What matters for hotel executives? An examination of major theories in non-equity entry mode research

This study examines the non-equity entry mode decisions of high-level executives in the international hotel industry, specifically the choice between franchising and management contracts. This quantitative study is based on a self-selected scenario-based online survey of 110 hotel executives. The primary objective of the study was to develop and test hypotheses through the combined theoretical lenses of transaction cost economics and the resource-based view. The hypotheses were tested through a logistic regression and the findings show that intangible assets and resources are the most important consideration in deciding between franchising and management contracts when internationalising hotels, generally prompting the use of management contracts. It was also found that uncertainties in the host market may lead hotel executives to choose franchising over management contracts, and finally, that asset specificity may prompt the use of management contracts over franchising.