The effect of international franchising on domestic firms in emerging countries

Franchising has become one of the most applied business strategies for international expansion, as it provides economies of scale and flexibility to global operations. It usually offers the benefits of strong brand name, business know-how and experience that give businesses a competitive edge in overseas markets. The growth of franchising model globally and its impact on host-country firms is most noticeable in developing economies, as it forces local firms to evolve and adopt new practices to defend their market positions. This thesis, therefore, aims to examine the effect of international franchising on emerging market firms and the different ways to achieve a competitive advantage in developing economies by identifying resources, capabilities and strategies of both franchisees and local businesses. To address the objective of this thesis, an exploratory, qualitative case study is conducted by employing semi-structured interviews with 14 case companies in Ukraine and Georgia, which helps the researcher to answer the study questions and understand the experiences and perceptions of the participants. The collected data is analysed with the use of thematic analysis and fuzzy set of qualitative comparative analysis (fsQCA) to gain an in-depth knowledge of the research phenomenon and to enhance the credibility of the results. The findings of this study stress the importance of marketing activities, customer service development, localisation, pricing strategy and financial resources as the key conditions for businesses to gain success in developing economies. However, the analysis reveals that there are huge differences between the resources, capabilities and practices of international franchisees and emerging-market firms. Franchisees of well-established franchisors benefit from business knowledge, training support and worldwide experience but follow a rigid and formalised structure that gives them less flexibility. On the other hand, developing-country firms have the local market knowledge, autonomy, and the capacity to learn indirectly from competitors, but lack resources and technological capabilities. This thesis, therefore, suggests alternative paths and effective solutions to both to drive firm's competitiveness when particular resources and/or capabilities are present or absent. There are several contributions made to knowledge by this thesis. The new theoretical insights are developed through identifying the most significant drivers of competitive advantage and suggesting different configurational frameworks. The results also present practical implications by providing managerially amendable options to deal with intense competition within the food industry in emerging economies. Finally, the methodological ii contribution of this thesis lies in the application of fsQCA that allows researchers to see qualitative results transferred into quantitative findings with a clear and transparent way, thus, it would be beneficial not only for qualitative researchers but for scholars who follow quantitative approach.