New criteria to select foreign entry mode choice of global franchise chains into emerging markets

Abstract

Despite emerging markets are some of the fastest growing economies in the world and represent countries that are experiencing a substantial economic transformation, little is known about the factors influencing choices of foreign entry mode in those markets. Especially, regarding companies that franchise overseas. In an attempt to expand our knowledge of this topic, this paper presents an empirical assessment of the relationship between a set of different variables with the four possible modes of entry that franchisor companies can adopt overseas: i) direct franchising; ii) master franchising; iii) joint venture; and iv) direct investment. Besides the host market’s political stability, economic potential and unemployment rate were proposed as independent variables, we controlled for other variables that may affect foreign entry mode choice: the geographical distance between the host and home country, the franchisor’s international experience as well as the efficiency of contract enforcement in the host country.