The impact of the entrepreneurial orientation on performance in Australian franchise firms

The Australian franchise industry represents a significant employer group and is responsible for a large portion of the Australian retail and services expenditure. This paper examines the impact Lumpkin and Dess's (1996) Entrepreneurial Orientation (EO) dimensions: autonomy; innovation; risk taking; proactiveness; and competitive aggression, had on franchise firms performance. The EO dimensions were found to be dominant at the inception of each franchise firm reviewed. Over time all components diminished in importance whilst performance of the franchise continued to improve. It was found that autonomy became restricted by boards of management, innovation reduced through the introduction of proven systems, and that risk taking became "calculated" risk taking. It was also found that over time proactiveness no longer meant having to establish new markets or trends, and there was a diminished importance in the firm's propensity to competitive aggression. A paradox was present in the surveyed franchise businesses. The entrepreneurial owners strived to create independent and flexible organisations through the formation of franchise businesses, however by creating the buying, marketing and support systems necessary to run a franchise, the owners inadvertently developed bureaucratic constraints often seen in other corporate organisations.