Trust, Decision Rights Delegation, and Performance: The Case of Franchising

Previous research has not examined the relationship between trust, decentralization, and franchisor performance. Complementary to the literature on autonomy and relational governance from franchisees’ perspective, this study focuses on the franchisor's perspective on the impact of decentralization and trust on performance. Consistent with the embeddedness view, the results show that trust is a facilitator of decentralization in franchise networks, thereby increasing the positive performance effect of decision rights delegation. Overall, the study offers a new perspective on the relationship between formal governance—through decision rights allocation—and trust as a relational variable in interorganizational networks.