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- Title
Entrepreneurial signaling to attract resources: the case of franchising.
- Authors
Michael, Steven C.
- Abstract
Why firms and individuals reveal information is the subject of considerable theoretical research, but little empirical work has been possible due to a lack of suitable data. In this paper we examine why entrepreneurs selling business opportunities (franchisors) reveal information regarding potential profits (termed earnings claims). Empirical analysis shows that: first, contrary to theory, only a small percentage of franchisors claim; and, second, the franchisors that do claim have lower costs or are responding to competition. In particular, the prediction of theoretical models from economics that resource providers will not transact if information is not disclosed is not supported; resource providers can and do make significant investments even when entrepreneurs refuse to disclose information. Copyright © 2009 John Wiley & Sons, Ltd.
- Subjects
RETAIL franchises; ENTREPRENEURSHIP; CORPORATE profits; BUSINESS enterprises; BUSINESSPEOPLE; EMPIRICAL research
- Publication
Managerial & Decision Economics, 2009, Vol 30, Issue 6, p405
- ISSN
0143-6570
- Publication type
Article
- DOI
10.1002/mde.1460