This study aims to examine the process through which franchise outlet performance is formed from the perspective of new institutional theory. The franchise industry operates based on standardized systems established by the franchisor, including operat...
This study aims to examine the process through which franchise outlet performance is formed from the perspective of new institutional theory. The franchise industry operates based on standardized systems established by the franchisor, including operational manuals, service standards, training programs, and evaluation systems. However, despite sharing the same institutional environment and standardized operating procedures, significant performance differences remain across franchise outlets. This suggests that outlet performance cannot be sufficiently explained solely by the existence of institutional arrangements or the level of compliance. Accordingly, this study investigates the effects of institutional isomorphism on customer orientation and performance. In addition, the mediating roles of customer orientation and nonfinancial performance, as well as the moderating role of personal innovativeness, were examined.
Institutional isomorphism was categorized into coercive, mimetic, and normative isomorphism, whereas performance was divided into nonfinancial and financial performance. Customer orientation was specified as a mediating variable linking institutional isomorphism to performance outcomes, while personal innovativeness was incorporated as a moderating variable in the relationship between institutional isomorphism and customer orientation. Empirical data were collected through a survey of franchise owners in South Korea, and a total of 203 valid responses were used for analysis. Data analysis was conducted using jamovi version 2.7, including reliability analysis, exploratory and confirmatory factor analyses, correlation analysis, and structural equation modeling. In addition, focus group interviews (FGIs) were conducted to supplement and contextualize the quantitative findings.
The findings are summarized as follows. Coercive and mimetic isomorphism were found to positively influence nonfinancial performance, whereas normative isomorphism showed no significant effect. In terms of financial performance, only mimetic isomorphism demonstrated a significant positive relationship. In contrast, coercive and normative isomorphism did not show statistically significant relationships with financial performance. All three types of institutional isomorphism—coercive, mimetic, and normative—positively affected customer orientation, with normative isomorphism exerting the strongest influence among the three dimensions.
Customer orientation positively affected both nonfinancial and financial performance, while nonfinancial performance also positively influenced financial performance. Furthermore, customer orientation mediated the relationship between institutional isomorphism and nonfinancial performance, and nonfinancial performance mediated the relationship between customer orientation and financial performance. In addition, customer orientation and nonfinancial performance jointly constituted a sequential mediation mechanism in the relationship between institutional isomorphism and financial performance.
Regarding the moderating effects, personal innovativeness significantly moderated the relationships between coercive isomorphism and customer orientation, as well as between mimetic isomorphism and customer orientation. However, no significant moderating effect was identified in the relationship between normative isomorphism and customer orientation.
Overall, the findings confirm that structural relationships exist among institutional isomorphism, customer orientation, nonfinancial performance, and financial performance, and that personal innovativeness functions as a moderator in selected pathways. This study contributes to the literature by applying institutional isomorphism theory to the franchise outlet level and empirically validating the structural relationships among key variables. It further extends the explanatory power of performance formation by identifying a sequential mediation mechanism involving customer orientation and nonfinancial performance. In addition, by incorporating personal innovativeness, this study provides empirical evidence regarding the interaction between institutional pressures and individual-level characteristics within franchise outlet operations.
Keywords: Franchise, Institutional Isomorphism, Coercive Isomorphism, Mimetic Isomorphism, Normative Isomorphism, Customer Orientation, Personal Innovativeness, Nonfinancial Performance, Financial Performance