Academic journal article International Journal of Management

Influence of the Operating Environment on Organization Innovation: A Multiple Case Study of Food Franchises in Brazil

Academic journal article International Journal of Management

Influence of the Operating Environment on Organization Innovation: A Multiple Case Study of Food Franchises in Brazil

Article excerpt

The importance of innovation in franchising chains is a reminder that franchisees can be seen as important sources of innovation in chains, but that they require mechanisms of governance so that these innovations can be effective. Thus, the goal of this paper is to analyze and discuss the process of innovations in franchise companies, based on organizational innovation. We will examine four aspects previously defined as innovation drivers: the professionalization of the franchisor, the management of relationships with franchisees, the performance of franchisees with entrepreneurial profiles and the role of knowledge management. Therefore we use a multiple-case study involving two important franchising food chains in Brazil: the Giraffas and the Trendfoods Group. Brazil presents revenues of some US$30 billion with almost 72,000 units franchised by 1,380 chains. Interviews lasted on average one hour and thirty minutes, and were conducted with the Director of Operations (Trendfoods) and the Director of Planning (Giraffas). The results reveal: The franchisor's professionalization, better-qualified professionals will enjoy conditions allowing them to participate more actively in their tasks, and while new competences are generated, organizational or product innovations. The franchisor-franchisee relationship, in the case of the Giraffas, it was possible to observe the weight of the franchisor in the generation of innovations in partnership with its suppliers. As for the Trendfoods Group, franchisor credits to relationships with its franchisees. The entrepreneurial role within the franchising model is questionable, in the case of the Giraffas, it was evidenced that the chain is preoccupied with having franchisees able to implement the innovations created by the franchisor. The participation of the Trendfoods franchisees is relevant, and they are responsible for some 30% of the innovations. Knowledge management, both at the Giraffas chain and the Trendfoods Group, the circle of informal communication among franchisees fosters the exchange of information.

Introduction

Data about the world franchising market demonstrate that the United States dominates the sector internationally, with over 760,000 franchised units, yielding 18 million jobs and moving US$1.5 trillion per year in the economy (IFA, 2008; Dant, 2008). Brazil presents revenues of some US$30 billion with almost 72,000 units franchised by 1,380 chains, 90% of which are totally Brazilian, which accounts for some 600,000 direct jobs and an estimate of almost 2 million indirect jobs. Growth rates of franchising companies command attention due to the increasing adoption of this business model. Between 2007 and 2008, there was a growth in revenue (20%), new franchising chains (10%) and the number of franchised units (15%). The segment of food chain is relevant in franchising markets and represents the biggest number of chains in Brazil with 21% of all chains that adopt franchising and generate more than US$ 6 billion (Melo & Andreassi, 2010; ABF, 2009).

However, despite being an important sector in economic terms and a type of venture that has increasingly attracted entrepreneurs, Brazilian franchising still needs deeper scientific research (Melo & Andreassi, 2010). Particularly, we understand that, in discussing the competition among firms and the generation of competitive advantages, it is important to highlight the role played by innovation. Addressing innovation in franchising is extremely relevant given the competitive environments in which these companies operate. Kaufamn and Eroglu (1998), Dyer and Singh (1998), Bradach (1997), and Castrogiovanni et al. (1993) emphasize the importance of innovation in franchising chains, in particular reminding one that franchisees can be seen as important sources of innovation in chains, but that they require from franchisors mechanisms of governance so that these innovations can be enjoyed by various franchisees, thereby increasing competitive advantages and avoiding chains stagnation. …

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