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An Agency Perspective on Service Triads: Linking Operational and Financial Performance

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dc.contributor.authorZhang, Jie J.
dc.contributor.authorLawrence, Benjamin
dc.contributor.authorAnderson, Chris K.
dc.date.accessioned2020-09-12T21:08:46Z
dc.date.available2020-09-12T21:08:46Z
dc.date.issued2015-05-01
dc.description.abstractWe explore one prolific type of service triad, the franchise triad, involving three primary stakeholders: the franchisor, the franchisee and the customer. In this triad, franchisees use their affiliation with the franchisor’s brand to attract customers to their local outlets. In exchange for the right of assuming the identity of the brand, the franchisee pays the franchisor royalties and retains residual profits. Applying Agency Theory, this paper examines the inherent conflict of interests between a principal (i.e., franchisor) that controls and manages brand equity as a shared resource and an agent (i.e., franchisee) that retains pricing right and profits from the identity of the brand by interacting directly with customers. We empirically isolate the effect of triad structure on outlet performance by matching two unique datasets. One set of data captures operational performance in the form of aggregated online review scores and the other financial performance including average daily hotel rate and revenue per available room. We find that franchisees charge higher prices than their corporate counterparts even when controlling for operational performance. Even though franchisees charge higher prices they maintain similar financial performance in terms of revenue per available room. These results suggest that the triad structure plays a significant role in franchisees' ability to free-ride on shared brand equity and have important managerial implications for effective outsourcing, contract design and performance evaluation for a wide range of service industries.
dc.description.legacydownloadsLawrence8_An_agency_perspective.pdf: 719 downloads, before Aug. 1, 2020.
dc.identifier.other8329874
dc.identifier.urihttps://hdl.handle.net/1813/72132
dc.language.isoen_US
dc.relation.doihttps://doi.org/10.1016/j.jom.2014.10.005
dc.rightsRequired Publisher Statement: © Elsevier. Final version published as: Zhang, J. J., Lawrence, B., & Anderson, C. K. (2015). An agency perspective on service triads: Linking operational and financial performance. Journal of Operations Management, 35, 56-66. Reprinted with permission. All rights reserved.
dc.subjectservice triads
dc.subjectcustomer satisfaction
dc.subjectservice outsourcing
dc.subjectagency theory
dc.subjectfranchising
dc.titleAn Agency Perspective on Service Triads: Linking Operational and Financial Performance
dc.typearticle
local.authorAffiliationZhang, Jie J.: University of Vermont
local.authorAffiliationLawrence, Benjamin: bcl5@cornell.edu Cornell University School of Hotel Administration
local.authorAffiliationAnderson, Chris K.: cka9@cornell.edu Cornell University School of Hotel Administration

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