How to design franchise contracts: the role of contractual hazards and experience

• Autores: Vanesa Solís Rodríguez
• Localización: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS], ISSN-e 1988-8767, Nº. 554, 2010
• Idioma: inglés
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• Resumen

  • We analyze factors determining the degree of contractual completeness in franchising.

    We argue that heterogeneity in firms� contract design capabilities is an important factor along with different contractual hazards. Our results support these hypotheses showing that experienced franchisors draw up more complete contracts. Additionally, we ob- serve that the effects of contractual hazards on completeness are not always positive and direct and that there may be a substitution effect between formal and relational governance mechanisms because risks of bilateral expropriations might serve as a mutual guarantee. This also suggests that contract analysis must not focus on particu- lar clauses but on the contract as a whole.