The present study addresses this need. We regard litigation
between franchise partners as representative of serious
manifest conflict, defined as open behavioral disagreements
between the firms that hamper their respective goal attainment
(Pondy 1967). We examine both parties' litigation initiation
and resolution choices and the dyadic and systemwide
consequences attributable to these choices. Relying on
agency theory-based arguments, we assess the impact of
regulation on the incidence of litigated conflict between
franchisors and their franchisees. We hypothesize the impact
of such regulation to vary significantly by (1) the level of
analysis, either across the franchise system (regulated and
nonregulated markets) or within the particular market in
which the conflict occurs; (2) the specific regulation considered
(registration law or relationship law); and (3) the ownership
structure of the channel system—specifically, the extent
to which the franchisor relies on franchisee-owned outlets.
We collect multisourced archival data with respect to 411
instances of htigation for 75 ñ-anchise systems over a 17-year
observation window. Conditional on litigation occurrence,
we identify the party more likely to initiate the litigation,
predict the likelihood of the litigation being settled by alternative
dispute resolution (ADR) rather than adjudication,
and assess the dyadic and systemwide outcomes that result
from the prior litigation initiation and resolution choices