Interfirm arrangements in different institutional environments: McDonald's France and Brazil case study

Abstract

This paper aims to investigate the effect of the institutional environment variables on the organizational choice by franchise chains that share a business format (business format franchising). Inasmuch as this type of franchising requires strict standardization, a comparative analysis of the same franchise chain operating in different institutional environments allows for the control of several variables, such as product and firm strategies, so that the observed organizational differences may be attributed to institutional variables. We compare McDonald's operations in France and Brazil, countries that are important players in the international franchising, are relevant locations for McDonald's, and present quite different institutional environments. We did case studies based on semi-structured interviews with procurement and franchising managers of McDonald's in France and Brazil. The main finding is that McDonald's uses in Brazil governance structures that provide more control on transactions, both in the transactions with their outlets and their suppliers. In accordance with our results, three institutional environment features explains differences in the organizational choice in each country: lower institutional and macroeconomic stability in Brazil; limits to vertical restraints by the competition policy in France; and more rigorous food regulation standards in Europe, particularly in France.