Enhancing Relationship Quality: The Case of Franchises

Abstract

What circumstances enhance franchise relationship quality is not well understood. We help to fill this research gap by developing and testing a model of the sources of relationship quality using constructs from the transactions cost literature, including idiosyncratic investment and interdependence. A survey was conducted successfully to 550 franchise owners or managers of Taiwanese small and medium enterprises. We find that idiosyncratic investment directly enhances trust and indirectly reinforces trust via interdependence. Franchisees’ idiosyncratic investment cannot directly influence opportunistic behavior but indirectly influence it via trust or interdependence. Moreover, franchisees with lower opportunistic behavior and higher trust have higher commitment.