Performance and completeness in repeated inter-firm relationshipsthe case of franchising

Resumen

We analyze factors determining contractual completeness in distribution channel relationships and how they influence performance. We argue that investing in completing the franchise contract is profitable when contractual hazards are high, as in the presence of asset specificity and reputational capital. We also claim that contracts cannot be completed without having experienced different problems and contingencies arising from former exchanges. We evaluate these hypotheses using a treatment regression model and an original sample of 74 franchise contracts. Analysis of our data broadly supports our hypotheses except for the influence of franchisor’s reputation. Results suggest that completeness is profitable only when relevant contractual hazards are dealt with. Finally, contractual learning seems to be as important as other production factors which become the strategic resources of the firm.