During the last decades, there has been an increasing recognition that evolutionary theory can be suitable for explaining the dynamics of organizations (Hannah and Freeman, 1970; Nelson and Winter, 1982; Aldrich and Ruef, 1999; Hodgson and Knudsen, 2010). Despite of the differences in the content of the distinct evolutionary approaches to organizations, and eventual punctual discordances, significant commonalities and overlaps can be observed (Dollimore, 2006; Knudsen, 2008). In this sense, support is found for hiking this way as a clear trail, but not to ride it as a rail.
The use of evolutionary theories to study organizations has also led to a growing acceptance of organizational routines as a central unit of analysis (Nelson and Winter, ibid; Pentland and Feldman, 2003; Becker, 2004 and 2008; Hodgson, 2008; Hodgson and Knudsen, ibid.), being the primary means by which they achieve their ends (Pentland and Feldman, 2005). Hence, to understand how organizations become stable, evolve and survive, it has become critical to first investigate the nature of the routines.
Although this direction has been pointed, there are still many areas of the evolutionary quality of organizational routines that need to be clarified (Hodgson and Knudsen, ibid.). Moreover, while the exploration of such topic has advanced into the conceptual arena, empirical studies are still rare and critically needed to provide more oxygen to the theoretical development on organizational routines (Becker, Salvatore and Zirpoli, 2005; Hodgson 2008). This research therefore seeks to be of contribution to this context.
The object of the present proposal is the empirical investigation of how organizational routines are replicated in franchise organizations and how selection takes place in their context. The choice of this subject is based on the increasing importance of this type of organization, central role of routines replication in their business model, and on explicit account given to routines in their management.
The franchise business model has been increasingly adopted by retail and service companies (Verbieren et al, 2008). In the United States, their participation was estimated at 35% of retail sales in 1986 (Kostecka 1988 Apud La Fontaine and Shaw, 1999), increasing to 40.6% in 2010 (Dant et al, 2011).
The model chosen by franchises to grow is based on the replication of their operating model, materialized in routines through agreements between franchisors and franchisees. While franchisors provide the rights of use to the established brand, a set of operational routines proven in existing businesses and an operational back-office, franchisees invest capital and their own “entrepreneurial labor” to open a new franchise unit. Accordingly, the successful replication of routines in Franchise Organizations contributes to its own success (Knott, 2003).
The main questions to be addressed in the proposed research area:
A. How are organizational routines replicated and how do they evolve in franchise organizations?
B. When taking into consideration the different types of selection processes: (a) [successor] selection of franchisor by the franchisee and (b) [subset] selection of franchisee by entity termination driven by bankruptcy or other type of event; how does selection impact the franchise organizations?
C. As we incorporate the [subset] selection process through the termination of the franchise organizations to the above types, how does selection impact routines replication?
In pursuit of answers to the above research questions, the present research will include the below intermediate questions without being limited to them:
A. What are the mechanisms used when transferring operational and managerial routine information between franchisors and franchisees?
B. How are routines formed as dispositions in new employees and how are they energized as part of the new firm?
C. How can we measure routines fitness in franchising organizations?
D. Is there a difference between franchisee unit fitness and franchise organization fitness? How routines influence to fitness in both levels?
3. Literature Review
The understanding of how organizations evolve is an audacious objective that can only be reached by collective and cumulative effort, going beyond the reach of a single research initiative. However, in the embraced task of empirically studying the nature of routines, it becomes crucial to frame the work under systematic and robust theories that can transform it in a contribution to such aspiration.
As expressed before in this text, evolutionary approaches have been widely used and supported for the study of organizations (see also Murmann, 2003), an angle that should be shared here. Notwithstanding, the approach presented by Hodgson and Knudsen (2010, 2011), offering a generalization of Darwinian principles that can be applied to the evolution of social entities, has been selected for three main reasons. First, it transparently transfers concepts conceived in Biology to the context to social sciences, balancing the required level of abstraction for transposition with the necessary acknowledgement of their complete and original meaning. Second, it gives a comprehensive and careful account of all building blocks of evolutionary theory. Third, it presents clear definitions to support its instrumental use.
According to Hodgson and Knudsen (2010, p.26 and p.33-37), the Darwinian principles of variety, inheritance and selection apply to small worlds described by them as complex population systems. In such worlds, a variety of non-identical entities interact with each other and with their environment, under the pressure of immediately scarce resources in a struggle for existence. These entities that populate and compose complex population systems are mortal, and require the consumption of materials and energy from this environment to survive or minimize degradation, but have only a limited capacity to absorb it. They are also capable of processing information from their environment through sensory mechanisms. In complex population systems, a part of the adaptive solutions to faced problems of survival are retained by entities through time and can be passed to other entities; in what constitutes the Darwinian principle of inheritance. In the generalized framework, replication is taken as a synonym of inheritance, and must satisfy the following criteria (p.77):
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