDI). For example, the data compiled by UNCTAD in 2012 shows that FDI in
services was $570bn, representing 40 per cent of the total FDI during 2011 (UNCTAD,
2012). Developing and emerging economies have attracted the majority of this FDI
(UNCTAD, 2012). Despite this impressive growth, the research on SMNCs has not kept
pace within the mainstream IB field (Boddewyn et al., 1986;Dunning, 1989;Erramilli, 1990;
Kundu and Lahiri, 2015;Kundu and Merchant, 2008).
Many SMNCs are entering into the international markets through franchise arrangements,
and the subject of knowledge transfer through the franchisor to their international
franchisees has become an important empirical question to researchers (Gorovaia and
Windsperger, 2013). Recently, it has been shown that emerging economies have become
one of the most important destinations for franchising, as the middle class now represents
Received 1 May 2015
Revised 7 August 2015
Accepted 15 September 2015
The author would like to thank
Hemant Merchant,
Editor-in-Chief of this journal,
the Area Editor, David Shaw,
and the two anonymous
reviewers for their excellent
guidance and feedback on the
earlier draft.
PAGE 148 JOURNAL OF ASIA BUSINESS STUDIES VOL. 10 NO. 2, 2016, pp. 148-163, © Emerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-05-2015-0052
one of the important segments in these markets. In particular, emerging markets such as
China, India, Pakistan and Russia are becoming extremely attractive for franchise firms
from the USA (Paswan et al., 2001;Welsh and Alon, 2001). However, little is known currently
about how the franchisors transfer their valuable knowledge to their less experienced
franchisees in these emerging economies. The ongoing growth and success of these
international franchising models depend upon a successful knowledge transfer to these
international franchisees to capture new market opportunities (Gorovaia and Windsperger,
2013;Grace and Weaven, 2011;Winter et al., 2012). The research suggests that even top
line franchise-oriented brands have lost their market position because of their inability to
create and maintain “an environment of effective and easy knowledge sharing” (Paswan
and Wittmann, 2009, p. 178). Thus, a successful knowledge transfer, from the franchisor to
their international franchisees, remains one of the most important strategic challenges in
franchising.
So far, limited research has been conducted around the determinants of a successful
knowledge transfer in cross-border franchising arrangements (Dant et al., 2011;Gorovaia
and Windsperger, 2013;Merchant and Gaur, 2008;Paswan and Wittmann, 2009). Above
all, less attention has been paid to both the franchisor- and franchisee-related factors that
affect knowledge transfer in cross-border franchise networks, where the asymmetry of the
information between a franchisor and a franchisee is pervasive, especially in developing
and emerging economies (Doherty, 2009;Gorovaia and Windsperger, 2013;Paswan and
Wittmann, 2009).
The present paper addresses the gaps above and examines what the key determinants are
for a successful knowledge transfer from the franchisor to their emerging economies
franchisees. We chose Pakistan as our context to investigate this question, because
franchising is on the rise in Pakistan, and to date, there has been hardly any studies that
have investigated knowledge transfer here from the franchisor to the local Pakistani
franchisees.
Based on two franchise networks and using a qualitative methodology (i.e. semi-structured
interviews conducted with two franchising networks in the Pakistani fast food and hospitality
sector), our study has found that the ability and commitment of the franchisor to engage in
the knowledge transfer helps the franchisee to acquire knowledge related to sales
trainings, marketing development and promotion tools, quality control and operating
manuals. The prior experience of the franchisee and the regional and local franchisor
agents, in their role as knowledge transfer intermediaries, facilitate the acquisition and
assimilation of knowledge from the franchisor to a franchisee in the developing economies
and help in addressing the issues of standardization and adaptation. The successful
transfer of knowledge from a franchisor to a franchisee is facilitated through the use of a
variety of transfer mechanisms, which are through both hard and soft mechanisms such as
video conferencing, emails, phone calls, seminars, meetings, documents, quality control
committees and franchisor agents’ visits.
Conceptual background
Knowledge transfer in cross-border franchise networks
The concept of knowledge transfer is difficult to capture. Scholars have equated
knowledge transfer with knowledge creation and the application of knowledge (Spender,
1996). For the purpose of this study, we have used the definition of knowledge transfer put
forward by Argote and Ingram (2000), which incorporates both the sender of the
knowledge and the recipients of knowledge-related outcomes. According to Argote and
Ingram (2000, p. 151), “knowledge transfer in organizations is the process through which
one unit (e.g. group, department, or division) is affected by the experience of another”.
Similarly, Grant (1996) documents the attributes of the senders of knowledge and the
recipients of knowledge, the characteristics of the knowledge and the knowledge transfer
VOL. 10 NO. 2 2016 JOURNAL OF ASIA BUSINESS STUDIES PAGE 149
To continue reading
Request your trial