The Influence of a Franchisor’s
Entrepreneurial Orientation on Franchisee
Trust
University of Groningen Faculty of Economics and Business Msc. BA Small Business and Entrepreneurship
Bas de Lange
Prinsenlaan 22-‐1 7822 GH Emmen h.s.de.lange@student.rug.nl Student number: S1896016 Word count: 11.991 January 2016
First supervisor: Dr. E.P.M. Croonen
Abstract
This study tries to fill in the gap in research on EO and trust in franchise systems. The rapidly changing markets require the franchisor to adjust the formula in order to stay competitive. In franchising, mutual trust is very important for a formula to succeed. This study will be looked at from a franchisee perspective at the displayed entrepreneurial orientation by their franchisor, which is expected to have influence on the competence and intentional trust franchisees have in their franchisor. This study showed that the franchisees’ perceptions of their franchisors’ innovative and proactive behaviours has a positive influence on the competence and intentional trust franchisees have in their franchisor. A dynamic environment was expected to have an influence on this relation but did not have a positive effect.
Key words: Franchising, entrepreneurial orientation, innovativeness, proactiveness, risk-‐taking, competence trust, intentional trust
Table of Content 1. Introduction 4 1.1 Background 4 1.2 Entrepreneurial Orientation 5 1.3 Trust 5 1.4 Research Question 6 2. Theoretical Background 7 2.1 Entrepreneurial Orientation 7 2.1.1 Innovativeness 7 2.1.2 Proactiveness 7 2.1.3 Risk-‐taking 7
2.1.4 Entrepreneurial Orientation in Franchising 8 2.2 Trust: definition and dimensions 9 2.3 Franchisee Trust: definition and dimensions 10 2.4 Entrepreneurial Orientation and Trust 12
2.5 Conceptual Model 14
3. Methodology 14
3.1 Sample and Data Collection 14
3.2 Entrepreneurial Orientation 15
3.3 Trust 15
3.4 Environmental Dynamism 16
3.5 Control Variables 16
3.6 Validity and Reliability 16
4. Results 17
4.1 Descriptive findings 17
4.2 Reliability analysis results 18
4.3 Correlations 18
4.4 Hypothesis testing 20
5. Discussion 21
5.1 Discussion 21
5.2 Conclusion 22
5.3 Practical implications 23
5.4 Limitations and future research 23
6. References 24
7. Appendix 29
7.1 Result tables – regression 29
7.1.1 Appendix – Regression table A Innovativeness 29
7.1.2 Appendix – Regression table B Proactiveness 29
7.1.3 Appendix – Regression table C Risk-taking 30
7.1.4 Appendix – Regression table D Entrepreneurial Orientation 30
7.2 Overview Questions 31
7.2.1 Overview questions: Entrepreneurial Orientation 31
7.2.2 Overview questions: Trust 32
1. Introduction
1.1 Background
Business format franchising has become an increasingly popular entrepreneurial strategy in different industries, and exists in a variety of industries. It exists in industries from the Internet to banking, but is most common in eating and drinking establishments, business services and retail (Lafontaine, 1992, Shane, 1996). Business format franchising is a network of legally independent organizations that jointly exploit a common asset, the franchisor’s business format for the provision of a product or service to end customers. Under a business format franchise arrangement, the franchisee obtains the right to use the franchisor’s brand name and business format in return for paying a royalty and franchise fees and agreeing to oversight by the franchisor (Shane and Foo, 1999). Business format franchising has understandably become popular because it has the advantages of the standardization of a business format, resulting in economies of scale. Business format franchising leads to a consistent quality and presentation for customers (Croonen, 2010). Franchisees enter into a franchise system for a variety of reasons. Among those reasons is that they will join the franchisor’s proven business format and easy start-‐up allows franchisees to minimize the risks of their operation if they are unfamiliar with the business (Lundberg, 1994).
As Lafontaine and Shaw (1997) point out, franchising does not guarantee success for franchisors or franchisees. Franchisees who invest in less than the very best established franchised businesses; take on more risk than starting up an independent business. The continuously changing market and needs requires strategic adaption to the franchisor’s proven business format. It presents challenges for the traditional firms, by offering them opportunities and at the same time threats (Perrigot and Pénard, 2012). To ensure sustainability, franchise systems must be capable of adapting to new opportunities and threats over time (Dada, Watson & Kirby, 2011).
Franchisees rely on a franchisor’s established business format, which enhances the likelihood of the survival and eventual success of the franchisee’s business even though they can feel that there is a greater potential for their operation to be a success (Sen, 1993). The franchise relationship is characterized by a asymmetrical control; by virtue of the franchise contract, the franchisor has generally more power than its individual franchisees, which renders the latter vulnerable to possible opportunistic behaviors of the franchisor (Croonen, 2010; Davies et al. 2011; Storholm and Scheuing, 1994). Franchisees have less freedom in general; they are operating according to the franchisor’s full business format, which includes a specific strategic positioning in the market and various internal operational procedures, those franchisees are obliged to follow (Kaufmann and Eroglu, 1998).
the unique selling points that geography has provided. There are many new entrepreneurs who have used the opening up of the marketplace to give birth to a whole new generation of businesses providing online services (Perrigot and Pénard, 2012). Another example of an environmental change is the emergence of the so-‐called ‘sharing economy’. Recent years have seen a proliferation of electronic tools and platforms, which allows individuals to share-‐out work and service delivery. Individuals can now earn income by letting others drive their car (for example, RelayRides, Blablacar), by acting as an independent taxi service (Uber), renting out a spare room in or entire house (Airbnb), or informally buying and selling goods (eBay) (Schaper, 2015). These changes have an influence on existing markets and organizations and thereby it forces franchisors to look critically at their formula.
1.1 Entrepreneurial Orientation
Nowadays, the future profits from existing operations are uncertain, and therefore businesses need to constantly seek for new opportunities (Wiklund and Shepherd, 2005). One reason is the increasing level of competition in local and global markets, which forces many firms to adopt an entrepreneurial orientation (Dada and Watson, 2013). A high entrepreneurial orientation provides businesses the ability to find and discover new opportunities that can differentiate them from other firms and create a competitive advantage (Wiklund and Shepherd, 2005). An entrepreneurial orientation refers to a firm’s strategic orientation, capturing specific entrepreneurial aspects of decision-‐making styles, methods and practices (Lumpkin and Dess, 1996). Researchers have agreed that an entrepreneurial orientation is a mix of three dimensions: innovativeness, proactiveness and risk taking. When a firm has adopted an entrepreneurial orientation, it will show a willingness to innovate and to renew market offerings, take risks to try out new and uncertain products, services and markets, and be more proactive than competitors toward new marketplace opportunities (e.g., Covin and Sleving, 1989, 1990, 1991; Knight, 1997; Miller, 1983; Namen and Slevin, 1993; Wiklund, 1999; Zahra and Covin, 1995; Zahra, 1993). In this research, the focus will be on the franchisee’s perception of their franchisor’s entrepreneurial orientation and how the franchisor integrates the three dimensions of innovativeness, proactiveness, and risk taking in their strategy.
1.2 Trust
1.3 Research Question
In a world where the markets and customer demands are changing, franchisors need to change their business format in order to stay competitive and sustainable in the changing markets. The only way they are able to recognize, create, and exploit new changes to their formula is to adopt an entrepreneurial orientation because it is the franchisor’s responsibility to maintain the unique features of the business format (Kaufmann and Eroglu, 1998). Franchisors can only successfully implement a strategic change if their franchisees have a certain level of intentional and competence trust (Croonen, 2010). In the current research about entrepreneurial orientation in a franchise context, most of the research has been done from a franchisee perspective, here the franchisor has a desire for uniformity across their system and has to find a balance how entrepreneurial their franchisees can behave (Dada and Watson, 2012, 2013; Wiklund and Shepherd, 2005). Past research in the field of franchisee trust already provides a theoretical framework of the antecedents of franchisee trust (Croonen and Brand 2013, 2013) and research has been done to the antecedents of trust and fairness during strategic change processes (Croonen, 2010), franchisors strategy-‐ making mode (White, 2010), franchisee satisfaction and conflict with franchisor (Davies et al, 2011) and the franchisor openness and the franchisee perceived support (Frazer et al, 2012). Nonetheless, the relation between the franchisees perception of their franchisor’s entrepreneurial orientation and the franchisees intentional and competence trust in their franchisor is yet to be empirically tested.
By addressing this literature gap I aim to contribute to the theoretical framework of the antecedents of trust, by empirically testing the relation between the franchisors entrepreneurial orientation and the franchisees competence and intentional trust.
Based on the identified literature gap and the goals of my research, I have formulated my research question:
What is the relationship between the franchisee’s perception of the franchisor’s entrepreneurial orientation and the franchisee’s competence and intentional trust in their franchisor in a dynamic environment?
2. Literature Review
In this study, the aim is to look at the franchisor’s entrepreneurial orientation from the perception of the franchisees. Expecting that this entrepreneurial orientation will have an influence on the amount of trust franchisees have in their franchisor. Trust will be explained and measured with competence and intentional trust. Entrepreneurial orientation in this research has the dimensions innovativeness, proactiveness and risk-‐ taking. Further taking into account is the environmental dynamism, which is expected to have an influence on the franchisees perception of the franchisors the entrepreneurial orientation.
2.1 Entrepreneurial Orientation
Existing operations for organizations do not guarantee profits in the future. This uncertainty forces businesses to constantly seek for new opportunities (Wiklund and Shepherd, 2005). The increasing competition and constant development in local and global markets may be the reason why organizations are now adopting an entrepreneurial orientation (Dada and Watson, 2013). Therefore, entrepreneurial orientation has become one of the most established and researched subjects in the entrepreneurship literature (Covin and Slevin, 1989, 1990, 1991; Knight, 1997; Miller, 1983; Naman and Slevin, 1993; Wiklund, 1999; Zahra and Covin, 1995; Zahra, 1993 and Covin and Lumpkin, 2011). Entrepreneurial orientation (EO) is a firm-‐level strategic orientation, which consist of the strategy-‐making practices, managerial philosophies and the firm behaviors that are entrepreneurial in nature (Anderson et al, 2009). The concept of EO seeks to explore the extent to which firms are involved in entrepreneurial behaviors such as product-‐market innovation, undertakes somewhat risky ventures and developing proactive innovations (Miller, 1983).
Some authors have suggested that there are five dimensions of EO: autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk-‐taking (Lumpkin and Dess, 1996; Hughes and Morgan, 2007). However, there is some consensus amongst researchers of the primacy of the latter three dimensions: innovativeness, risk-‐taking and proactiveness (Wiklund and Shepherd, 2005). Wiklund et al. (2009) stressed that in recent studies scholars have decided to use the original and well-‐validated scale of Miller (1983), where the underlying dimensions of EO are innovativeness, proactiveness and risk-‐taking.
2.1.1Innovativeness
The innovativeness dimension reflects a tendency for novel, unusual, or creative solutions to challenges facing a firm (Morris et al., 2002). This includes the development of new products and services (Walter et al., 2006) as well as new administrative techniques, technologies, and practices for the firm’s operations (Knight, 1997).
2.1.2Proactiveness
2.1.3Risk-‐taking
Risk taking reflects an acceptance of uncertainty and relates to the firm’s propensity to support projects and commit resources where the costs of failure may be high and the expected results are uncertain (Wiklund and Shepherd, 2005; Walter et al., 2006) such as moving into unfamiliar new markets, committing substantial resources to ventures with vague outcomes, and/or incurring substantial debts (Lumpkin and Dess, 2001). 2.1.4Entrepreneurial Orientation in Franchising
In this study, the franchisee’s perception of the franchisor’s entrepreneurial orientation is the main focus. Table 1 underneath shows the research that has been done on entrepreneurial orientation in franchise organizations. Most of this research looks at the franchisee’s entrepreneurial orientation and links its performance and relationships. Kaufmann and Eroglu (1999) argued that in general it is the franchisee that, through their local adaptation efforts, develop new market offerings and transform existing ones. Most of the franchisors recognize that it is the franchisee that is able to show a level of entrepreneurial orientation, as a result of their daily customer interaction (Cox and Mason, 2007). Nevertheless, the increasing competition in the retail marketplace, where a significant number of franchise systems operate, has created the importance of the role of EO in franchised firms (Griffith et al., 2006). The need for entrepreneurial activity in franchising is likely to increase significantly as the environment becomes more competitive: the franchisor has the challenge to manage new ideas and at the same time maintaining the integrity of the franchise system (Falbe et al., 1998). The franchisor is known to innovate brands, create the business model, and develop organizational processes and innovations to create value for the customer in a way that generates profit (Ketchen et al., 2011).
Three dimensions of the EO construct will be used in this research. In order to use them in this research they will be translated into a franchise context. I will look at the franchisee’s perception of their franchisors entrepreneurial orientation. Therefore, the three dimensions will be translated into a franchisor’s context.
Franchisor’s innovativeness:
The franchisor’s innovativeness will reflect their tendency to engage in and support new ideas, novelty, experimentation, and creative processes, where they will depart from established practices and technologies (Lumpkin and Dess, 1996). When a franchisor adapts a high rate of technological and/or product market innovation, the franchisor is able to pursue new opportunities.
Franchisor’s proactiveness:
The franchisor’s proactiveness refers to a posture of anticipating and acting on future wants and needs in the marketplace. The franchisor creates a first mover advantage towards their competitors (Lumpin and Dess, 1996). When the franchisor adapts a proactive orientation and has a forward-‐looking perspective, the franchisor has the desire to be a pioneer, thereby capitalizing on emerging opportunities.
Franchisor’s risk-‐taking:
are unknown. It largely reflects that the franchisor is willing to break away from the tried-‐and-‐true and venture into the unknown.
Authors Year Topic
Falbe et al.
Maritz
Dada and Watson
Dada and Watson
Grünhagen et al. 1998 2005 2012 2013 2014
Organizational context on entrepreneurial strategies in franchising.
Entrepreneurial orientation and character themes in franchise systems
Entrepreneurial orientation on the franchise relationship
Organisational antecedents and performance outcomes
HR operational autonomy on the EO, performance link in franchise systems.
Table 1 – Research on EO in franchising
2.2 Trust: definition and dimensions
Trust can be defined as “the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control” (p. 712) (Mayer, Davis and Schoorman, 1995). A number of other authors have adopted this definition because it contains two critical components of trust, a trustee’s positive expectations regarding a trustee’s intentions or behavior and a willingness to be vulnerable, so accepting a level of risk in the relationship (cf. Rousseau, Sitkin, Burt, & Camerer, 1998; Six & Sorge, 2008; Zaheer et al., 1998). Croonen and Brand (2013) distinguished between a truster (the party who has a certain degree of trust) and a trustee (the party who is trusted).
Trust can also be approached in a multi-‐level approach (Croonen & Brand, 2013). This perspective comes from social exchanges and later this perspective was extended to organizational levels (e.g., Bachmann, 2001; Cropanzano and Mitchell, 2005; Nooteboom, 1999; Ring and Van de Ven, 1994). Trust in a multi-‐level approach is divided by personal and system trust (Croonen, 2010). Bachmann (2001) stresses that an important distinction should be made between the so-‐called system trust or institutional-‐based trust and the so-‐called personal trust or process based trust. System trust is mostly based on institutional arrangements. One used example is the trust that economic actors have in the universal usability of money, which enables the efficient functioning of socio-‐economic systems. In contrast, personal trust is likely to develop when individual actors frequently have face-‐to-‐face contact and become familiar with each other’s personal preferences and interests without the extensive use of institutional arrangements (Croonen, 2010).
Trust can be approached in multiple ways. Table 2 presents an overview of the different dimensions and levels of trust. Central in this research will be the two dimensions competence and intentional trust.
Trust Authors
Dimensions of Trust Competence trust Intentional trust Ability trust Integrity trust Benevolence trust
Davies et al. (2011). Nooteboom, (1999). Mayer et al. (1995). Ridings et al. (2002). Gefen, (2002).
Levels of Trust Personal trust System trust Organizational trust Bachmann, (2001). Croonen, (2010). Zaheer et al, (1998). Table 3 – Dimensions and levels of Trust
In the present section, the definition, different dimensions, and levels of trust are argued. In the next section the definition of trust will be presented in a franchise context, along with the dimensions of trust that will be further used in this research. 2.3 Franchisee Trust: Definition and Dimensions
and franchisee trust. This study tries to fill in this gap and contribute to a better understanding of franchisee trust.
Authors Year Topic
Dahlstrom & Nygaard
Chiou et al.
Dickey et al.
Croonen
White
Davies et al.
Frazer et al.
Croonen and Brand
Mumdziev and Windsperger 1995 2004 2008 2010 2010 2011 2012 2013 2013
Exploratory investigation of interpersonal trust.
Franchisees’ intentions to remain in the franchise system.
The role of trust in franchise organizations.
Trust and fairness during strategic change processes.
Strategy creation and climate of trust in a franchise setting.
A model of trust and compliance in franchise relationships.
Franchisors and franchisees and causes of conflict.
Antecedents of franchisee trust.
The moderating role of trust in decision rights in franchising.
Table 3 – Research on antecedents of trust in franchise context
As mentioned in the previous part, trust can be approached in two ways, a multi-‐ dimensional approach or a multi-‐level approach. In this research a multi-‐dimensional approach is used, like Davies et al. (2011) did in their research to explain the franchisees trust in their franchisor’s competences and intentions. Central in this study is the perception of trust franchisees have in their franchisor. Croonen (2010) looked at franchisees’ perceptions of trust in general, using a useful theoretical framework for understanding the two key dimensions of franchisees’ perceptions of trust. The framework used is the one of Mishra and Spreitzer (1998), who distinguishes key dimensions of a change agent’s trustworthiness during a change process. These dimensions are a concern for the interest of all organizational stakeholders, competence, openness and reliability. Translating to this article’s context, the change process described by Mishra and Spreitzer (1998) and Croonen (2010) is comparable with the franchisor’s entrepreneurial orientation. Although a change process is a situation and the franchisor’s EO a characteristic of the franchisor, eventually a franchisor’s EO will lead to changes. Therefore, it can be argued that the amount of trust franchisees have in their franchisor consists of the following four factors:
§ The interest the franchisor shows and has in his franchisees (i.e., will the
franchisor take into account the franchisees’ interest and will the franchisor not act opportunistically?).
§ The openness of the franchisor (i.e., how open is the franchisor and honest about what is happening and why it is happening?).
§ The competences of the franchisor (i.e., is the franchisor capable of creating and maintaining the franchise system’s competitive position and is it capable of performing its tasks in the franchise relationship?).
The first three factors, the franchisor’s interest, openness and reliability capture the dimension intentional trust. The franchisor’s competence represents the dimension competence trust. Together they will represent the level of trust franchisees have in their franchisor.
2.4 Entrepreneurial Orientation and Trust
The business format (formula), which is the franchisor’s responsibility, ideally includes a unique strategic positioning that serves the needs of customers in a viable segment (Kaufmann and Eroglu, 1998). According to Kaufmann and Eroglu (1998), the formula contains multiple elements that will help in communicating the unique features of the business to the customers. The franchisor has the responsibility for the business format. Croonen and Brand (2013) argue that the franchisee will assess the trustworthiness of the franchise system by evaluating the franchisor’s ability to develop both a business format with unique features, and to effectively communicate these features to the customers (Kaufmann and Eroglu, 1998). Wiklund and Shepherd (2005) found prove that an entrepreneurial orientation has a positive influence on performance. Looking at the individual dimensions of EO, previous research suggests that each dimension can have a positive influence on performance. The franchisor has an economic interest in creating and maintaining franchisee trust, because the franchisees are important for the total success of the franchise system (Michael and Combs, 2008). Especially in franchising, the relationship must be based on mutual trust in order to be successful (Morgan and Hunt, 1994; Zaheer et al. 1998).
Innovativeness
The franchisor’s innovativeness reflects that the franchisor has a tendency for new, unusual, or creative solutions for the formula (Morris et al., 2002). This means that the franchisor develops new products or services (Walter et al., 2006), as well as new techniques or practices for the firm’s operations (Knight, 1997). So if the franchisor has the right competences concerning innovative behavior, and shows thereby the right intentions towards their franchisees, it is expected that the franchisee’s trust in their franchisor will increase. Thus:
H1a: The franchisee’s perception of his franchisor’s entrepreneurial innovativeness has a positive influence on the franchisee’s competence trust in their franchisor.
H1b; The franchisee’s perception of his franchisor’s entrepreneurial innovativeness has a positive influence on the franchisee’s intentional trust in their franchisor.
Proactiveness:
H2a: The franchisee’s perception of his franchisor’s entrepreneurial proactiveness has a positive influence on the franchisee’s competence trust in their franchisor. H2b: The franchisee’s perception of his franchisor’s entrepreneurial proactiveness has a positive influence on the franchisee’s intentional trust in their franchisor.
Risk-‐taking:
The franchisor’s risk-‐taking shows that the franchisor is willing to commit resources to projects that are risky, with the possibility of high returns (Miller and Friesen, 1982). This indicates that the franchisor is willing to break away from the tried-‐and-‐true and venture into new areas. New opportunities can be seen as risky, but are necessary for the formula to stay unique and maintain a competitive position (Kaufmann and Eroglu, 1998). So if the franchisor displays the right competences for risk-‐taking behaviour towards his franchisees, and does this with the intention to strengthen the formula, I expect that the franchisee’s trust in their franchisor will increase. Thus:
H3a: The franchisee’s perception of his franchisor’s entrepreneurial risk-‐taking has a positive influence on the franchisee’s competence trust in their franchisor.
H3b: The franchisee’s perception of his franchisor’s entrepreneurial risk-‐taking has a positive influence on the franchisee’s intentional trust in their franchisor.
Environmental Dynamism
Dynamic environments are in the literature associated with a high level of unpredictability of customers and competitors and high rates of change in market trends and industry innovation (Dess and Beard, 1984; Miller, 1987a,b).
When a franchise formula is active in a dynamic environment, where demand constantly shifts, opportunities arise all the time, and firm performance should be the highest among competition (Wiklund and Shepherd, 2005). Entrepreneurial-‐type strategies are more likely to be successful when addressing customers that attach value on innovation and unique services (Miller, 1990). So franchisors who adopt an entrepreneurial orientation will be better in pursuing new opportunities because they are able to find a fit between their strategic orientation and the environment (Wiklund and Shepherd, 2005).
In an environment where the demands constantly shifts and if there are high rates of change in the market, the franchisees have to trust their franchisor in adapting an entrepreneurial orientation. The franchisor stays responsible for the unique factors of the formula (Kaufman and Eroglu, 1998). If the formula is active in a dynamic environment the franchisees will depend more on their franchisor’s competence and their intentional behavior. Thus:
H4: The relationship between the franchisor’s EO and the franchisee’s trust is moderated
by environmental dynamism. The relationship between EO and trust will be stronger when the franchisee perceives to be in a highly dynamic environment.
2.5 Conceptual model + + +
Figure 1 – Conceptual model
3. Methodology
3.1 Sample and Data Collection
For this study, franchise organizations (located in The Netherlands) were selected that are doing business in the retail market. Data collection included three steps and lasted from November till December 2015. The first step was finding organizations that are active in the retail market, information for the retail organizations was found on two websites: denationalefranchisegids.nl and franchiseformules.nl. After selecting franchise organizations, I started sending emails to different franchise organizations, I asked them permission to distribute the survey among their franchisees. This led to no response, and that may be because the willingness from organizations to cooperate is low, and the subject of this study, trust is sensitive in franchising. In the Netherlands, different franchise organizations went bankrupt and that dominated the news. Therefore, I couldn’t distribute my survey directly among a large group of franchisees. So, I tracked down the personal email addresses from the franchisees on their own website from 8 different franchise organizations. Secondly, I mailed all the franchisees with a short introduction and the purpose of my study with the link to the survey. Thirdly, I have sent all the franchisees a reminding email with a more personal request to fill in the survey. In the reminder, I added a time index how long the survey takes on average. By the end of December, 104 surveys were returned and the response rate was 8,81%
(104/1180). 40 cases were deleted for missing values. Thus, 64 cases were retained and used in this study. In addition, the sample size is suitable for the empirical investigations carried out in this study and it is comparable with prior studies that have examined issues related to EO in different contexts. For example, Fable et al. (1998) had a sample size of 50 participants, Zahra and Garvis (2000) had 98 firms and Dada and Watson (2012) had a size of 95 participants. Although the aim was to gather more than 100 respondents, the low response rate is offset to some extend by the fact that many respondents were not able to participate because the franchisor has policies that state that their franchisees cannot take part in external research. The fact that their email addresses are public, could incline that they receive on a daily base many spam emails. Table 1 summarizes the characteristics of the sample.
Table 1 -‐ Sample characteristics N Franchise organization:
Bicycle (Biketotaal, Fietsprofiel and Fietspecialist) 32 Eyewish 15 Spar 12 Other (Expert, Intersport and Autototaalglas) 5 Gender:
Male 58 Female 6 Number of units:
1 57 2 6 5 1 Total 64 3.2 Entrepreneurial Orientation
The variable, entrepreneurial orientation (EO), was measured with the dimensions: innovativeness, proactiveness and risk-‐taking (Lee et al., 2001; Wiklund et al., 2009). Lumpkin and Dess (1996) conceptually introduced competitive aggressiveness and autonomy as potentially important aspects of entrepreneurial orientation. Wiklund et al. (2009) noted that many scholars, including recent studies have measured EO in terms of innovativeness, proactiveness and risk-‐taking. Most of the measures for the dimensions of EO used in this study were adapted from Keh et al. (2007) and Dada & Watson (2012). The measures were originally extracted from Covin and Slevin (1989) and Miller and Friesen (1982). The questions are adjusted from a franchisor perspective towards their franchisees to a franchisee perspective towards their franchisor. A 5-‐point likert-‐scale for all the three dimensions, ranging from 1 (strongly disagree) to 5 (strongly agree) was used. Innovativeness has an alpha (α) of 0,74, proactiveness has an alpha (α) of 0,76, and risk-‐taking has an alpha (α) of 0,76.
3.3 Trust
role as promised within the franchise agreement and the franchisee needs a certain level of trust in the good intentions of the franchisor (intentional trust), and secondly the franchisee needs a certain level of trust in the capabilities of the franchisor and expectations that the franchisor will perform with technical competence (competence trust) (Davies et al., 2011; Croonen & Brand, 2007). The questions to measure both dimensions of trust were derived from the work from Mishra & Spreitzer (1998) and Croonen & Brand (2007). Mishra & Spreitzer (1998) made four dimensions of trust; concern for the other partner’s interest, openness, reliability and competence. Croonen and Brand (2007) translated this to a franchise context, where the first three dimensions represent the intentional trust and the last one competence trust. Although these dimensions are not concrete questions in their research, they capture both the trust dimensions when they are translated into questions (Appendix). Competence trust is measured with four questions and intentional trust with three questions. For both dimensions a 5-‐point likert-‐scale is used, ranging from 1 (strongly disagree) to 5 (strongly agree). Competence trust has an alpha (α) of 0,74 and intentional trust has an alpha (α) of 0,83.
3.4 Environmental Dynamism
Environmental dynamism was operationalized using items from Dill (1958). Dill’s (1958) five items capture environmental dynamism and all five statements are answered with a 5-‐point likert-‐scale, ranging from 1 (strongly disagree) to 5 (strongly agree). These questions capture the intensity and the changes in the market, the demand for new products and services, and the speed in which the changes take place. The five items have a Cronbach’s alpha (α) of 0,85.
3.5 Control Variables
In this research, I have included a set of control variables in order to make sure that the model is properly specified and will allow alternative explanations for the results. In this study it concerns the franchisee’s trust in their franchisor (de Clercq et al., 2009). In franchising several aspects are important that can explain the difference in results (Mayer and Davis, 1999; Croonen and Brand, 2013). The franchisee’s willingness to trust is added in the research, which is measured with four items and has an alpha of 0,67. Furthermore, the age and the experience in the industry are also added as control variables. These control variables are added in the questionnaire for better explaining the variables.
3.6 Validity and Reliability
The reliability determines whether the measurements and study can be generalized across different studies (Field, 2013). To determine the reliability of the measurements in this study, I conducted a reliability test. All the variables, except one control variable, have a Cronbach’s alpha above 0,7. That secures the reliability for the scales used in this study (Nunnally and Bernstein, 1994). To avoid common method bias, response anonymity and confidentiality was guaranteed to reduce the respondent’s evaluation apprehension (Podsakoff et al, 2003).
4. Results
This chapter will present the results of the different test that are made in this study. It will begin with the explanation of the descriptives. After that the results of the reliability tests are presented, followed by the correlation results. The chapter will end with the examination of the regression analysis results, which are used to test the hypotheses in this research.
4.1 Descriptive findings
In table 1, the descriptives of the different variables are presented. To see if there are multicollinearity problems, the variance inflation factor (VIF) are derived from the dataset in SPSS. In the linear regression, the test between the independent variables showed in the collinearity diagnostics shows that the highest variance inflation factor (VIF) is 3,84. This score is below 5 so no multicollinearity problems are found and the highest score is far below the cut-‐off value of 10 (Hair et al., 1998).
Table 1 – Descriptive
Variable Min. Max. Mean SD
Competence Trust 2 5 3,82 0,49 Intentional Trust 1 5 3,56 0,77 Innovativeness 1 5 3,33 0,74 Proactiveness 1 5 3,39 0,78 Risktaking 1 5 2,78 0,68 Dynamic Environment 2 5 3,59 0,68 Control Variables: Willingness to trust Experience (years) Age 2 1 24 5 49 64 3,37 25,42 47,42 0,52 11,58 10,22
4.2 Reliability analysis results
In this research the internal reliability results are accepted when the Cronbach’s alpha (α) is 0,70 or higher (Nunnaly, 1978). Therefore, the cut-‐off rate in this study will be 0,7 with one exception. In Table 2, the results of all the Cronbach’s alpha are presented from the variables that are measured with more than one item. The four items used to measure competence trust has a Cronbach’s alpha (α) of 0,74 and the three items used to measure intentional trust has an alpha (α) of 0,83. Furthermore, the variable innovativeness, which is measured with three items, has an alpha (α) of 0,74; one item was deleted because the alpha (α) was 0,67 (see appendix). Proactiveness has with three items an alpha (α) of 0,76, and risk-‐taking with three items has an alpha (α) of 0,76. All the ten items together from innovativeness, proactiveness and risk-‐taking form entrepreneurial orientation as a whole, which has an alpha (α) of 0,84. The moderating variable environmental dynamism has an alpha (α) of 0,85 for five items. The control variable willingness to trust has an alpha (α) of 0,67, which is measured with four items. Although the cut-‐off rate is normally below 0,7, Cronbach (1951) gives directions in his research and an alpha (α) of 0,6 is acceptable since it is used in other studies as a cut-‐off rate.
Table 2: Reliability Statistics results
Variable Number of Items Cronbach’s Alpha (α)
Competence Trust 4 0,74 Intentional Trust 3 0,83 Innovativeness 3 0,74 Proactiveness 3 0,76 Risk-‐taking 3 0,76 EO 10 0,84 Environmental Dynamism 5 0,85
Willingness to trust 4 0,67
4.3 Correlations
