The Upper Echelon Effect on Restaurant Franchising: The Moderating Role of Internationalization

Won Seok Lee, Kyonggi University
Choongbeom Choi, University of Nevada, Las Vegas
Joonho Moon, Kangwon National University


Purpose This study aims to investigate how upper echelon theory accounts for franchising by selecting the top management team to proxy for the upper echelon and using age, tenure, education, equity ownership and stock options as its main attributes. Design/methodology/approach The sample was drawn from the Execucomp and Compustat databases and from other publicly accessible resources (e.g. LinkedIn and Business Week, in addition to Annual 10-K reports). A total of 29 restaurant companies were used for data collection, which covered the period of 2000-2013. A panel feasible generalized least squares (FGLS) regression was used to analyze the data. Findings The study found a significant moderating effect of the degree of internationalization on the relation between the attributes of the upper echelon (e.g. tenure, education and share ownership) and franchising decisions. Research limitations/implications The results verified that top managers in the restaurant industry with more tenure and share ownership become more risk averse when they operate under riskier conditions, whereas highly educated restaurant top management teams tend to take more risks in strategic decision-making. Originality/value This study expanded internationalization research to upper echelon theory and into the arena of franchising.