Reproducing knowledge: Inaccurate replication and failure in franchise organizations

The recognition that better use of existing knowledge can enhance performance has spawned substantial interest in the replication of productive knowledge within organizations. In particular, it has been argued that, when guided by a template, the exploitation of a business model by replication is more successful if the template is copied precisely. We report the first large sample empirical investigation of this proposition by examining the effect that deviation from prescribed practice has on the survival chances of franchise units within a large non-food franchise organization. We present extensive empirical evidence based on a unique longitudinal dataset tracking all U.S. units of that franchise system from 1991 to 2001. Our analyses provide strong support for the merit of precise replication: units that deviate from the product mix recommended by their franchisor or offer non-standard products are significantly more likely to cease operations.