Week 46: Shane (1996) Hybrid Organizational Arangements and their implication for firm growth Flashcards
Q: What are hybrid organizational forms?
Business structures that combine elements of market-based independence and hierarchical control.
Q: What is the entrepreneurial capacity problem?
A: The difficulty entrepreneurs face in balancing monitoring employees and exploring new opportunities as their firms grow.
Q: How does franchising solve the entrepreneurial capacity problem?
A: By transferring operational responsibilities to franchisees, who invest their own capital and manage day-to-day tasks.
Q: What is agency theory?
A: A framework explaining conflicts between principals (owners) and agents (employees or managers) due to misaligned interests.
Q: What are two common agency problems in businesses?
A: Moral hazard and adverse selection.
Q: What is moral hazard in the context of agency theory?
A: When agents act in their own interest instead of the principal’s because their actions are hard to monitor.
Q: What is adverse selection in the context of agency theory?
A: The difficulty of identifying qualified agents before hiring them.
Q: How does franchising reduce moral hazard?
A: Franchisees bear financial risk, motivating them to align their actions with the franchisor’s goals.
Q: How does franchising address adverse selection?
A: Franchisees self-select by investing their own money, signaling commitment and competence.
Q: What is residual claimancy in franchising?
A: Franchisees earn profits based on their performance, aligning their interests with the franchisor’s success.
Q: What are co-specialized assets?
A: Assets like branding and technology that are most valuable when paired together.
Q: Why do firms using franchising grow faster?
A: Franchising reduces resource constraints and allows for rapid expansion through motivated franchisees.
Q: What are suboptimal efforts?
A: When employees or managers do not put in their best effort, leading to inefficiencies.
Q: What are misdirected efforts?
A: When employees focus on tasks that don’t align with the firm’s goals, wasting resources.
