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The Effect of Electronic Communication Among Franchisees on Franchisee Compliance

Abstract The virtual organization has emerged as a result of the availability of information technology. One business model well suited to the virtual form is franchising. Since the success of franchise organizations is highly dependent on communication effectiveness, these organizations are beginning to adopt technologynamely, private corporate networks called intranets and extranetsto support electronic communication. This paper reports the results of an empirical study on the effects of lateral electronic communicationsi.e., the formation of virtual community among franchiseeson a strategic outcome that is important to franchisors, namely, franchisee compliance. The survey results indicate that communication frequency among franchisees increases with the existence of a lateral communication channel. Previous research suggests that electronic communication facilitates lateral communication by providing an asynchronous media choice, making communication on such channels more frequent because they are more convenient. Franchisee compliance, though expected to be higher among franchisees that had electronic communication channels available to them, was actually found to be lower.