Journal of Small Business Management 2010 48(4), pp.

605–626

Franchised and Small, the Most Beautiful of

All; HRM and Performance in Plural Systems jsbm_310 605..626

by Maryse J. Brand and Evelien P. M. Croonen

Franchising is particularly present in industries in which human resources play a

vital role. However, little is known about human resource management (HRM) in a
franchising context. This study investigates HRM behavior and performance using a
sample of 171 units within one plural retailing system. The results lend support to the
agency and entrepreneurial perspectives; franchised units have a relatively low HRM
intensity but superior HR performance. We also find a negative relationship between
unit size and performance, moderated by type of unit ownership. We conclude that
when it comes to HR performance, the units that are franchised and small are the
most beautiful of all.

Huselid 1996; Evans and Davis 2005;

Introduction
Human resource management (HRM)
entails a set of policies and practices
directed at attracting, developing, and
maintaining (or disposing of) a firm’s
human resources (Lado and Wilson
1994). In recent years, several studies
have shown that HRM is an important
strategic business function that influ-
ences the performance of both large and
small firms (see, e.g., Arthur 1994;
Becker and Huselid 1998; Carlson,
Upton, and Seaman 2006; Delaney and
Huselid 1995; Sels et al. 2006). HRM is
also regularly identified as a critical
driver of business success in retailing
and service industries (McLean 2006;
Miller 2006). In these industries, busi-
ness format franchising is a very impor-
tant business strategy (Combs and
Ketchen 2003; Welsh, Alon, and Falbe
2006). In business format franchising, a
franchisor owns a business format—
including a uniform identity toward cus-
tomers and extensive internal
procedures—and replicates it by entering

Maryse J. Brand is associate professor of small business management and entrepreneurship

in the Faculty of Economics and Business, University of Groningen.
Evelien P. M. Croonen is assistant professor of small business management and entrepre-
neurship in the Faculty of Economics and Business, University of Groningen.
Address correspondence to: Maryse Brand, Faculty of Economics and Business, University
of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands. Tel: +31 3637492; E-mail:
m.j.brand@rug.nl.

BRAND AND CROONEN 605

into contractual relationships with fran-
chisees, who are typically self-financed
and owner-managed small firms operat-
ing under the franchisor’s business
format in return for fees (Truss 2004).
Many franchise systems consist of both
franchised units and company-owned
units that are owned and operated by the
franchisor itself. Such a system with both
franchised and company-owned units is
also known as a “plural form” (see, e.g.,
Bradach 1998; Dant, Perrigot, and
Cliquet 2008) or a “plural system” (see,
e.g., Bürkle and Posselt 2008).
An important and well-known chal-
lenge for franchisors is the tension
between maintaining the franchise sys-
tem’s uniformity and allowing for local
adaptations (Bradach 1998; Kaufmann
and Eroglu 1998; Sorenson and
Sørensen 2001). A high degree of uni-
formity and standardization results in
economies of scale and allows for a con-
sistent image in the market, whereas a
high degree of local adaptation may
lead to a better fit with the local market.
This tension does not only apply to
the system’s shared identity toward
customers—which is, for example,
reflected in the range of goods and ser-
vices, the use of trademark or logo, and
architectural features—but also to the
system’s “format facilitators” (Kaufmann
and Eroglu 1998). These format facilita-
tors refer to a wide range of policies
and procedures that form the founda-
tion for the format’s effective and effi-
cient functioning at the individual store
level and the system level. Format facili-
tators at the store level entail, for
example, the specification of equipment
and detailed operating instructions that
may also include policies and proce-
dures regarding the store’s HRM. Format
facilitators at the system level integrate
individual units into the operation of the
total system and include, for example,
royalty paying procedures and financial
reporting requirements. Although these
business format elements are not
606 JOURNAL OF SMALL BUSINESS MANAGEMENT
directly visible to customers, they are
critical because they comprise the man-
agement and operational infrastructure
of the entire franchise system and its
units (Kaufmann and Eroglu 1998).
Given the above-mentioned influence
of HRM on business success, HR practices
are potentially important format facilita-
tors in franchise systems. However, very
few studies have empirically investigated
how franchisors and franchisees deal
with HRM (exceptions are Krueger 1990;
Litz and Stewart 2000; Felstead 1993;
Truss 2004), and—to the authors’
knowledge—studies linking HRM to per-
formance in a franchise context are not
even available. This lack of attention may
be explained by the fact that HR practices
are only scantly incorporated in the fran-
chise agreement and/or handbook. Truss
(2004) and Felstead (1993) show that
franchisors largely consider their franchi-
sees’ personnel policies and practices as
the franchisees’ own responsibility (this,
with the exception of employee training
and the prohibition of controversial fran-
chisee behavior, may damage the fran-
chise system’s image). Truss’s explorative
study of four franchisors in the automo-
tive franchise retail sector found that
several HR practices, such as pay and
rewards, were left to the franchisees’ dis-
cretion in order to keep the franchisees
satisfied and motivated. However, regard-
ing some other HR practices, such as
employee training, the franchisor
tried to exercise direct control over the
franchisees.
Next to issues of franchisee satisfac-
tion and motivation, there is also a legal
explanation for the relatively large
degree of freedom of franchisees regard-
ing HR practices (Felstead 1993). Legal
systems make a distinction between busi-
ness transactions and employee relation-
ships with all kinds of consequences
such as taxation and insurance fees.
Because many business format franchise
relationships already include prescrip-
tions in most business areas (such as
marketing, logistics, and automation),
HRM could very well be the last strate-
gic area that is left to the franchisees’
discretion. This could keep the franchi-
see from being regarded as an employee
of the franchisor with all its legal con-
sequences. Moreover, if franchisors
intervene too much in their franchisees’
HR practices, this might send out con-
fusing messages for the franchisees’
employees as to whom they would have
to relate to (Truss 2004). On the basis of
U.S. court cases in which the franchisor
was alleged to be the employer of a
franchisee’s employee, Koch and Dodge
(2003, p. 53) recommend the following:
“The franchisor might even provide
information about its own policies and
practices in ‘here’s how we do it’
fashion. But the franchisor should never
prescribe specific policies and practices
that the franchisee is required to
follow . . . If the franchisor mandates
particular employment practices, the
franchisor will be at much greater legal
risk.”
At this point, we conclude that HRM is
an important strategic issue in franchise
systems, particularly in retail industries,
whereas several factors contribute to the
fact that HRM is one of the least stan-
dardized areas for franchisees. At the
same time, very little is known about
how franchisees deal with this large
degree of freedom and how effective
their HR practices actually are. The
objective of this paper is to learn more
about the HRM behaviors of franchisees
and the effectiveness of these behaviors.
We do this by making systematic com-
parisons between franchised and
company-owned units within one plural
system. Because differences in gover-
nance and management of franchised
and company-owned units, we expect
differences in these units’ HRM behav-
iors and, ultimately, in HR performance.
This approach is similar to Krueger
(1990), who did a survey of American
fast food restaurants, comparing wages
BRAND AND CROONEN
and fringe benefits in company-owned
and franchised units.
This paper proceeds as follows. First,
we discuss the differences between fran-
chised and company-owned units, and
we present two contrasting views regard-
ing the effect of type of unit ownership
on HR performance in order to develop a
number of hypotheses. The first view
largely builds on a resource-based per-
spective and proposes that company-
owned units have more intensive HR
practices than franchised units because
they are part of a large organization that
has the resources and the legal and
bureaucratic need to develop intensive
and detailed HR procedures. Subse-
quently, it is assumed that the more
intensive HR practices of company-
owned units also lead to superior HR
performance. The second view builds on
an agency and an entrepreneurial per-
spective and proposes the opposite,
namely, that franchised units have a
higher HR performance because of the
franchisees’ motivation and efforts, and
local adaptation regarding HRM. The
resulting hypotheses are tested with a
sample of 171 franchised and company-
owned units of a Dutch retailing system.
Literature Review and
Hypotheses Development
Differences between Franchised
and Company-Owned Units
The differences in governance and
management of franchised and
company-owned units have been dis-
cussed and studied extensively (see, e.g.,
Bradach 1998; Bürkle and Posselt 2008;
Castrogiovanni and Kidwell Forthcom-
ing; Michael 2002; Sorenson and
Sørensen 2001; Yin and Zajac 2004). The
differences between these two gover-
nance forms can be described along
three dimensions: decision-making
authority, incentives, and monitoring
and control systems (Makadok and Coff
2009; Michael 1996; Michael 2002; Soren-
son and Sørensen 2001; Yin and Zajac
607
2004). The literature argues that because
franchisees own the assets and are the
residual claimants of their units, they
generally enjoy a wider range of decision
rights than company managers
(Makadok and Coff 2009; Yin and Zajac
2004). These decision rights may entail,
for example, decisions regarding price
levels, hours of service, and hiring
(Michael 1996). Moreover, because of
their asset ownership and residual claim-
ant status, franchisees are generally
assumed to have more incentives to
closely supervise operations and to
engage in other cost-reducing and
demand-generating activities (Makadok
and Coff 2009; Michael 2002; Yin and
Zajac 2004). In their attempt to reduce
cost levels, franchisees may be tempted
to underinvest in ongoing activities
because a large part of their total wealth
is already tied up in their franchise unit
(Combs and Castrogiovanni 1994), and,
in the case of externalities, they may be
inclined to free ride on the efforts and
investments of other units (Michael 2002,
2000). Therefore, franchisors supple-
ment the franchisees’ residual claimant
status with monitoring in order to assure
quality. Nevertheless, the monitoring of
franchisees is less stringent and system-
atic than the monitoring of company
managers. Company managers are moni-
tored and controlled closely by means of
field audits, mystery shoppers, and auto-
mated management information systems,
and are therefore much more inclined to
stick to a format’s routines and opera-
tions than franchisees (Bradach 1998;
Sorenson and Sørensen 2001; Yin and
Zajac 2004). Field audits in franchised
units, however, are much more focused
on working with the franchisee to under-
stand his/her local market conditions
and the issues he/she is facing in
running the unit.
We propose that these differences
between franchised and company-owned
units will also result in differences
regarding their HRM behavior and, ulti-
608 JOURNAL OF SMALL BUSINESS MANAGEMENT
mately, in their HR performance. We will
explain this line of reasoning below.
Resource Availability and
Bureaucratization
As discussed already, franchisees typi-
cally have more decision rights than
managers of company-owned units, in
particular, regarding HRM. As a result,
we expect that each individual franchisee
largely adopts its own HR practices. In
company-owned units, however, head-
quarters owns all HRM decision rights,
and company or “unit” managers are
inclined to stick to these decisions
because of the way they are monitored
and rewarded. Because each individual
franchised unit can largely adopt its own
HR practices, franchised units will dem-
onstrate HRM behavior that is congruent
with their organizational size and struc-
ture, in other words, behavior that is
typical for small firms. In contrast,
company-owned units will adopt the HR
practices developed and prescribed by
headquarters, leading company-owned
units to demonstrate HRM behavior that
is typical for large firms. Figure 1 pro-
vides a graphical representation of this
argument.
Before proceeding, we first have to
clarify two decisions we have made in
this study. First, our hypotheses and
arguments hinge on the assumption that
all units are managed by either a franchi-
see or a company manager. In reality,
franchisees may own multiple units,
which may influence the way they
conduct their HRM activities and, ulti-
mately, the (HR) performance of their
units (also see Castrogiovanni and
Kidwell Forthcoming). In the method-
ological section, we point out why this is
not a problem for our current study, and
in the concluding section, we suggest
ways to incorporate the influence of mul-
tiunit franchising on HRM behavior in
future studies.
The second clarification relates to our
approach to studying HRM. Existing
 Figure 1
Expected Differences between Franchised and
Company-Owned Units Regarding Human Resource
Management (HRM) Behavior
Franchisor
of a plural system
Etc. FR FR FR
Each FR unit develops its own HR
practices: HRM in individual FR units as
in a small organization
Legend:
FR = Franchised units
CO = Company-owned units
= Scale of HRM activities
research on the relationship between
HRM and performance mainly uses one
of two approaches (Becker and Huselid
1998; Bowen and Ostroff 2004).
Researchers adopting the first approach
focus on the added value of individual
practices. This type of research could
provide insight in the effectiveness of
certain HR practices, but it is criticized
(e.g., by Wright and Boswell 2002) for
the fact that it usually ignores the poten-
tial simultaneity between HR practices
(exceptions are recent studies by Faems
et al. 2005 and Gooderham, Parry, and
Ringdal 2008). This limitation leads to an
overestimation of the contribution of
single practices. The second approach,
identified as the dominant trend in HRM
research (Bowen and Ostroff 2004),
acknowledges the simultaneity and inter-
action between HR practices by focusing
on comprehensive bundles of HR prac-
BRAND AND CROONEN
CO CO CO Etc.
Franchisor develops HR practices for all
CO units: HRM in individual CO units as
in a large organization
tices, such as high performance work
systems or HPWS (Delaney and Huselid
1996; Evans and Davis 2005; Way
2002), high-involvement work practices
(Guthrie 2001), and sophisticated, pro-
fessional, or intensive HR practices (de
Kok and Uhlaner 2001; Huselid 1995;
Sels et al. 2006). Studies following this
latter approach typically use a single
index as a measure of the HRM system,
arguing that a single index reflects the
notion of a HRM system as a strategic
asset and accommodates for simultaneity
and substitutability among HR practices
(Becker and Huselid 1998; Guthrie 2001;
Way 2002).
The objective of this paper is to learn
more about the HRM behaviors of fran-
chisees and the effectiveness of these
behaviors. In this light, we are interested
in the effectiveness of the set of HR prac-
tices that franchisees choose, and not in
609
the effectiveness of single practices. For
this reason, we follow the second
approach, as just described, and concep-
tualize the set of HR choices as an index
called HRM intensity (compare Sels et al.
2006). HRM intensity can thus be defined
as the extent of use of a set of HR prac-
tices that cover all major HR domains as
identified in mainstream HR research
(see Measurement). The extent of use is
related but not identical to the concept of
formalization of HR practices (see, e.g.,
Kotey and Slade 2005), because formal-
ization is a prerequisite for some HR
practices (e.g., the use of job descrip-
tions and regular meetings), but it is not
relevant for other practices (e.g., sharing
strategic information with employees
and the use of nonmonetary rewards
such as compliments). HRM intensity
also overlaps with the concept of HPWS
because they both look at the extent of
use of certain practices (e.g., staffing
practices). However, HPWS literature is
mainly normative in nature (proposing
certain HRM systems), whereas HRM
intensity has a descriptive nature
(describing certain HRM systems).
Multiple studies have demonstrated
that small firms have less professional
and intensive HR practices than large
firms (see, e.g., de Kok and Uhlaner
2001; de Kok, Uhlaner, and Thurik 2006;
Kotey and Slade 2005). There are differ-
ent explanations for this observation.
First of all, from a resource-based per-
spective, it is often argued that a small
scale results in a lack of specific
resources, such as financial resources,
expert knowledge, and staff functionar-
ies (de Kok, Uhlaner, and Thurik 2006;
Golhar and Deshpande 1997; Noote-
boom 1994). For example, Golhar and
Deshpande (1997) have shown that the
lack of specific knowledge in small firms
may lead to less intensive HR practices.
Larger firms are more likely to have a
separate HRM department, and the
person in charge is therefore more likely
to be an expert. In small firms, the
610 JOURNAL OF SMALL BUSINESS MANAGEMENT
person in charge for HRM (mostly the
business owner itself) is usually also
involved in other management practices,
which means that he/she is unable to
keep up with the latest HRM trends
and developments (Bayo-Moriones and
Merino-Díaz de Cerio 2001). There is also
some evidence that small business
owners do not tend to develop HR poli-
cies and instruments, but wait to take
action until they perceive acute problems
(Cooper, Ramachandran, and Schoorman
1997; Tocher and Rutherford 2009).
Additionally, setting up professional and
intensive HR practices is costly. Large
firms benefit from economies of scale by
spreading the fixed cost of setting up
such professionalized HR practices over
a larger number of employees (Klaas,
McClendon, and Gainey 2000; Lynch
and Black 1998), whereas small firms
encounter problems with the consider-
able development costs of intensive HR
practices because of their lack of econo-
mies of scale and their lack of financial
resources.
Two final explanations for the differ-
ences in HRM intensity between small
and large firms relate to bureaucratiza-
tion of larger firms. First, research shows
that as firms increase in size and com-
plexity, they develop an internal need for
bureaucracy and introduce more layers
of management and more formalized
and/or systematized HR procedures and
policies in order to process information
more effectively within the organization
(Chandler and McEvoy 2000; de Kok,
Uhlaner, and Thurik 2006; Kotey and
Slade 2005). Second, the institutional
environment usually provides an exter-
nal need for bureaucratization by forcing
larger firms to adopt more and/or more
complex HR practices. In the Nether-
lands, for example, small firms are
exempted from certain types of employ-
ment legislation such as the requirement
to have a works council.
Given the just described consider-
ations, we argue that the headquarters of
a retail system does have the financial
resources, the knowledge, and the
bureaucratic need to develop intensive
HR practices for all its own units,
whereas individual franchisees that
operate within the same system do not
have such resources and bureaucratic
needs. This leads to the following
hypothesis:
H1a: Company-owned units have a
higher HRM intensity than franchised
units.
The next step is to link a unit’s HRM
intensity to unit performance. In the last
decades, there has been growing empiri-
cal evidence that HR practices can have a
significant impact on the performance of
firms, either direct or through a causal
chain of intermediating variables (see,
e.g., Bae and Lawler 2000; Evans and
Davis 2005; Huselid, Jackson, and
Schuler 1997; Huselid 1995; Sels et al.
2006; Way 2002). As pointed out earlier,
the dominant trend in such studies has
been to aggregate HR practices into one
measure or index for a firm’s HRM
system. The general conclusion of these
studies is that doing more HRM is better,
or—in other words—a higher HRM
intensity ultimately leads to higher firm
performance (Becker and Huselid 1998).
However, some recent empirical studies
focusing on small firms conclude that
this relationship may be contingent on
firm size; for small firms, the additional
costs of more intensive HRM probably do
not outweigh the financial benefits (Sels
et al. 2006; Way 2002).
The relationship between HRM and,
ultimately, firm performance is a
complex one, and researchers have
pointed at different variables that
mediate the relationship between HR
practices and firm performance (Bowen
and Ostroff 2004; Evans and Davis 2005;
Huselid 1995; Sels et al. 2006; Way
2002). Many of these researchers argue
that HR practices can improve employ-
BRAND AND CROONEN
ees’ skills and capabilities, and satisfac-
tion and motivation, which in turn leads
to increased employee productivity and
lower workforce turnover and absentee-
ism levels (e.g., Huselid 1995; Way
2002). Moreover, it is often suggested
that improvements on the employee
level ultimately lead to improved perfor-
mance on the firm level, such as organi-
zational efficiency and flexibility (e.g.,
Evans and Davis 2005), and, ultimately,
the firm’s financial performance (e.g.,
Huselid 1995; Perry-Smith and Blum
2000).
In order to deal with the complexity
of this causal chain between HRM inten-
sity and performance, we build on the
ideas of Sels et al. (2006). They suggest
three hierarchical levels of performance
in which the outcomes at one level influ-
ence performance at the next level. The
first level includes behavioral outcomes,
such as voluntary turnover and absentee-
ism. The second level consists of
employee performance variables, such as
productivity. The final and ultimate level
is firm performance, which consists of
financial performance variables such as
profitability and liquidity. However, on
the basis of their empirical study, Sels
et al. conclude that in small firms (less
than 100 employees), the gains of more
motivated and competent employees are
not realized through cost savings (the
costs of intensive HR practices neutralize
the gains in productivity) but through
other mediating variables that are not
included in their model, such as higher
customer satisfaction and innovation.
These findings (that are in line with con-
clusions of Way 2002) lead us to con-
clude that in order to successfully relate
HRM intensity to financial firm perfor-
mance, the already rather extensive
model of Sels et al. is still not compre-
hensive enough. Therefore, we focus on
Sels et al.’s first two performance levels:
behavioral outcomes and employee per-
formance (see Measurement for the spe-
cific measures). We thus focus on HR
611
performance variables and abstain from
trying to make a link to financial firm
performance. This approach is also sup-
ported by Truss (2001), who concludes,
on the basis of an in-depth case study,
that it is very difficult to establish a direct
relationship between HR practices and
an organization’s financial performance.
The majority of empirical studies
claim that HRM leads to more motivated
and competent employees and thus
higher employee productivity, lower
workforce turnover, and lower absentee-
ism levels, which lead to the following
hypothesis:
H1b: A higher unit HRM intensity leads
to a higher unit HR performance.
The combination of hypotheses H1a
and H1b proposes that—because of their
higher HRM intensity—company-owned
units demonstrate superior HR perfor-
mance compared with franchised units.
This proposition is based on HRM litera-
ture but is also supported by more
general franchising literature (Combs
and Castrogiovanni 1994; Michael 2002,
2000). Because of their asset ownership
and residual claimant status, franchisees
might be tempted to cut costs on several
activities, including HRM activities.
These franchisees will refrain from devel-
oping intensive HR practices, ultimately
leading to lower HR performance in fran-
chised units.
Franchisee Efforts and
Entrepreneurship
The second view on the relation
between type of unit ownership and HR
performance takes an opposite stand by
arguing that franchised units will demon-
strate a higher HR performance than
company-owned units. Arguments from
two theoretical perspectives lead to this
proposition. First, from an agency per-
spective, it is often suggested that fran-
chisees will, on average, put in more
effort than salaried unit managers
612 JOURNAL OF SMALL BUSINESS MANAGEMENT
because they have more incentives to
maximize their units’ performance (see,
e.g., Lafontaine 1992; Shane 1996; Yin
and Zajac 2004). It is plausible that these
larger franchisee efforts will also occur in
the field of HRM and that franchisees
monitor their employees more closely (as
is also suggested by Krueger 1990), take
appraisal interviews more seriously, and
demonstrate more enthusiasm about
their activities.
The second theoretical perspective,
which we have labeled an “entrepreneur-
ial” or “local adaptation” perspective,
relates to the essence of franchising. We
have already pointed out that franchisees
have more decision rights and thus room
for local adaptation regarding HRM than
company managers; additionally, because
of their incentives to maximize their units’
performance, they also have stronger
incentives to actually use this room for
local adaptation (Bradach 1998; Castro-
giovanni and Kidwell Forthcoming;
Sorenson and Sørensen 2001; Yin and
Zajac 2004). Thus, franchisees are more
likely to adapt their HR practices to their
local circumstances, such as the local job
market and employee base. For example,
if the unit is located in a city with many
educational institutions, a franchisee can
easily decide to target student workers
specifically and organize events that are
particularly attractive for this group. In
contrast, a unit manager will usually
apply standard recruitment activities, and
in case the unit manager wants to do
something different, he/she probably
faces negotiations with headquarters and
additional paperwork.
The combination of high levels of
franchisee efforts and motivation, and
local adaptation regarding HRM will ulti-
mately result in superior HR perfor-
mance for franchised units. This leads to
the following hypothesis:
H2: Franchised units have a higher HR
performance than company-owned
units.

Methodology
Sample and Data Collection
Data were collected by means of a
written questionnaire sent to all franchi-
sees and unit managers in one Dutch
plural system. In order to control for
industry and system differences, we
selected one single system with a rela-
tively large number of both company-
owned and franchised units. Considering
the prevalence of franchising and the
importance of HRM in retailing, we
selected the HEMA system. HEMA is one
of the largest and oldest Dutch plural
systems with a total of 281 department
stores throughout the Netherlands at the
time of data collection (mid-2005). At this
point in time—and similar to most Dutch
retail franchises—HEMA did only have a
few multiunit franchisees, who typically
owned two or three units at the most.
In order to understand the possible
influence of contextual variables at the
franchise system level, we first did a
qualitative preliminary study on the
extent of HR practices at HEMA and,
more specifically, about differences
between HR practices delivered to
company-owned units versus the ones
adopted by the franchised units of the
system. For this purpose, a variety of
sources were used, including HEMA’s
website (http://www.hema.nl) and
in-company HRM manuals and docu-
ments. Additionally, semi-structured
explorative interviews were held with
two franchisees, two unit managers, and
the head of HEMA’s HRM department
(consisting of six staff members).
The HEMA company-owned units are
rather tightly monitored and controlled.
Their HR practices largely stem from the
so-called “SWO” (standard work organi-
zation), which is a collection of standard-
ized procedures that are obligatory for
HEMA company-owned units. SWO
renders detailed procedures and standard
formats for various operational issues,
such as daily planning, operational activi-
BRAND AND CROONEN
ties (cashing up, product placement),
education planning, and absenteeism reg-
istration. The daily planning procedure is
an interesting example, because it
requires the unit manager to plan each
employee’s activities per 15 minutes. If
unit managers have questions about HRM
issues, they can turn to their regional
operational manager or directly to the
main HRM department, or consult the
information database on the company’s
intranet. Unit managers are advised to
organize weekly meetings with all per-
sonnel to discuss ongoing business,
including the unit’s performance, such as
weekly sales. A part of the SWO is based
on specific requirements of the company-
specific Collective Labour Agreement
(CLA), which only applies to employees
of the HEMA headquarters and company-
owned units. Because of the extensive-
ness and detail of the SWO, there should
be few differences regarding HR practices
among HEMA company-owned units.
However, interviewees indicated that
local atmosphere and openness of com-
munication do vary between company-
owned units because of varying personal
management styles.
About the HR practices of franchisees,
we can be brief. As we expected, the
interviewees indicated that franchisees
are largely free to make their own
choices and to cherry-pick from available
projects as they feel suited. The inter-
viewees stressed that to their perception,
actual HR practices highly differ among
franchisees because of the priorities and
management style of the individual fran-
chisees, although for some operational
activities, such as cashing up, all franchi-
sees follow the SWO procedures. Also,
franchisees are obliged to follow the
SWO procedure on absenteeism registra-
tion; the main HRM department collects
these data for all units.
Measurement
The research model consists of three
main groups of variables that are defined
613
and measured at the unit level: type of
unit ownership, the unit’s HRM intensity,
and the unit’s HR performance. Addition-
ally, we included the size of the unit as a
control variable. The questionnaire only
included closed questions in order to
minimize invalid answers and the
amount of effort and time required from
the respondents. Appendix I summarizes
all measures used.
The first variable, type of unit owner-
ship, is a dichotomous variable:
company owned (coded 0) versus fran-
chised (coded 1). Regarding the second
variable, a unit’s HRM intensity, a list of
HR practices was constructed on the
basis of the six HRM domains as distin-
guished by Noe et al. (2003) and that are
generally recognized as relevant HRM
domains: (1) job analysis and design; (2)
recruitment and selection; (3) training
and development; (4) performance man-
agement; (5) pay structure, incentives,
and benefits; and (6) labor and employee
relation. Ultimately, the following 11
practices were included in the question-
naire: job design, formalization of jobs,
recruitment channels, standardization of
selection, training, individual feedback,
absenteeism policy, monetary rewards,
nonmonetary rewards, employee partici-
pation, and communication. Where pos-
sible, each HR practice consisted of more
than one item, capturing a wider variety
of behavior (Sels et al. 2006). Our final
measurement model of HR practices
includes 23 items. The extent of use of
the available HR practices is an indicator
for HRM intensity. Sels et al. (2006)
measure HRM intensity as the number of
HR practices that are used by the respon-
dent firm. The HRM intensity measure
used in the present study elaborates on
this conceptualization by measuring the
practices on a five-point scale and calcu-
lating the unweighed mean of the 11
practices (a similar approach is used by
Way 2002).
The third and final main variable,
unit HR performance, is defined as the
614 JOURNAL OF SMALL BUSINESS MANAGEMENT
unweighed average of two sub-variables
that are generally acknowledged as rel-
evant HR performance variables mediat-
ing the relationship between HR
practices and firm performance: absen-
teeism and share of wages. Because
both sub-variables are negatively related
to positive performance, in all analyses
and the calculation of HR performance,
reversed scores are used. Absenteeism
is a “behavioral outcome” variable in
terms of Sels et al. (2006). We have
measured this variable as the share of
sick leave in the unit’s total of working
hours (following Noe et al. 2003).
Absenteeism is an important variable
because it increases costs—for example,
costs of other employees working over-
time and replacement costs—and it can
thus generate a temporary decrease in
productivity (see, e.g., Hausknecht,
Hiller, and Vance 2008). The second
sub-variable is the share of wages in
the unit’s turnover, which is the multi-
plicative inverse of labor productivity, a
concept that is used in several previous
studies in this area (e.g., Guthrie 2001;
Way 2002). Share of wages is an
“employee performance” variable in
terms of Sels et al. (2006). Even though
productivity does not guarantee long-
term profitability and success, it is gen-
erally considered a necessary condition
for a firm to be financially healthy
(Guthrie 2001; Sels et al. 2006). Share of
wages and absenteeism are both vari-
ables that all franchised and company-
owned HEMA units report regularly to
their head office so the reliability and
availability of these data are high. The
share of wages only includes operations
staff, which means that data of
company-owned and franchised units
can be compared (if all wages were
included, corrections would be needed
to compensate for the absence of a
wage for the owner/manager).
Finally, irrespective of the type of
ownership, small local units will expe-
rience more pressing resource scarcity
 Table 1
Responses (N = 171)
Unit Sizea 0–20 21–40
Employees Employees
Company-Owned 38 3 6
Units
Franchised Units 5 33
Total Sample 43 36
a
Including part-timers.
and less bureaucratization than their
large counterparts. This local size effect
will probably be larger in independent
franchised units than in company-
owned units that are influenced by the
large organization they are part of.
These considerations lead to the need
to include unit size as a control variable
when explaining HR behavior and per-
formance (also see Perry-Smith and
Blum 2000; Way 2002), with a possible
interaction effect with type of owner-
ship. Unit size is measured as the
number of employees including part-
timers (who are ubiquitous in the Dutch
retailing sector). This measure is pre-
ferred to alternatives such as full-time
equivalents (FTEs) because the com-
plexity of HRM particularly increases
with the number of unique employees,
not the total number of working hours
or FTEs.
Data Collection and Analysis
The questionnaire was sent through
company mail to all 281 HEMA units
(mid-2005), including 134 franchised
units and 147 company-owned units.
After two weeks, a reminder was send
via e-mail. In total, 174 questionnaires
were returned, three of which were
not usable as a result of missing data.
The average net response rate is
60.8 percent, which is quite high, and
was almost identical for each subsample
BRAND AND CROONEN
41–60 61–80 >80 Total
Employees Employees Employees
21 22 90
26 10 7 81
32 31 29 171
(61.2 percent for the company-owned
units and 60.4 percent for the fran-
chised units). As Table 1 illustrates, the
total sample is more or less evenly dis-
tributed among size classes. Because
HEMA does not keep records of the
number of employees of its franchised
units, it is not possible to check for
response biases related to this
variable.
Table 1 shows that the respondents
are well distributed among the two own-
ership classes and five size classes. It also
shows that company-owned and fran-
chised units are not evenly distributed
among size classes. A majority of the
small units and larger units are company
owned, whereas the medium-sized units
(between 20 and 60 employees) are
mostly franchised units.
The collected data have been analyzed
in two main steps. First, descriptives of
all variables were calculated. These
descriptives provide a first overview of
the nature and intensity of HR practices
in franchised and company-owned units.
Subsequently, t-tests identified signifi-
cant differences in application of HR
practices between company-owned and
franchised units. Second, a series of
regression analyses provides insight in
the relationship among type of unit own-
ership, HRM intensity, and HR perfor-
mance, and thus enables testing of our
hypotheses.
615
Results
Differences in HRM Intensity
between Company-Owned and
Franchised Units
Table 2 presents the descriptives of
the variables used and the results of a
t-test comparing company-owned and
franchised units. We see that there are
significant differences within five of the
six HRM domains; only the training and
development domain does not show any
significant difference. A total of 8 out of
11 HRM practices differ significantly
between company-owned and franchised
units. Company-owned units score sig-
nificantly higher on five practices and
franchised units on four practices.
Company-owned units score higher on
formalization of jobs, standardization of
selection interviews, absenteeism policy,
employee participation, and communica-
tion, whereas franchised units score rela-
tively high on employee autonomy and
delegation in job design, the use of
recruitment channels, and monetary
rewards. Overall, company-owned units
have a HRM intensity of 3.12 on a five-
point scale, which is significantly higher
than the franchised units’ HRM intensity
score of 2.90 (p < .01). The correlation
matrix as presented in Table 3 confirms
these findings (significant correlation of
-0.27 between ownership and HRM
intensity). The partial correlation coeffi-
cient controlling for unit size is similar
(-0.30, p = .00). At this point, we tenta-
tively confirm H1A; company-owned
units demonstrate more intense HRM
practices than franchised units. Addi-
tional regression analysis will be used to
confirm these findings.
Type of Unit Ownership, HRM
Intensity, and HR Performance
The correlation matrix (see Table 3)
demonstrates that ownership and HRM
intensity are significantly correlated with
all other main variables. The two ele-
ments of HR performance (absenteeism
and share of wages) are correlated mod-
616 JOURNAL OF SMALL BUSINESS MANAGEMENT
erately high with each other (0.50) and
of course very high (0.87) with the com-
posite measure. In this section, we will
disentangle these simple correlations by
applying multiple regression analysis.
Table 4 first presents the results of
multiple regression analyses explaining
HRM intensity (related to H1A). The
model specification reflects the hypoth-
eses that HRM intensity is explained by
type of unit ownership and control vari-
able unit size, and that ownership and
unit size may have an interaction effect.
The additional regression results pre-
sented in Table 4 explain HR perfor-
mance by unit ownership, HRM
intensity, and, again, unit size and an
interaction term as control variables
(related to H1B and H2). In both regres-
sions, the control variables are entered
first as one block; next, the remaining
variables are entered simultaneously.
Because the bivariate correlations among
the variables were moderately high (see
Table 3), it is important to check for mul-
ticollinearity. All variance inflation factor
(VIF) scores in both regressions (except
for the interaction variables) were (well)
below 10, indicating that multicollinear-
ity is no problem (Hair et al. 1998).
The regression results explaining
HRM intensity confirm the conclusion of
the bivariate analysis; HRM intensity is
solely determined by unit ownership,
and the relation has a negative sign
(standardized beta is -0.53). The results
also show that HR performance is not
explained by HRM intensity but is deter-
mined by ownership (positive sign) and
unit size (negative sign). The size of the
effect is largest for unit size (standard-
ized beta is -0.82). Moreover, the inter-
action variable is moderately significant
as well (p = .07), indicating that the nega-
tive effect of unit size is smaller in fran-
chised units. The adjusted R2 is quite
high; 55 percent of the variance in HR
performance is explained by these vari-
ables. The interaction effect becomes
clearer by looking at the HR performance
 Table 2
Descriptives of 11 HRa Practices, HRMb Intensity, and HRa Performance Variables
(Including t-Test for Differences between CO and FU)
HRa Practicesc Total (N = 171) CO (N = 90) FU (N = 81) t-Teste

Mean Minimum Maximum S.D.d Mean Minimum Maximum S.D.d Mean Minimum Maximum S.D.d

Job Design 2.99 1.00 4.50 0.68 2.88 1.00 4.50 0.73 3.12 2.00 4.50 0.61 -
Formalization of Jobs 3.32 1.00 5.00 1.17 3.64 1.00 5.00 0.94 2.96 1.00 5.00 1.29 ++
Recruitment Channels 2.13 1.00 3.50 0.50 2.01 1.00 3.25 0.46 2.27 1.00 3.50 0.51 --
Standardization of Selection 3.19 1.00 5.00 1.12 3.34 1.00 5.00 1.10 3.01 1.00 5.00 1.12 +
Training 4.47 1.00 5.00 0.96 4.44 3.00 5.00 0.90 4.51 1.00 5.00 1.03 nsf
Feedback Interviews 2.88 1.00 5.00 0.81 2.87 2.00 5.00 0.60 2.90 1.00 5.00 1.00 nsf
Absenteeism Policy 3.77 1.00 5.00 0.99 3.96 1.00 5.00 0.86 3.56 1.00 5.00 1.09 +
Monetary Rewards 1.46 1.00 5.00 0.79 1.35 1.00 3.00 0.69 1.59 1.00 5.00 0.87 -
Nonmonetary Rewards 3.21 1.00 5.00 0.67 3.23 1.67 5.00 0.64 3.19 1.00 5.00 0.71 nsf
Employee Participation 1.73 1.00 5.00 1.55 1.98 1.00 5.00 1.73 1.44 1.00 5.00 1.26 +
Communication 3.97 1.00 5.00 0.95 4.53 2.33 5.00 0.49 3.35 1.00 5.00 0.96 ++

BRAND AND CROONEN

HRMb Intensity 3.02 1.89 3.92 0.39 3.12 2.27 3.92 0.32 2.90 1.89 3.85 0.42 ++
Absenteeism (Reversed) 3.60 1 5 1.24 3.12 1 5 1.26 4.12 1 5 0.98 --
Share of Wages (Reversed) 3.37 1 5 1.27 2.75 1 5 1.37 4.05 2 5 0.68 --
HRa Performance 3.5 1 5 1.09 2.96 1 5 1.13 4.09 1.5 5 0.67 --

a
HR, human resource.
b
HRM, human resource management.
c
For a description of the underlying items, see Appendix I.
d
S.D., standard deviation.
e
+ means that company-owned units (CO) score higher than franchised units (FU). ++ or - - means that p < .01, and + or - means that p < .05.
f
ns, not significant.

617
 Table 3
Correlation Matrix for Type of Unit Ownership (COa = 0,
FUb = 1), HRMc Intensity, and HRd Performance Measures
1 2 3 4 5 6

1. Type of Unit — -0.27* 0.42* 0.49* 0.50* 0.01

Ownership
2. HRMc Intensity — -0.20* -0.25* -0.26* 0.34*
3. Absenteeism — 0.50* 0.88* -0.46*
(Reversed)
4. Share of Wages — 0.85* -0.48*
(Reversed)
5. HRd Performance — -0.51*
6. Unit Size —

a
CO, company-owned units.
b
FU, franchised units.
c
HRM, human resource management.
d
HR, human resource.
*p < .01, Spearman correlation.

Table 4
Multiple Regression Analysis (Controls Entered as
Block First)
Dependent Variable HRMa Intensity HRb Performance

Standard Beta p-Value Standard Beta p-Value

Constant 0.00 0.00

Type of Unit Ownership -0.53 0.00 0.30 0.02
HRMa Intensity 0.02 0.94 0.04 0.48
Unit Size 0.41 0.12 -0.82 0.00
Unit Size ¥ Type of Unit 0.35 0.07
Ownership
F 14.18 0.00 53.16 0.00
Adjusted R2 Controls Only 0.15 0.54
Adjusted R2 All Variables 0.19 0.55
N 171 171

a
HRM, human resource management.
b
HR, human resource.

618 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table 5
Mean Scores of HRa Performance (Five-Point Likert Scale)
Number of <20 20–39
Employees
(n = 43) (n = 36)
Company Owned 3.88 3.17
Franchised 4.80 4.24
Total 3.99 4.15
a
HR, human resource.
scores of company-owned and fran-
chised units of various sizes (Table 5).
The data show that HR performance has
a negative relationship with unit size. For
company-owned units, however, this
effect is much stronger (HR performance
going from 3.88 to 2.18) than for fran-
chised units (going from 4.80 to 3.57).
Considering these results, we can
accept H1A: Company-owned units have
more intensive HR policies. However, we
have to reject H1B: HRM intensity is not
related to HR performance. H2 is
accepted: Type of unit ownership has a
direct effect on HR performance. Finally,
we conclude that it is indeed relevant to
include unit size and the interaction
between unit size and ownership as
control variables because they are both
significant in explaining HR performance.
Discussion and
Conclusion
To our best knowledge, this study is
the first to look into the use of a range of
HR practices in plural systems at the
level of the individual units and the first
one to explain differences in HR perfor-
mance between franchised and
company-owned units. By choosing an
empirical setting of one large plural
system, we have been able to systemati-
cally compare HRM behavior of
company-owned and franchised units,
BRAND AND CROONEN
40–59 60–79 ⱖ80 Total
(n = 32) (n = 31) (n = 29) N = 171
2.00 2.36 2.18 2.96
4.08 3.65 3.57 4.09
3.69 2.77 2.52 3.50
using the same business format, in the
same industry, in practically the same
context. In the former section, we pre-
sented the results of this comparison. To
get a better understanding of the nature
and causes of the differences found, we
will now discuss the results in more
detail.
The results indicate that the HRM
intensity of company-owned units is
indeed higher than that of franchised
units, confirming H1A. A closer look at
the differences on the level of individual
practices shows that company-owned
units make more extensive use of job
descriptions (“formalization of jobs”),
standardized interview procedures, and
absenteeism policies. The company-
owned units also have a larger number
of employees involved in formal
employee representative bodies and
communicate more often and on more
strategic issues with their employees
than franchisees do. These relatively
high levels of use are all influenced by
guidelines and procedures that are pro-
vided by the HEMA headquarters. Some
of these procedures stem from an inter-
nal need for bureaucratization (e.g., stan-
dardized job descriptions), but the
external need for bureaucratization as a
result of the institutional environment is
relevant as well (the HEMA organization
is legally obliged to have a works
619
council, whereas the individual fran-
chised units are usually too small to have
such a body).
Compared with the HEMA company-
owned units, we see that franchised units
score significantly higher on the use of
recruitment channels, employee
autonomy, delegation in job design, and
monetary rewards. These HR practices
seem to be deliberate choices at the local
unit level, aimed at adaptation to the
local labor market and at motivating
employees by delegation of responsibili-
ties and rewards. The franchisees use
their room for local adaptation by
employing a high variety of employee
recruitment channels to attract the
desired applicants. Also, franchisees take
the opportunity to customize employee
relations by giving certain employees
more autonomy and by selective use of
above CLA pay.
Regarding HR performance, our
results clearly show that company-
owned units score less favorable on
total HR performance and on both HR
performance variables separately (i.e.,
percentage of sick leave and share of
wages). We found that unit ownership
has a direct effect on HR performance
and not an indirect effect through HRM
intensity. In other words, our results
show that the availability of resources
and the higher bureaucratization of HR
practices in company-owned units do
not ultimately lead to superior HR per-
formance. It turns out that the higher
level of franchisee efforts, motivation,
and local adaptation lead to a higher HR
performance of franchised units. In sum,
it is not the intensity of HR practices
that influences performance, but the
role and choices of the independent
entrepreneur make the difference. This
conclusion supports the idea that there
is no single universally superior
approach to managing people; in other
words, our results support the contin-
gency or “fit” approach toward HRM as
opposed to a best practices approach
620 JOURNAL OF SMALL BUSINESS MANAGEMENT
(for a discussion of these approaches,
see de Kok, Uhlaner, and Thurik 2006
and Chandler and McEvoy 2000).
Instead of focusing on improving HRM
effectiveness by doing “more HRM,” it
would be better to look at “what com-
binations of specific practices are
needed in this particular situation?” and
“how are these practices implemented
and managed?”
Our results show that franchised units
use a combination of the carrot and the
stick in managing their employees. The
presence of an effective and involved
boss, who is willing to delegate respon-
sibilities and to reward good performing
employees, but at the same time directly
supervises every day’s course of events,
motivates employees to be productive
and loyal, as turns up in the share of
wages and absenteeism figures. More-
over, the independent franchisees seem
to make more effective HR choices that
fit their particular situations.
A final conclusion of our study is that
unit size seems to be an important vari-
able in understanding unit HR perfor-
mance, not only when comparing firms
with, for example, more or less than 100
employees (see Sels et al. 2006; Way
2002), but even within a group of small
and medium-sized firms as included in
the present study. Unit size has a direct
negative effect on HR performance and
also has an interaction effect with unit
ownership, indicating that the negative
effect of unit size is significantly smaller
in franchised firms. It seems like the
effort, motivation, and local adaptation
of the franchisee play an important role
here as well; as a unit grows in size,
franchisees are better capable than
company-owned unit managers to
protect the small unit’s superior work
environment from becoming more
bureaucratic and impersonal. Overall, we
conclude that when it comes to HR per-
formance in plural systems, the units that
are franchised and small are the most
beautiful of all.
Practical Implications
As argued above, giving franchisees
considerable leeway in their HR practices
is wise in order to prevent unwanted
legal consequences for the franchisor
and to improve the motivation and satis-
faction of franchisees. Our findings dem-
onstrate that this leeway is also
beneficial for the franchisees’ HR perfor-
mance. In terms of the well-known
tension of standardization versus local
adaptation in the franchising literature
(cf. Bradach 1998; Kaufmann and Eroglu
1998), this study provides strong support
for local adaptation in the field of HRM.
Franchisors may of course provide their
franchisees with expert advice and
support, but the physical presence and
discretionary power of the entrepreneur
in the unit constitute a force that should
not be underestimated. In this light, the
extant policy of some franchisors to
demand franchisees to personally
manage their units seems to be a wise
one.
Next to implications for franchised
units, our results also lead to implica-
tions for company-owned units.
Although, generally speaking, most unit
managers will be motivated and make
their contribution, the results of the
present study do support earlier work,
pointing at differences in motivation and
pay structures leading to differences in
performance. Franchisors could benefit
from motivating their unit managers to
behave more entrepreneurial, for
example, not only by suitable pay struc-
tures, but also by adapting the relevant
selection and training procedures.
Limitations and Suggestions for
Further Research
We conclude this paper by pointing at
some limitations and suggestions for
further research. It has become clear that
so far, there have been no studies regard-
ing the use and effectiveness of HR prac-
tices in a franchise context. On the basis
of theoretical arguments and a handful of
BRAND AND CROONEN
earlier empirical studies, we have
assumed that franchisees have relatively
much freedom in conducting their HR
practices. This assumption seems to hold
in the empirical setting of this study (the
HEMA system) but should be studied
more systematically. The detailed results
of the present study, such as the use of
specific HR instruments, are specific for
HEMA and not generalizable to other
contexts. However, we expect the pat-
terns that we found on a more aggregate
level to be generalizable to other plural
retail franchises. Our research design
(including a qualitative preliminary study
and a single-system survey) helped us to
minimize contextual influences and to
isolate the relationships that we were
interested in theoretically. Also, our lit-
erature review does not point at possibly
omitted variables that are not country,
sector, or system related. However, we
do recommend that the study is repli-
cated in different empirical settings, such
as different plural systems, different
industries, and different countries, to see
if the relationships among unit owner-
ship, HRM intensity, unit size, and HR
performance will indeed hold. For this
study, we choose to look at the impact of
the extent of use of HR practices by
individual units of a franchise system,
aggregated into one HRM intensity
index. As a result of the research design
that compared franchised and company-
owned units within one franchise
system, further efforts on isolating the
effectiveness of specific practices or
smaller bundles of practices do not seem
to be useful, as such detailed results will
be very context specific and the general-
izability of the findings will be very low.
Future research using more heteroge-
neous samples should be able to shed
more light on the individual practices
and/or “powerful combinations” that
determine HR performance in franchised
and company-owned units, respectively.
Second, as pointed out earlier, future
research should take into account
621
whether a franchised unit is owned by a
multiunit franchisee. We expect that a
multiunit franchisee will behave differ-
ently from a single-unit franchisee
because of his/her larger scale of HR
activities, which enhances a certain
degree of standardization and formaliza-
tion. Moreover, a relevant question is
who has the decision rights regarding
HRM activities in a multiunit franchising
context; does the franchisee develop his/
her own HRM practices for all his/her
units, or does he/she delegate these deci-
sions to the managers of his units? Con-
sequently, we may wonder how the
degree of delegation of HRM decisions
ultimately influences the (HR) perfor-
mance of units that are owned by multi-
unit franchisees. During the time period
that the data for this study were col-
lected, multiunit franchising within
HEMA was very limited; in other con-
texts, this issue, however, should be
taken into account.
A third limitation of this study is that
it uses survey data collected from one
single source, the person managing the
specific retail unit. Such studies run the
risk of mono-method bias. In small firms
or units, where the entrepreneur or unit
manager is the dominant person respon-
sible for HRM, it is difficult to obtain data
from different sources without the risk of
reducing construct validity (see Ham-
brick 1989). We cannot exclude that the
answers of our respondents are subject
to common method biases as summa-
rized by Podsakoff et al. (2003).
However, we consider this risk rather
limited given the following consider-
ations. First, our predictors and our per-
formance measures are objective, factual
data that are regularly collected for
normal business purposes and are thus
less susceptible to method bias than, for
example, attitudinal data. Additionally,
following the guidelines offered by Pod-
sakoff et al. (2003), respondents were
guaranteed anonymity, there was ample
variation in measurement of items, and
622 JOURNAL OF SMALL BUSINESS MANAGEMENT
the questionnaire was designed to
prevent funneling that could lead the
respondents to assume a presence of
certain relationships between variables.
Finally, Harman’s one-factor test (Podsa-
koff et al. 2003) generated seven factors
explaining 63 percent of the variance.
The first factor explained only 20 percent
of the variance. Thus, concerns of mono-
method bias are minimized.
A fourth and final suggestion for
future research relates to the influence of
“contextual variables” on HR practices.
Important examples of such variables are
local labor markets (Hausknecht, Hiller,
and Vance 2008) and the wider institu-
tional environment including, for
example, country-specific regulations on
CLAs (de Kok and Uhlaner 2001). In
order to diminish the effects of some
contextual variables, this study focused
on one specific franchise system in one
industry, and we have adopted a quali-
tative approach next to our quantitative
study to grasp the influence of other
contextual variables. For future research,
we suggest that researchers put consid-
erable effort in adopting similar
approaches to understand and account
for the influence of such contextual
variables.
References
Arthur, J. B. (1994). “Effects of Human
Resource Systems on Manufacturing
Performance and Turnover,” Academy
of Management Journal 37(3), 670–
687.
Bae, J., and J. J. Lawler (2000). “Organi-
zational and HRM Strategies in Korea:
Impact on Firm Performance in an
Emerging Economy,” Academy of
Management Journal 43(3), 502–517.
Bayo-Moriones, J. A., and J. Merino-Díaz
de Cerio (2001). “Size and HRM in the
Spanish Manufacturing Industry,”
Employee Relations 23(2), 188–206.
Becker, B. E., and M. A. Huselid (1998).
“High Performance Work Systems and
Firm Performance: A Synthesis of
 Research and Managerial Implica-
tions,” Research in Personnel and
Human Resource Management 16,
53–101.
Bowen, D. E., and C. Ostroff (2004).
“Understanding HRM-Firm Perfor-
mance Linkages: The Role of the
‘Strength’ of the HRM System,”
Academy of Management Review
29(2), 203–221.
Bradach, J. L. (1998). Franchise Organi-
zations. Boston, MA: Harvard Busi-
ness School Press.
Bürkle, T., and T. Posselt (2008). “Fran-
chising as a Plural System; a Risk-
Based Explanation,” Journal of
Retailing 84(1), 39–47.
Carlson, D. S., N. Upton, and S. Seaman
(2006). “The Impact of Human
Resource Practices and Compensation
Design on Performance: An Analysis
of Family-Owned SMEs,” Journal of
Small Business Management 44(4),
531–543.
Castrogiovanni, G. J., and R. E. Kidwell
(2010). “Human Resource Manage-
ment Practices Affecting Unit Manag-
ers in Franchise Networks,” Human
Resource Management 49(2), 225–
239.
Chandler, G. N., and G. M. McEvoy
(2000). “Human Resource Manage-
ment, TQM, and Firm Performance in
Small and Medium-Size Enterprises,”
Entrepreneurship Theory and Practice
25(1), 43–57.
Combs, J. G., and G. J. Castrogiovanni
(1994). “Franchisor Strategy: A
Proposed Model and Empirical Test
of Franchise versus Company-
Ownership,” Journal of Small Busi-
ness Management 32(2), 37–48.
Combs, J. G., and D. J. Ketchen Jr.
(2003). “Why Do Firms Use Franchis-
ing as an Entrepreneurial Strategy?: A
Meta-Analysis,” Journal of Manage-
ment 29(3), 443–465.
Cooper, A., M. Ramachandran, and D.
Schoorman (1997). “Time Allocation
Patterns of Craftsmen and Administra-
BRAND AND CROONEN
tive Entrepreneurs: Implications for
Financial Performance,” Entrepre-
neurship Theory and Practice 22(2),
123–136.
Dant, R. P., R. Perrigot, and G. Cliquet
(2008). “A Cross-Cultural Comparison
of the Plural Forms in Franchise Net-
works; United States, France and
Brazil,” Journal of Small Business
Management 46(2), 286–311.
Delaney, J. T., and M. Huselid (1996).
“The Impact of Human Resource
Management Practices on Perceptions
of Organizational Performance,”
Academy of Management Journal
39(4), 949–969.
Evans, W. R., and W. D. Davis (2005).
“High-Performance Work Systems and
Organizational Performance: The
Mediating Role of Internal Social
Structure,” Journal of Management
31(5), 758–775.
Faems, D., L. Sels, S. De Winne, and J.
Maes (2005). “The Effect of Individual
HR Domains on Financial Perfor-
mance: Evidence from Belgian Small
Businesses,” International Journal of
Human Resource Management 16(5),
676–700.
Felstead, A. (1993). The Corporate
Paradox; Power and Control in the
Business Franchise. London: Rout-
ledge.
Golhar, D. Y., and S. P. Deshpande
(1997). “HRM Practices of Large and
Small Canadian Manufacturing Firms,”
Journal of Small Business Manage-
ment 35(3), 93–97.
Gooderham, P., E. Parry, and K. Ringdal
(2008). “The Impact of Bundles of
Strategic Human Resource Manage-
ment Practices on the Performance of
European Firms,” International
Journal of Human Resource Manage-
ment 19(11), 2041–2056.
Guthrie, J. P. (2001). “High-Involvement
Work Practices, Turnover, and Pro-
ductivity; Evidence from New
Zealand,” Academy of Management
Journal 44(1), 180–190.
623
Hair Jr., J. F., R. E. Anderson, R. L.
Tatham, and W. C. Black (1998). Mul-
tivariate Data Analysis, 5th ed. Upper
Saddle River, NJ: Pearson Education.
Hambrick, D. C. (1989). “Guest Editor’s
Introduction: Putting Top Managers
Back in the Strategy Picture,” Strategic
Management Journal 10, 5–15
(special issue).
Hausknecht, J. P., N. J. Hiller, and R. J.
Vance (2008). “Work-Unit Absentee-
ism: Effects on Satisfaction, Commit-
ment, Labor Market Conditions, and
Time,” Academy of Management
Journal 51(6), 1223–1245.
Huselid, M. A. (1995). “The Impact of
Human Resource Management Prac-
tices on Turnover, Productivity and
Corporate Financial Performance,”
Academy of Management Journal
38(3), 635–672.
Huselid, M. A., S. E. Jackson, and R. S.
Schuler (1997). “Technical and Strate-
gic Human Resource Management
Effectiveness as Determinants of Firm
Performance,” Academy of Manage-
ment Journal 40(1), 171–188.
Kaufmann, P. J., and S. Eroglu (1998).
“Standardization and Adaptation in
Business Format Franchising,”
Journal of Business Venturing 14(1),
69–85.
Klaas, B. S., J. McClendon, and T. W.
Gainey (2000). “Managing HR in the
Small and Medium Enterprise; the
Impact of Professional Employer
Organizations,” Entrepreneurship
Theory and Practice 25(1), 107–124.
Koch, D., and G. Dodge (2003). “How
Franchisors and Franchisees Can
Work Together on Employment
Issues,” Franchising World 35(7),
53–54.
de Kok, J., and L. M. Uhlaner (2001).
“Organization Context and Human
Resource Management in the Small
Firm,” Small Business Economics
17(4), 273–291.
de Kok, J., L. M. Uhlaner, and A. R.
Thurik (2006). “Professional HRM
624 JOURNAL OF SMALL BUSINESS MANAGEMENT
Practices in Family Owned-Managed
Enterprises,” Journal of Small Busi-
ness Management 44(3), 441–460.
Kotey, B., and P. Slade (2005). “Formal
Human Resource Management Prac-
tices in Small Growing Firms,” Journal
of Small Business Management 43(1),
16–40.
Krueger, A. B. (1990). “Ownership,
Agency and Wages; an Examination of
Franchising in the Fast Food Indus-
try,” NBER Working Paper No. 3334,
National Bureau of Economic
Research, Cambridge.
Lado, A. A., and M. C. Wilson (1994).
“Human Resource Systems and Sus-
tained Competitive Advantage: A
Competency-Based Perspective,”
Academy of Management Review
19(4), 699–727.
Lafontaine, F. (1992). “Agency Theory
and Franchising; Some Empirical
Results,” RAND Journal of Economics
23(2), 263–283.
Litz, R. A., and A. C. Stewart (2000).
“Research Note: Trade Name Fran-
chise Membership as a Human
Resource Management Strategy: Does
Buying Group Training Deliver ‘True
Value’ for Retailers?,” Entrepreneur-
ship Theory and Practice 25(1), 125–
135.
Lynch, L. M., and S. E. Black (1998).
“Beyond the Incidence of Employer-
Provided Training,” Industrial and
Labor Relations Review 52(1), 64–81.
Makadok, R., and R. Coff (2009). “Both
Market and Hierarchy: An Incentive-
System Theory of Hybrid Governance
Forms,” Academy of Management
Review 34(2), 297–319.
McLean, M. (2006). “Evaluating the
Importance and Performance of the
Human Resources Function: An
Examination of a Medium-Sized Scot-
tish Retailer,” Journal of Retailing and
Consumer Services 13(2), 143–156.
Michael, S. C. (1996). “To Franchise or
Not to Franchise: An Analysis of Deci-
sion Rights and Organizational Form
 Shares,” Journal of Business Ventur-
ing 11, 57–71.
——— (2000). “The Effect of Organiza-
tional Form on Quality: The Case of
Franchising,” Journal of Economic
Behavior and Organization 43, 295–
318.
——— (2002). “Can a Franchise Chain
Coordinate?,” Journal of Business
Venturing 17, 325–341.
Miller, D. (2006). “Strategic Human
Resource Management in Department
Stores: An Historical Perspective,”
Journal of Retailing and Consumer
Services 13(2), 99–109.
Noe, R. A., J. R. Hollenbeck, B. Gerhart,
and P. M. Wright (2003). Human
Resource Management: Gaining a
Competitive Advantage. New York:
McGraw-Hill.
Nooteboom, B. (1994). “Innovation and
Diffusion in Small Firms: Theory and
Empirical Evidence,” Small Business
Economics 6, 327–347.
Perry-Smith, J. E., and T. C. Blum (2000).
“Work-Family Human Resource
Bundles and Perceived Organizational
Performance,” Academy of Manage-
ment Journal 43(6), 1107–1117.
Podsakoff, P. M., S. B. MacKenzie, J-Y.
Lee, and N. Podsakoff (2003).
“Common Method Biases in Behav-
ioral Research: A Critical Review of
the Literature and Recommended
Remedies,” Journal of Applied Psy-
chology 88(5), 879–903.
Sels, L., S. de Winne, J. Delmotte, J. Maes,
D. Faems, and A. Forrier (2006).
“Linking HRM and Small Business Per-
formance: An Examination of the
Impact of HRM Intensity on the Pro-
ductivity and Financial Performance
of Small Firms,” Small Business Eco-
nomics 26, 83–101.
Shane, S. A. (1996). “Hybrid Organiza-
tional Arrangements and Their
BRAND AND CROONEN
Implications for Firm Growth and Sur-
vival,” Academy of Management
Journal 39(1), 216–234.
Sorenson, O., and J. B. Sørensen (2001).
“Research Note: Finding the Right
Mix: Franchising, Organizational
Learning, and Chain Performance,”
Strategic Management Journal 22(6/
7), 713–724.
Tocher, N., and M. W. Rutherford (2009).
“Perceived Acute Human Resource
Management Problems in Small and
Medium Firms: An Empirical Examina-
tion,” Entrepreneurship Theory and
Practice 33, 455–479.
Truss, C. (2001). “Complexities and Con-
troversies in Linking HRM with Orga-
nizational Outcomes,” Journal of
Management Studies 38(8), 1121–
1149.
——— (2004). “Who’s in the Driving
Seat? Managing Human Resources in a
Franchise Firm,” Human Resource
Management Journal 14(4), 57–
75.
Way, S. A. (2002). “High Performance
Work Systems and Intermediate Indi-
cators of Firm Performance within the
US Small Business Sector,” Journal of
Management 28(6), 765–785.
Welsh, D. H. B., I. Alon, and C. M. Falbe
(2006). “An Examination of Interna-
tional Retail Franchising in Emerging
Markets,” Journal of Small Business
Management 44(1), 130–149.
Wright, P. M., and W. R. Boswell (2002).
“Desegregating HRM: A Review and
Synthesis of Micro and Macro Human
Resource Research,” Journal of Man-
agement 28(3), 247–276.
Yin, X., and E. J. Zajac (2004). “The
Strategy/Governance Structure Fit
Relationship: Theory and Evidence in
Franchising Arrangements,” Strategic
Management Journal 25, 365–
383.
625
Appendix I
Measurement of Variables
HRa Domains HRa Practicesb Items Measurementc

Job Analysis and Job Design Autonomy Five-Point Likert Scale

Design Formalization of Delegation Idem
Jobs Use of Job Descriptions Idem
Recruitment and Recruitment Window Ad Five-Point Likert scales
Selection Channels Internal Referral Idem
Standardization of Internal Vacancy Idem
Selection Database of Direct Applicants Idem
Regional Newspaper Idem
Job Center Idem
Regional Educational Institutes Idem
Formal Interview Procedure Idem
Training and Trainingd Retraining Dichotomous, 1 or 5
Development Vocational Training Dichotomous, 1 or 5
Performance Individual Use of Appraisal Interviews Three Classes: 1,2, 3 or
Management Feedbacke Use of Reward Reviews more
Absenteeism Extensiveness of Absenteeism Policy Idem
Policy Five-Point Likert scale
Pay Structure, Monetary Rewards Above CLAf Pay Five-Point Likert Scale
Incentives, and Nonmonetary Work-Related Compliments Idem
Benefits Rewards Attention for Birthdays Idem
Attention for Marriage Anniversaries Idem
Labor and Employee Employee Formal Employee Participation Dichotomous, 1 or 5
Relations Participation Sharing Financial Goals Five-Point Likert Scale
Communication Sharing Sales Performance Idem
Regular Meetings Idem
Dependent
Performance HRa Performance Percentage of Sick Leave (Rg) Five Classes: <2 percent,
Share of Wages (Rg) 2–4 percent, 4–6 percent,
6–8 percent, >8 percent
Five Classes: <10 percent,
10–12 percent,
12–14 percent,
14–16 percent,
>16 percent
Other
Ownership Company Owned/Franchised Dichotomous (0/1)
Unit Size Number of Employees Five Classes: <21, 21–40,
41–60, 61–80, >80

a
HR, human resource.
b
All HR practices get a score of 1 to 5 calculated from the scores of the underlying items.
c
For all scores, a high score (5) indicates high use.
d
Score on training is 1 if no training at all, 3 if retraining or vocational training, 5 if both.
e
Score is total number of appraisal and reward interviews minus one.
f
CLA, Collective Labour Agreement.
g
R, for the data analysis, these items are reverse coded in order to have a higher value indicating higher HR
performance.

626 JOURNAL OF SMALL BUSINESS MANAGEMENT

Copyright of Journal of Small Business Management is the property of Wiley-Blackwell and its content may
not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written
permission. However, users may print, download, or email articles for individual use.