Cooperative organizational forms such as franchising and joint venturing have
long been popularamong hospitality chains. However, not all chains use cooperative
organizational forms and those that do varygreatlyin theirproclivityto use them. One
possible explanation for this variation is that when a chain confronts critical resource
scarcities, its managers will use cooperative organization in order to build upon the
resources of their partners. However a second approach, agency theory, suggests
that chain managers use cooperative organization to minimize the costs of monitor
ing outlet managers. Using data on 94 restaurant chains, hypotheses are tested that
investigate the independent and joint efficacy of these explanations. Results show
that capital and brand name are important resources affecting the choice of
organizational form whereas geographic dispersion, task programmability, and
asset specificity are key agency variables. Overall, perhaps the key finding is that the
ability of agency theory to explain organizational form is diminished among resource
scarce chains. The results, therefore, suggest that both perspectives are needed to
fully explain the choice of organizational form.
