Abstract

Electronic integration stands for a form of vertical quasi-integration achieved through the development of a proprietary interorganizational system, which is considered as a cheaper way to gain integration advantage than conventional vertical integration. This paper draws on both transaction cost theory and resource dependency theory to obtain the determinants of electronic integration in franchise systems, and then develop a model of five determinants: business process asset specificity, trust, transaction specific investment, net dependency, exercised power. The model was then tested by case studies which include four franchisors and ten franchisees in convenience store chains. The results indicated that business process asset specificity, transaction specific investment and net dependency have positive correlation with the degree of electronic integration; though trust and exercised power did not show strong correlation with the degree of electronic integration when individual franchise systems were compared. And among the five variables tested only trust didn't present significant impact upon electronic integration when franchise systems were classified as franchise chain and voluntary chain.