The diffusion of innovation in franchising: managing the exploration and exploitation paradox

The need to balance standardization with innovation has been identified in franchising networks as the paradox of exploitation and exploration. Literature suggests that the Plural Form, i.e. the simultaneous presence of company-owned and franchised outlets, might be a useful and appealing way of dealing with this paradox. This paper poses that there are yet alternative ways of dealing with difficulties associated with innovation diffusion, while keeping standardization in the network. This paper seeks to identify those means by analysing two contrasting Portuguese franchising companies. The results show that by sidestepping the classic top-down relationship and exerting a participative leadership, the franchisor might motivate franchisees to be more willing to adopt innovations.