Psychological ownership and franchise growth An empirical study of a Taiwanese taxi franchise

Transcription

1 The current issue and full text archive of this journal is available at Psychological ownership and An empirical study of a Taiwanese taxi franchise Sheng-Tsung Hou Graduate Institute of Management of Technology, Feng Chia University, Seatwen, Taiwan, and Mu-Yen Hsu and Se-Hwa Wu Graduate Institute of Technology and Innovation Management, College of Commerce, National Chengchi University, Taipei, Taiwan Psychological ownership and 415 Received 25 February 2008 Revised 10 May 2008 Accepted 5 December 2008 Abstract Purpose The primary purpose of this paper is to verify the importance of psychological ownership in the organisational context of a franchise by testing predicted relationships concerning feelings of ownership towards branding, legal ownership of complementary assets, organisational commitment, and a willingness on the part of franchisees to diffuse a franchise brand to peers. Design/methodology/approach Evidence is presented from an empirical study on the largest taxi franchise fleet in Taiwan. Two formal questionnaires/surveys were conducted in May 2005 and September 2005, from which data were collected from 147 franchisees. Regression analysis is employed to test seven hypotheses. Findings The empirical results demonstrate that analysing the psychological ownership of a franchise brand from two dimensions (i.e. the degree of psychological ownership and the self-centred propensity towards psychological ownership) sees an increase in explained variance in organisational commitment and brand diffusion in the context of the franchise organisation. It also illustrates that both dimensions of psychological ownership are negatively affected by the ownership of the non-brand-specified complementary assets owned by a franchisee. Research limitations/implications The majority of previous research has investigated the phenomenon of franchising from the perspective of the agency theory or of resource scarcity; and has focused on the franchisor s concerns. A major implication of this study indicates that these perspectives, while essential, are insufficient in explaining the growth through franchising strategies. Researchers need to consider how to integrate asset ownership (or property rights) and affect elements in order to influence a franchisee s cognition and behaviour entrepreneurially. A limitation of this study is that it is conducted within the respective boundaries of cultural, professional, and industrial factors. Practical implications This study indicates that entrepreneurs can achieve better brand diffusion effects for if they engage in merging the structures of asset ownership and psychological ownership. Originality/value This is the first paper to examine the psychological ownership of branding within the setting of a franchise organisation and highlights the importance of a sense of ownership in entrepreneurship. Keywords Assets, Employee involvement, Franchising, Corporate ownership, Taiwan Paper type Research paper International Journal of Entrepreneurial Behaviour & Research Vol. 15 No. 5, 2009 pp q Emerald Group Publishing Limited DOI /

2 IJEBR 15,5 416 Introduction Affect with reference to feelings or emotions in psychology creates strong influences on cognition which have been shown to influence several important forms of organisational behaviour (see citizenship behaviour, co-operation, and workplace aggression) and it also possesses the potential to influence entrepreneurship in many ways (Baron, 2008). Taken as a whole, this affective approach towards organisational behaviour indicates that the interface between affect and cognition is both continuous and pervasive. Besides, it is reciprocal in nature so that feelings shape thought, and thought in turn shapes feelings (Isen and Baron, 1991). Our paper seeks to extend the depth of previous research on affect by testing a framework of psychological ownership for understanding the potential role of affect in entrepreneurship. A sense of possession is the core of psychological ownership (Furby, 1978), which is a psychologically experienced phenomenon where an individual develops possessive feelings for some target such as an organisation (Pierce et al., 2001). The idea of psychological ownership for the organisation has drawn increasing attention from organisational behaviour scholars as a potentially important predictor of individual attitudes and behaviour (Van Dyne and Pierce, 2004). But this concept has failed in attracting extensive entrepreneurship research, especially in the context of a franchise organisation, where the owner-employee relationship evolves into an agent relation between franchiser and franchisee. From the firm s perspective, an entrepreneur might find that franchising is one solution to solving the agency problem (Norton, 1995; Shane, 1998) or the problem of capital scarcity (Oxenfeld and Kelly, 1969) in a retailing or service organisation by promoting entrepreneurship or a sense of ownership for franchisees. Franchising restructures the traditional employment relationship from one that is company-owned into a franchiser-franchisee contract. Previous findings clearly indicate that affect influences several aspects of cognition in work settings (Borman et al., 2001; Staw et al., 1994; Segal et al., 2005). However, such research was mainly conducted in large, established organisations or in the Western context, and with employees rather then entrepreneurs. This raises our research question: RQ1. In the non-western context, does the sense of psychological ownership of franchisees also affect the growth of a franchise chain from the franchisee s perspective? Although very little direct evidence on this issue is currently forthcoming it is possible to contribute further insights into the comprehensive understanding of how an affect such as psychological ownership, influences the entrepreneurial behaviour of franchisees in the context of a franchise organisation. This empirical study seeks to answer our research question from the perspective of psychological ownership in the franchise context in Taiwan because the domestic market in Taiwan has the greatest number of franchise stores globally and has adopted various franchising systems. It is well-recognized that small companies that are flourishing entrepreneurial companies play an important role in Taiwan s economic development (Chiou et al., 2004). However, establishing a new small business appears to be fraught with risks and uncertainties and demands numerous management skills required of entrepreneurs. One response to minimizing the risks for small businesses has been franchise development. Therefore, the experiences of the franchise industry in Taiwan may provide some fresh insights and implications

3 towards our understanding of entrepreneurship from the perspective of the self-employed entrepreneur. The primary objective of this research is to explore the importance of psychological ownership of a brand by testing the predicted relationships between franchisees feelings of ownership, their legal ownership of complementary assets and commitment toward the franchise organisation, as well as their willingness to diffuse the franchise brand. We selected Taiwan High-Tech Transportation (THT), the largest taxi franchise in Taiwan, as our research setting. With the largest taxi fleet in Taiwan, THT has been using the dispatch technology of the global positioning system (GPS) since All THT drivers are franchisees adopting GPS-enabled taxi dispatch system and their franchisor s THT brand name as added instruments for boosting their incomes and reducing their vacancy rates. From the viewpoint of the self-employed, each franchisee taxi driver is like a small business-owner or an individual entrepreneur who uses the franchisor s brand as an asset to complement his/her capability to create revenue. This micro perspective of observing how the individual franchisee generates his/her business is of considerable importance in understanding the small business owner s behaviour in a self-employed entrepreneur s environment. Research on franchising is also valuable for investigating the relationship between formal and psychological ownership. In this study, each individual taxi driver belongs in varying degrees to a formal ownership structure for the issuing of taxi licences by the Republic of China s Ministry of Communications and Transportation. This franchise setting is beneficial for observing how the psychological ownership of a franchise brand is influenced by the individual franchisee s degree of legal ownership of complementary assets. It also enables us to further observe how psychological ownership affects each individual s sense of organisational commitment to his franchise organisation and his willingness to diffuse the franchise brand to others. In the next section, we review existing literature on both franchising and psychological ownership to establish a theoretical basis for the development of our hypotheses. We then proceed to explain the quantitative method employed for data collection, followed by regressive analysis of the results and the presentation of our findings. We follow this with a discussion of the implications of these findings, and we conclude with an overview of our research project. Theoretical background and hypotheses Reasons for franchising The franchise contract is a bilateral agreement between a franchiser and a franchisee, which gives the franchisee the right of receiving most of the residual revenues arising from the operation of a given outlet under the franchisor s brand (Michael, 2000). The main purpose of using a franchise chain to expand business is to solve the agency problem (Norton, 1995; Shane, 1998) or to overcome the problem of capital scarcity (Combs and Ketchen, 1999; Oxenfeld and Kelly, 1969) while an entrepreneurial firm is in the infant stages of growth. Agency theory. It has been verified by previous researchers (Brickely and Dark, 1987; Lafontaine, 1992); that franchising could reduce the problems of adverse selection and the moral hazards of fixed wage employment by making the agent the residual claimant on the proceeds of a franchising system. This system also serves to reduce costs incurred by monitoring the business. However, the franchise organisational form simultaneously Psychological ownership and 417

4 IJEBR 15,5 418 creates a new set of agency problems because the franchiser and franchisee both possess incentives to behave opportunistically (Scott, 1995). On the one hand, franchisees are confronted with the risk that franchisers might fail to promote the chain s brand name. On the other hand, franchisers also face the possibility that some franchisees might offer poor quality products to customers or demonstrate self-interested or free-riding behaviour, contrary to the franchiser s goals, and such behaviour, would in turn, tarnish the entire chain s reputation (Combs and Ketchen, 1999). Resource scarcity. Oxenfeldt and Kelly (1969) proposed that firms enter into franchising in order to access scarce resources, particularly capital and managerial resources for expanding rapidly (Castrogiovanni et al., 2006). By the same token, young organisations in traditional financial markets or from existing operations, find it is difficult to develop the requisite managerial talent (Shane, 1996). It is an appropriate strategy for the growth of entrepreneurial firms that organisations might seek to access such resources rapidly through franchising, despite the fact that their preferred avenue for growth is firm ownership, where they can expect higher rates of return (Castrogiovanni et al., 2006; Oxenfeld and Kelly, 1969). Thus, according to the resource scarcity theory, firms turn to franchising when the desire to achieve economies of scale pressurizes them into expanding at a rate beyond what would be possible if they were deploying only internally-generated resources (Castrogiovanni et al., 2006). According to estimates, franchisees sell more than 40 percent of the retail goods and services sold in the United States each year (Combs and Ketchen, 1999). Why do some retail and service firms expand primarily through franchising whereas others emphasize company ownership? Extant research has described the typical franchiser as a mature firm that uses the ownership incentives in franchising to establish a presence in remote locations (Brickely and Dark, 1987; Scott, 1995) and in new markets (Minkler, 1992) where direct observation is costly. Company-owned outlets are reserved for densely populated areas where monitoring of economies prevails (Lafontaine, 1992). If franchisees are successful in a new market, the firm may eventually construct company-owned outlets near its previously established franchisees (Minkler, 1992). Another agency variable that plays an important role in the franchising business is outlet-level asset specificity, a concept perceived by Combs and Ketchen (1999). Similarly, Windsperger and Dant emphasized the importance of the franchiser s system-specific assets and the franchisee s local market assets, using the property rights approach (Windsperger and Dant, 2006). According to these studies, the issues concerning the use of franchisees vis-à-vis employee-managers are considerable and complex. They include the existence of varied agency problems in franchising firms (Combs and Ketchen, 1999); costly capital sources for governing franchisees (Brickely and Dark, 1987; Norton, 1995); as well as outlet-level asset specificity. In other words, asset ownership plays an essential role in balancing management costs and agency problems, internally and externally. Psychological ownership of a franchising brand In this study, we refer to the right to own as ownership, and this is not a simple concept (Tannenbaum, 1983). Ownership can be divided among individuals or entities who share legal rights to the property (Rousseau and Shperling, 2003), and it also can be separated by tangible physical objects or by kinds of feelings (Baker, 1990; Beaglehole, 1932; James, 1982; Van Dyne and Pierce, 2004). Traditionally, ownership

5 structure and contracted relationship are the two roots of organisational research (Rousseau and Shperling, 2003). The concept of ownership is essential in present-day human society. It provides a critical foundation for social norms and institutions. Scholars in the management field view ownership as a legitimate claim on specific property, which includes five kinds of rights: (1) the right to use; (2) residual control rights; (3) sharing of the profits; (4) access to information; and (5) participation in decision-making regarding the use of the assets (Rousseau and Shperling, 2003). Through resourceful arrangement of the various kinds of rights, organisations could encourage employee participation and promote knowledge sharing among group members. Employer-employee relationships and utilization of human resources would be improved, while conflicts within the organisation would be fewer, resulting in improved organisational performance. The feeling of psychological ownership refers to a state of mind that employees have toward a specific object of the organisation. They may feel that an object is mine or ours (Furby, 1978; Pierce et al., 1991). Psychological ownership influences people s attitudes, motivations and behaviour (Van Dyne and Pierce, 2004). At the core of psychological ownership is the psychological link between the feeling towards such ownership and the object of the ownership (Belk, 1988; Dittmar, 1992), which means that specific things or objects (such as the franchise brand) become a part of the psychological identity of the individual (Pierce et al., 2001). Pierce et al. (2001) claim that the concept of psychological ownership can be directed at the organisation (or workplace) as a whole or at specific aspects of the organisation such as the group, job and work tools. Others posit that different objects of ownership can vary in salience, depending on the individual and the situation (Van Dyne and Pierce, 2004). We believe that this sense of possession that an individual feels towards an organisation he has just joined, is of key importance in studying diffusion behaviour in the franchise organisation context. Primarily, this is because it allows individuals to satisfy their basic needs for place, efficacy and efficiency, and self-identity. Other than shifting the targets of psychological ownership from the organisation to the brand, current literature has generally failed to distinguish between the propensity towards selfishness of psychological ownership (e.g. MY own brand) and the extent of psychological ownership (e.g. OUR brand). In this research, we distinguish between a traditional one- dimensional construct of psychological ownership and a two-dimensional construct, which we respectively refer to as self-centred propensity towards psychological ownership and the degree of psychological ownership. We do so to ascertain in greater detail the difference between the sense of MY and the sense of OURS (Van Dyne and Pierce, 2004). Psychological ownership and asset specificity of formal ownership Ownership becomes a psychologically experienced phenomenon in which an individual develops possessive feelings for some object (Pierce et al., 2001), such as Psychological ownership and 419

6 IJEBR 15,5 420 a franchise organisation or a chain s brand. An increasing number of scholars and practitioners believe that people have an innate need to possess (Burk, 1990; Darling, 1937; Kline and France, 1899); and that this feeling of possession may thus influence the individual s attitude, behaviour (Brown et al., 1989; Dirks et al., 1996; Pierce et al., 1991), and organisational performance (Van Dyne and Pierce, 2004). Furthermore, according to Dittmar (1992), it is common for people to psychologically experience the connection between the self and various objects of possession, such as homes, automobiles, and other people. Possessions come to play such a dominant role in an owner s identity that they become part of the extended self (Belk, 1988; Dittmar, 1992). On their part, Van Dyne and Pierce (2004) theorized that the concept of property and ownership concerned man-object-man relations, and they argued that psychological notions of ownership have important behavioural and developmental implications. The intricate relationship between legal ownership, psychological ownership, and the individual s behaviour towards specific objects should thus be explored more thoroughly. However, an important and hitherto unexplored domain is the consideration of formal ownership and psychological ownership jointly to provide an understanding of how a franchisee s behaviour can be triggered in the context of the franchise organisation. Pierce et al. (1991) argued that ownership influences the employee s attitude towards the organisation and that the influence can be divided into two stages. They define the first stage as Formal ownership and the second as Psychological ownership. Three basic rights are considered when people claim formal ownership. These are the right to possess, the right to exercise, and the right to have information over the object possessed. Pierce et al. (1991) believed that formal ownership could only have a positive impact on an employee s attitude through the influence of psychological ownership. In other words, the higher the degree of the formal ownership, the more positive is the influence it has on psychological ownership. But this argument may not be valid in the context of the franchise organisation due to attribution of assets. For a franchise organisation, outlet-level asset specificity affects the costs of employing franchisees vis-à-vis employee-managers. Asset specificity is usually defined as the extent to which the investments made to support a particular transaction have a higher value to that transaction than they would have if they were redeployed for any other purpose (McGuinness, 1994). On the contrary, Williamson (1975, 1985, 1986) argued that transaction-specific assets are non-redeployable physical and human investments that are specialized and unique to a task. The production of a certain component, for example, might require investment in specialized equipment, while the distribution of a certain product may necessitate unique physical facilities. Thus, from the franchiser s viewpoint, franchisee investment in brand-specified assets is an important source of leverage that allows franchisers to ensure ongoing cooperation from franchisees. We also argue that when franchisees face the high risks and uncertain situations in the franchise system, allocation of psychological ownership and its privileges do impact both the interests of and the relationship between the franchiser (with formal ownership) and individual franchisees (who might or might not have legal ownership of a franchise system). However, if the franchisee owns more non-brand-specified complementary assets, that person might not manifest a self-centred propensity for psychological ownership or any degree of psychological

7 ownership for a franchise brand, because it is easy for the franchisee to switch the non-brand-specified complementary assets or equipment to another franchise brand. Accordingly, we posit that: H1. The higher the degree of ownership of the non-brand-specified complementary assets of a franchisee, the lower will be that franchisee s sense of self-centred propensity for psychological ownership of a franchise brand. H2. The higher the degree of ownership of non-brand-specified complementary assets of a franchisee, the lower will be that franchisee s sense of psychological ownership towards a franchise brand. Psychological ownership and its consequences Psychological ownership has positive consequences regardless of the organisational member s behavioral and social psychological consequences (VandeWalle et al., 1995). These relationships will be sustained even for members who are not in an equity ownership position. Pierce et al. (1991) also theorized that psychological ownership would be associated with high levels of motivation, including the performance of extra-role behaviour (constructive work efforts that benefit the organisation and go beyond the required work activities). Extra-role behaviour is discretionary behaviour that is not formally rewarded by the organisation (Katz and Kahn, 1978). Moreover, VandeWalle et al. (1995) found that psychological ownership is positively related to extra-role behaviour. In their empirical study, the results demonstrated that individuals with higher levels of psychological ownership are more likely to engage in extra-role behaviour that benefits the organisation. In the context of the franchise organisation, it is deemed an extra-role behaviour if franchisees with higher degrees of psychological ownership are willing to diffuse a franchise brand to others who are interested in joining their franchise. Based on the preceding arguments, we also anticipate that there should be a positive relationship between the degree of psychological ownership for a franchise brand and the willingness of a franchisee to diffuse his franchise brand to peers. Accordingly, we hypothesize: H3. The higher the degree of a franchisee s sense of psychological ownership for a franchise brand, the higher is the willingness of that franchisee to diffuse the franchise brand to peers. By the same token, it is important to acknowledge the potentially negative effects of psychological ownership for the organisation, which may lead to organizationally dysfunctional behaviour (Pierce et al., 2001). For instance, much like an overly possessive child an employee might resist sharing the object of ownership (e.g. tools, computers, and workspace) with co-workers, or might want to retain exclusive control over the object. Such behaviour, in turn, is likely to impede teamwork and cooperation. Dirks et al. (1996) argued that extremely high psychological ownership can cause resistance to change and a low level of co-operation. They suggested that managers should be especially mindful of psychological ownership during a transitional period and should stress overall shared ownership rather than individual feelings of possession for a particular job (Van Dyne and Pierce, 2004, p. 455). We suggest that the Psychological ownership and 421

8 IJEBR 15,5 422 potentially negative effects of psychological ownership for a franchise brand might be identified through separating these two dimensions of psychological ownership. Accordingly, we predict that: H4. The higher a franchisee s self-centred propensity for psychological ownership of a franchise brand, the lower is that franchisee s willingness to diffuse the franchise brand to peers. The solution to agency problems in the franchising system can be found in the binding and credible commitments that each party makes to the other (Williamson, 1983). Franchisers make two such commitments (Combs and Ketchen, 1999). First, the presence of company-owned outlets signals to franchisees that the franchiser is committed to maintaining its reputation (Minkler, 1992). Second, franchisers have an ongoing incentive to uphold the value of their brand name because they derive significant revenues from franchisee royalty payments, the value of which is tied closely to the brand name (Sen, 1993). In return, franchisers expect franchisees to make significant commitments. One such commitment is made when franchisees invest in specific assets in the franchising system. In other words, designing an appropriate ownership structure or trying to lock a closed relationship into the franchise system is important for triggering a franchisee s sense of commitment. Both can result in the expansion and diffusion of the franchise chain. Organisational commitment is the psychological attachment individuals feel for the organisation (O Reilly and Chatman, 1986). Such commitment prompts an individual to ask, Should I maintain my membership in this organisation and, if so, why? Those possessing strong organisational commitment do want to continue their organisational affiliation. There is strong support from previous literature[1], for conceptualising psychological ownership as an antecedent of organisational commitment. Pierce et al. (1991), for example, proposed that psychological ownership is an antecedent of organisational commitment; and in a similar vein, VandeWalle et al. (1995) demonstrated through their research on 797 residents of university housing cooperatives, that psychological ownership was positively related to organisational commitment. Earlier we argued that the psychology of possession shows that possessions give people a sense of place, belonging, and personal space (Porteous, 1976). Since a sense of attachment and belonging is the essence of organisational commitment, it seems reasonable to predict a positive relationship between psychological ownership for a brand and organisational commitment. In other words, a high degree of psychological ownership of a franchise brand should lead to high levels of organisational commitment. Accordingly, we hypothesize: H5. The higher the degree of a franchisee s psychological ownership of a franchise brand, the higher is that franchisee s commitment toward the franchise organisation. We reiterate our earlier view that a psychological ownership construct must be extended beyond its usual purposes when we consider the negative effects of psychological ownership in an organisational context. To date, prior research has demonstrated that psychological ownership can be positively related to organisational commitment (e.g. Van Dyne and Pierce, 2004). However, previous research has failed to

9 stress that an employee s self-interested behaviour might occur in an organisation if that employee possesses a propensity for selfishness in daily work. Hence, Van Dyne and Pierce (2004, p. 455) suggested that extremely high levels of psychological ownership for the organisation are counter-productive. In others words, the propensity for selfishness manifested by an employee may result in decreased organisational commitment. So we propose that a self-centred propensity for psychological ownership for a brand would have a negative effect on organisational commitment. H6. The higher a franchisee s self-centred propensity for psychological ownership of a franchise brand, the lower is that franchisee s commitment towards the franchise organisation. Extending our view on the link between psychological ownership of a franchise brand and the willingness of a franchisee to diffuse that franchise brand to peers, we also propose that that franchisee s organisational commitment has positive implications for brand diffusion. Indeed, there is abundant evidence in literature that supports organisational commitment as an antecedent of extra-role behaviour. For example, Mowday et al. (1979) theorized that committed individuals are more willing to give of themselves to contribute to the organisation s well-being. Similarly, O Reilly and Chatman (1986) and VandeWalle et al. (1995) also found a positive relationship between organisational commitment and extra-role behaviour. Generally, when franchisees experience a sense of organisational commitment toward the franchise, they should demonstrate a high level of willingness to promote the franchise brand (Beaglehole, 1932; Van Dyne and Pierce, 2004; Wilpert, 1991). Furthermore, a franchisee who has an organisational commitment might reciprocate by proactively promoting the franchise brand to peers (or even competitors) in the industry. Thus, we posit: H7. Organisational commitment toward a franchise will be positively-related to the level of willingness of a franchisee to diffuse the franchise brand to peers. Methods Research context Our study examines the relationship in terms of the degree of psychological ownership a franchisee has for a brand as well as his/her degree of organizational commitment, and that franchisee s willingness to diffuse a franchise brand to peers. To commence our research, we selected THT, the largest taxi franchise in Taiwan, as our research setting. THT s taxi drivers are franchisees who own their taxis while their licence plates are authorized by the government. By paying royalties of approximately US$90 per month, a THT driver can own a mobile data terminal (MDT) and install it in the vehicle for receiving booking-calls from a dispatch centre operated by the franchiser. For franchisee taxi drivers, the main purpose of joining the THT franchise fleet is to gain access to an additional tool for boosting their incomes and reducing their vacancy rates. The latter is an important consideration because the vehicle vacancy rate for taxis in Taiwan is over 70 per cent. The franchise setting of THT is beneficial for observing how psychological ownership of a franchise brand is triggered among individual franchisees with ownership of non-brand-specified complementary assets (taxis and licence plates in this scenario) instead of possessing legal, formal ownership of the organisation. Psychological ownership and 423

10 IJEBR 15,5 424 In 2001, THT transferred a GPS-enabled taxi dispatch system (named icall) from Comfort in Singapore to Taiwan, for its drivers in Taipei (Taiwan). Taipei is a city geographically similar to Singapore but with a larger population (6.3 versus 3.8 million). However, THT encountered significant problems in promoting its franchise brand in Taipei. The THT management team wondered why the company failed to attract more than 1700 icall users (with a population of 100,500 vehicles in Taiwan), compared with the adoption of more than 18,000 taxi drivers in Comfort (with a population of only 40,000 vehicles in Singapore). This was evidently a problem of franchise brand diffusion and offered us an opportunity to analyse the reasons why some franchisees rejected diffusing their franchise brands to others. Data collection and sampling In March 2005 we conducted a pre-test by administering a questionnaire in one-on-one interviews with 74 franchisee drivers working for THT. A total of 59 completed questionnaires were obtained (a return rate of 79.7 per cent). From the results of this pre-test, we discovered two factors concerning psychological ownership through factor analysis. After confirming the construct for two factors of psychological ownership for a franchise brand we proceeded to conduct a two-stage formal questionnaire/survey in May 2005 (Time 1 period) and September 2005 (Time 2 period). We administered the questionnaires to 246 (Time 1) and 437 (Time 2) franchisee drivers who were employed by THT (excluding taxi drivers who had participated in the pretest). All respondents were asked to record their identification numbers on the questionnaire so that the information provided could be linked to each individual franchisee s data, which was provided by THT headquarters. After combining the findings of the two-stage questionnaire/survey, we gathered about 147 franchisees who had responded to both questionnaires during the two periods. About 93 per cent of the respondents were male drivers and their years of driving experience in the taxi industry was almost representative of a normal distribution (22.2 per cent had between one to five years experience, 37.4 per cent had between five to ten years experience, 17.6 per cent had between 10 to 20 years experience, and 10.9 per cent had above 20 years experience). About 17.9 per cent of the taxi drivers were single while the rest were married. In addition, the mean of age was 46.4 years and the standard deviation was 6.9. The mean of time, which had elapsed since the commencement of the THT franchise was approximately 2.62 years, while the standard deviation was 1.72 years. Measurement of variables Psychological ownership of a franchise brand. Psychological ownership was measured using the Van Dyne and Pierce (2004) seven-item measurement procedure. We measured psychological ownership with respect to the franchisees attitudes towards their brand (in this case, THT). Following the sample questionnaire on psychological ownership for the organization designed by Van Dyne and Pierce (2004), we used possessive vocabulary, such as that reflected in everyday association with property and possessions. Examples of such expressions that we used include: That idea was MINE, This is MY office, She is OUR daughter (see Furby, 1978, 1991; Litwinski, 1947; Van Dyne and Pierce, 2004). Psychological ownership was measured on the following itemized scale during the Time 1 period:

11 (1) THT franchise brand is MINE. (2) I sense that the THT franchise brand is OURS. (3) I feel a very high degree of personal ownership for the THT franchise brand. (4) I sense that the THT franchise brand is MINE. (5) The THT franchise brand is OURS. (6) Most drivers who work for THT feel that they own the franchise brand. (7) It s hard for me to think about this franchise brand as MINE (reversed question). A Likert-type scale was used to measure the responses to each item, anchored with 1 ¼ strongly disagree to 6 ¼ strongly agree. Through factor analysis, we thus derived two factors from the results of our survey. The Cronbach alphas of these two factors in our sample were 0.91 for MINE and 0.90 for OURS. Next, we computed a pair of psychological ownership indexes (MINE, OURS), in which the length of the vector, L, represents the degree of psychological ownership for the franchise brand, while the angle between the vector and the MINE axis, u, indicates the tendency toward the MINE factor. Thus, we transformed the pair of psychological ownership indexes (MINE, OURS) into the following constructs: Degree of psychological ownership ¼ qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ðmineþ 2 þðoursþ 2 Psychological ownership and 425 Self 2 centred propensity for psychological ownership ¼ CosðuÞ MINE ¼ pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ðmineþ 2 þðoursþ 2 The traditional definition of psychological ownership in literature merely measures the degree of psychological ownership, while our measurement tools enable us to measure and derive the self-centred propensity for psychological ownership. Organisational commitment. In this study, we measured the franchisee drivers commitment to THT in the Time 2 period using the following seven items derived from the Organisational Commitment Questionnaire (OCQ: Mowday et al. 1979). They are: (1) I would like to try my best to help THT become successful. (2) I always tell my friends that THT, which I joined, is a very good organisation. (3) I find that my personal values are more or less the same as THT s. (4) When I drive on the streets every day, the THT brand encourages me to work hard. (5) I am proud of being one of THT s members. (6) I am concerned about THT s future. (7) I don t always like the cases assigned by the call centre (reversed question).

12 IJEBR 15,5 426 A Likert-type scale was used to measure the responses to each item, anchored with 1 ¼ strongly disagree to 6 ¼ strongly agree. The Cronbach alpha of this measure in our sample was Willingness to diffuse the franchise brand to peers. In order to discern how much taxi drivers are willing to introduce the THT franchise brand to which they belong to other persons or to diffuse it to their peers, we designed some questions for this construct that were extracted from our previous qualitative interviews with the taxi drivers. We measured the franchisees willingness to diffuse the franchise brand to peers during the Time 2 period using the following three-item scale: (1) The GPS-enabled taxi dispatch system is good technology, and I am willing to introduce it to other taxi drivers. (2) I don t like to share this GPS-enabled taxi dispatch system with others (reversed question). (3) The GPS-enabled taxi dispatch system can help me to get more bookings than others, so I do not want other taxi drivers to join THT (reversed question). A Likert-type scale was also used to measure the responses to each item, anchored with 1 ¼ strongly disagree to 6 ¼ strongly agree. The Cronbach alpha of this measure in our sample was Ownership of non-brand-specified complementary assets of a franchise. The data for this variable was provided by THT headquarters. We found five degrees of ownership structure concerning non-brand-specified complementary assets which are: (1) taxi drivers who rent both taxis and licence plates from private taxi companies (the lowest degree of ownership for non-brand-specified complementary assets); (2) taxi drivers who co-own their taxis with private taxi companies and rent licence plates from private taxi companies; (3) taxi drivers who own their vehicles but rent licence plates from a private taxi company; (4) taxi drivers who own a taxi but rent licence plates from cooperative associations to which all drivers are likely to belong; and (5) taxi drivers who own both taxis and licence plates (the highest degree of ownership for non-brand-specified complementary assets). The five different combinations of taxis and licence plates ownership listed above stand for various degrees of ownership of non-brand-specified complementary assets. Control variables. We also measured four control variables, including: (1) the age of the driver; (2) time elapsed since the driver joined THT; (3) the number of years spent driving a taxi; and (4) whether the driver was a cadre member (dummy variable). Such data was also provided by THT headquarters. The purpose of controlling for these four variables was to ensure that demographic information was eliminated, as well as to demonstrate the causal relationship between independent and dependent variables.

13 Results Descriptive statistics including means, standard deviations, and Pearson Product Moment correlations are recorded in Table I. We also found that there were no problems regarding multi-collinearity between the independent variables. By testing regressive square residuals to independent variables using the Breusch-Pagan test, we did not find homoscedasticity in our sample. Table II highlights the results of the regression analyses, which predict a franchisee s organisational commitment and willingness to diffuse the franchise brand to peers. Model 1 is a basic model of the personal characteristics effects (control variables) on the franchisees willingness to diffuse the franchise brand. It demonstrates that personal characteristics have no significant effects other than the status of being cadre members in the THT fleet. Model 2 demonstrates a negative relationship between ownership for the non-brand-specified complementary assets of a franchise and self-centred propensity for psychological ownership of a franchise brand. The results support H1 strongly (b ¼ 20:287, p, 0:01). Model 3 demonstrates a negative relationship between ownership for the non-brand-specified complementary assets of a franchise and the degree of psychological ownership for a franchise brand. The results also provide support for H2 (b ¼ 20:231, p, 0:05). Model 4 shows the results of H5 and H6 and demonstrates that organisational commitment is influenced positively by a franchisee s degree of psychological ownership for a franchise brand as was observed in H5 (b ¼ 0:326, p, 0:01). However, the results fail to support H6 (b ¼ , p. 0.1). This means that a franchisee s self-centred propensity for psychological ownership of a franchise brand does not affect organisational commitment negatively. Model 5 shows the results of tests on H7. In other words, H7 predicted a positive relationship between franchisees organisational commitment and willingness to diffuse their franchise brand to peers. Regression results in Model 5 support this relationship significantly (b ¼ 0:507, p, 0:0001). Additionally, Model 5 also highlights the results of tests on H3 and H4. Table II indicates that the self-centred propensity for psychological ownership of a brand failed to reach significance after accounting for demographic controls (b ¼ 0:097, p. 0:1). Similarly, the degree of psychological ownership for a brand did not reach significance (b ¼ 20:051, p. 0:1). In addition, Model 5 provides a significant improvement over previous models (Change in R 2 ¼ 0:193) In summary, this study illustrates that the degree of psychological ownership for a brand provides an incremental explanatory power for understanding the commitment and diffusion effects in the context of the franchise organization. Discussion The primary objective of this study was to verify the importance of psychological ownership towards branding in the organisational context of a franchise by testing a predicted relationship between feelings of ownership towards a brand and the legal ownership of complementary assets, organisational commitment, as well as the willingness to diffuse a franchise brand to peers. The empirical results demonstrate that dividing psychological ownership for a franchise brand into two dimensions; the degree of psychological ownership and the self-centred propensity for psychological ownership, increases explained variance in organisational commitment and brand diffusion in the context of the franchise organization. The results also demonstrate, as Psychological ownership and 427

14 IJEBR 15,5 428 Table I. Means, standard deviations, and correlations Mean SD Period of employment in the organization Working experience in the industry Age (ln) ** 4. Status of cadre (dummy) ** Ownership of non-brand-specified complementary assets Self-centred propensity for psychological ownership of the franchise brand ** (0.91) 7. Degree of psychological ownership for the franchise brand * ** (0.90) 8. Organizational commitment * * ** (0.85) 9. Willingness to diffuse the franchise brand to peers ** ** (0.78) Notes: n ¼ 149; reliability coefficients are reported along the diagonal; means and standard deviations reported here are for non-standardized variables; * p, 0.05; ** p, 0.01; two-tailed test

15 Variables Model 1 Model 2 Model 3 Model 4 Model 5 Willingness to diffuse the franchise brand to peers Organizational commitment Degree of psychological ownership for the franchise brand Self-centred propensity for the franchise brand Dependent variable Period of employment in the organization (1.287) (1.318) ** (2.407) (0.521) (0.178) Working experience in the industry (21.275) (1.448) (20.55) (20.855) (0.147) Age (ln) * (1.807) (0.80) (0.858) (1.504) (20.016) Status of Cadre (dummy) ** (2.42) (20.286) (0.954) ** (2.075) (20.34) Ownership of non-brandspecified complementary assets ** (23.236) ** (22.618) (20.158) (20.002) Self-centred propensity for psychological ownership of the franchise brand (20.752) (1.026) Degree of psychological ownership for the franchise brand ** (3.368) (20.562) Organizational commitment **** (5.861) Overall F ** ** *** **** R ** ** ** **** Change in F Change in R Notes: n ¼ 149; values are standardized estimates; * p, 0.10; ** p, 0.05; *** p, 0.01; **** p, 0.001; two-tailed tests are used Psychological ownership and 429 Table II. Results of regression analysis for organizational commitment and willingness to diffuse franchise brand to peers

16 IJEBR 15,5 430 predicted, that the degree of psychological ownership for a franchise brand is related positively to organisational commitment. Moreover, we find that both dimensions of psychological ownership are affected negatively by ownership of non-brand-specified complementary assets on the part of a franchisee. These findings are important because they show, with regard to the two dimensions, that the concept of psychological ownership increases our ability to predict and understand a franchisee s attitude and behaviour over and above the dimension of psychological ownership that describes the employee-organisation relationship. Theoretical implications The results of this study have direct implications for future research on the franchising industry. Previously, research has scrutinized the phenomenon from the perspectives of the agency theory or resource scarcity and has mainly emphasized the franchiser s concerns. Our study indicates that these perspectives are necessary but insufficient in explaining the rapid growth of a franchise chain by means of the franchising strategy. Researchers need to consider how to integrate ownership of assets (or property rights) and affect elements to influence franchisee s cognition and behaviour entrepreneurially (see Windsperger and Dant, 2006). Our study suggests that the psychological ownership dimension should be added to the central thrust of the explanation on the role of affect in the entrepreneurial process favouring franchising over formal ownership (Baron, 2008). The conditions under which franchising is more efficient than company ownership over time merits further consideration through examining the outcomes and influences of affect (VandeWalle et al., 1995) or analysing firm growth by means of designed hybrid organisational forms (Shane, 1996). The results also significantly extend research on firm growth. Although many scholars have argued that managerial limits to firm growth exist (Mahoney, 1992; Penrose, 1959), agency theorists have suggested that entrepreneurs can overcome these limits by turning employment relationships into residual claimant relationships. Additionally, this study demonstrates that psychological ownership, in particular, allows entrepreneurs to overcome some managerial limits to firm growth. These results are consistent with the observation that firms use franchising when they want to grow faster, implying that franchising allows franchisers to relax some forms of constraints on their growth (Lafontaine, 1992). Furthermore, supporting the initial observations of Norton (1988), our study demonstrates that psychological ownership of a brand is important for franchisers, because of its effects on overcoming managerial limits to franchise chain growth. In a practical sense, this study sheds light on why some franchise organizations might not be limited by resources or by lack of legitimacy (Castrogiovanni et al., 2006). Or why franchisees devote more commitment, responsibility, and extra-role behaviour (such as willingness to diffuse a franchise brand to peers) to their franchise organization. The results of this research suggest possible solutions to address the agency problem and that of ownership structures for franchise organizations. Based on agency theory, we explain how best to organise relationships in which one party (the principal) determines the work that another party (the agent) undertakes (Eisenhardt, 1989; Shane, 1998). Under conditions of incomplete information and uncertainty, which characterize most business settings, at least three agreed agency problems are anticipated: adverse selection, moral hazards, and holdups. Adverse selection occurs when the principal cannot ascertain if the