رشد از طریق کپی کردن : پیامدهای منفی نوآوری بر رشد شبکه فرانشیز (فرانچایز)

We explore how more exactly copying a blueprint for establishing a franchise network in a new country influences franchising network growth. We test opposing hypotheses using panel data involving the transfer of franchising knowledge to 23 different countries, measuring the degree to which master licensees ‘copy exactly’ knowledge concerning how to grow a network in their country and the effect that their approach has on subsequent network growth. We conclude that a strategy of copying more exactly seems to enhance growth and that the benefits of more exactly replicating knowledge in the 1st year of a local network’s existence persist for several years. Thus, innovation, in this specific context, seems to hinder firm growth.

Since Schumpeter (1911), sustained and comparatively faster innovative activity has often been considered to be a strong correlate of firm growth (Del Monte and Papagni, 2003). More recently, however, the replication, or exploitation, of an innovative business model has also become an increasingly salient driver of firm growth. Indeed, the successful geographic replication of a business model is the primary form of growth strategy for a diverse and increasingly large set of organizations that grow through the creation and operation of a large number of similar outlets that deliver a product or perform a service. These ‘replicator’ organizations that focus on growth through exploitation rather than continuous innovation are emerging in many sectors as a dominant economic phenomenon of our time. In 1997, 62% of all retail sales in the United States passed through chain organizations and their share of economic activity is rising (Kalnins and Mayer, 2004). Chains are now active in over 75 industries as diverse as fast food, banking, discount retailing, hotels, accounting, mail service, interior design, and personnel consulting. By 2001, business format franchise chains alone had created 14% of all private-sector jobs and 11% of all private-sector payroll in the United States (Association, 2004). Conventional wisdom suggests that the replicator’s ‘formula’ for success is either sufficiently simple or well understood that it can be tailored uneventfully to fit the relevant characteristics of the host environment through adaptive modifications.2 Few challenge the view that such innovations are to some degree necessary to fit new environments if performance is to be maximally effective, especially when contexts vary widely, such as in the case of International expansion. Indeed, previous work in the International Business literature has suggested that such local adaptation may be essential for successful subsidiary operation (e.g., Bartlett and Ghoshal, 1989 and Kostova, 1999) and possibly for subsidiary survival (Sorge, 1991). Closer scrutiny of how replicator organizations grow, however, has uncovered possible dysfunctions of adaptive innovations. It is increasingly recognized that the business model or system leveraged by a replicator is often a complex set of interdependent activities (Porter, 1996, Rivkin, 2001 and Winter, 1987). Reproducing such a ‘recipe’ often means re-creating the knowledge underpinning a system of complex, causally ambiguous, and imperfectly understood productive processes at each new site. Thus, an emerging view contends that the nature of the knowledge to be replicated is an important factor affecting the relationship between local innovation and performance (Baden-Fuller and Winter, 2007 and Winter and Szulanski, 2001) which is at least as important as knowledge of the local environment. Thus, knowledge for subsidiary success is no longer seen to reside mostly at the local level but may be embedded in headquarters, thus shifting the balance point between center and local knowledge at least early in a unit’s life. Innovation in the form of local adaptation, if undertaken too early or too substantially may undermine the ability to utilize the template, or original set of practices, thus hampering the replication (Jensen and Szulanski, 2007 and Szulanski and Jensen, 2006). In such circumstances, a strategy of discouraging innovation and copying the original as closely as possible has been found to be efficacious. This paper addresses two primary questions. First, to what extent is such a strategy of ‘copying more exactly’ efficacious in the cross-border transfer of knowledge? Second, if such a positive effect exists, how persistent is it? Theoretically, over time exact adherence to an original template becomes less needed as knowledge is better understood and local innovations can be made more effectively. Our setting is the transfer of franchising knowledge from the headquarters of Mail Boxes Etc., a large, US-based, non-food multinational franchise firm, to 23 of its foreign subsidiaries. The period of observation is from 1989, with the opening of MBE’s first international network, to 2003. Specifically, we measure the correlation between the degree to which Master Licensees (MLs—individuals who own the right to build a network in a country or region) follow a codified blueprint for network growth and the ensuing growth of their franchising networks. The analysis suggests a strong positive correlation between growth and how closely the blueprint is followed, implying a negative correlation between ML innovation and growth, an effect that persists for the first several years of a network’s existence.

Innovation is often seen as a central driver of growth in open economies. Since Schumpeter (1911), it has been argued to be an essential element of growth in most industries with firms either constantly innovating or succumbing to gales of creative destruction. Even a short survey of current research in a number of fields indicates that innovation is one of the most often researched subjects with hundreds of books and articles published on the topic each year. Yet, despite decades of arguments suggesting that innovation in terms of developing new ways of doing business to fit local environments is critical to the growth of subsidiaries of multinational organizations (Bartlett and Ghoshal, 1989 and Kostova, 1999), our analysis reports a strong negative correlation between innovation and network growth. Indeed, much of the growth observed in our data happens through the purposeful suppression of innovation. In this sample, as with many MNCs, knowledge is out of balance. Both headquarters and subsidiaries possess relevant knowledge necessary for firm and subsidiary success. While conventional wisdom suggests that the local knowledge is more critical for subsidiary success, our findings suggest that the knowledge transferred by headquarters may be more valuable, at least at first, with innovation potentially causing the abandonment of the very knowledge which made the franchise successful in the first place. Under such conditions, despite the need for local innovation, replicating knowledge as closely as possible may be sensible. Part of the findings may be due to the commonsense observation that growth often requires more than just the initial innovation—it requires exploitation as well in order to maximize value (McNamara and Baden-Fuller, 2007). This is likely to be particularly true in a knowledge economy as critical innovations may occur in locally developed processes and practices where the innovation is embedded in organizational routines. Replication is a primary mechanism for exploiting these types of innovations (Winter and Szulanski, 2001) and is a central part of the business model pursued by the firm in this study. As a consequence, one would expect replication at least to increase the return the firm obtains on its original innovation. This does not, however, adequately address the question of why growth is depressed by local innovations and why a policy of copying more exactly increases the rate of network growth. At least a portion of the findings may be the result of a more complicated interaction between replication and innovation. Instead of involving only exploitation, replication may play a role in the process of innovation (Gilsing and Nooteboom, 2006). To begin with, however, we need to delineate a few characteristics of innovation, including that innovation which involves creating new business practices by adapting a standardized model to a local environment. First, innovative skills are not distributed equally throughout the population. This hints at a possible role, which we discuss below, for replication within the process of innovation. As a result of unequal distribution, if we take a random sample of individuals they are likely to have different experiences at attempting to innovate. Some will quickly be able to innovate successfully, the majority will require significant time, effort and trial-and-error learning, while others will likely be unable to innovate at all. Second, this scenario is compounded if we consider innovating within a current organizational form or within a specific firm (the type of innovation specific to local adaptation), particularly if the innovation occurs without significant experience with either. Indeed, Adner and Levinthal (2001) have suggested that, while the entrepreneur is critical, an understanding of the environment in which the innovation takes place also plays a large role in understanding innovation. For instance, suppose one asks a random sample of individuals with little to no experience with running fast-food restaurants to innovate within that organizational form. There are four possible outcomes. First, they may innovate unsuccessfully. Given the degree to which most new businesses fail this is probably the most likely outcome. Second, they may spend time, money and effort developing knowledge which already exists, but of which they are currently unaware. Third, they may develop innovations which appear successful at first but which lower potential profitability as they undermine the economic logic of the organizational form or, if the innovation occurs within an existing firm, interrupt the interrelationship between productive subroutines of the existing, successful, business model. Finally, they may develop successful innovations which are both novel and relevant to the existing business model and/or organizational form. Replication, because it involves the re-creation of a successful model within an existing organizational form, may reduce the incidence of the first three outcomes. Indeed, a policy of copying more exactly for a period of time is likely to suppress improper innovations, enhancing the possibility of successful ones. In this regard replication is not just a tool for leveraging existing innovations but a method for lowering the risk and effort of innovation by allowing one to master the existing form first. In other fields, such as art and architecture, a common observation is that successful innovations tend to come from those who have first mastered existing techniques. Those who are successfully able to break the rules, to innovate, are those who are masters of existing practices. Similar to studying art from a master painter, replication may lower the threshold for successful innovation by providing a proven route to mastery within the organizational form being replicated. In this respect, our findings contribute to the literature on innovation by not only empirically verifying the observation that innovation requires exploitation in order to maximize its value but suggesting as well that the very process of initial innovation may be enhanced by exploitation through close replication. Anecdotal data from interviews with MBE’s MLs illustrate this concept, both the dangers of innovating without mastery and the benefits of doing so once mastery is attained. First, to illustrate the dangers: despite the successful German ML requiring a policy of copy exactly, the Austrian ML indicated in interviews that the Austrian market was different from the US and that he did not think the unit-level MBE model could be implemented without innovation. As a consequence, he encouraged his franchisees to innovate, deviating from the existing business model by de-emphasizing the primary profit centers within the business and elevating others. Because he had not mastered the existing model he did not appear to understand the underlying economic logic of the business. He felt that the innovation required him to recruit more educated, sophisticated franchisees who in turn demanded higher returns on their investment. Because his innovation, on average, did not support those higher returns, the pool of potential franchisees decreased and growth was slow. The Canadian ML allowed a very similar, if not identical, innovation, de-emphasizing the primary profit centers and emphasizing the same ones as the Austrian ML. He too felt that the US model was not optimized for Canada. However, unlike the Austrian ML, the Canadian ML chose to pursue a period of copy exactly concerning franchisee operation of the business model for four years after launching his network. “I said ‘hey, this [the original MBE model] is a pretty successful concept,’ and I still believe it is probably one of the most successful, if not the most successful, service concepts in the world. . So, [concerning modifications] I went kind of slow to start with.”—Canadian ML By the end of the 4-year period he felt that he understood the underlying logic of the business model and how to alter it effectively without destroying the reasons for its success. His assessment appears to have been correct as the Canadian network is the second largest in MBE, and he was able to innovate without removing his existing franchisees or undermining the return on investment that franchisees received. This case suggests that mastery enabled successful innovation. Replication, then, is involved in leveraging prior innovations and in lowering the threshold required for successful new innovation by enabling mastery of existing practices. In addition, it may enable innovation more directly through the replication of skills required for innovation. Music schools that teach improvisation and business schools that teach classes in entrepreneurship are both examples of attempts to replicate creative skills. To the extent that firms train the owners and managers of replicated units in the skills necessary to innovate successfully, replication may further lower the time, effort and risk required to create value through innovation.