Journal of Business Research 92 (2018) 360–373

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Journal of Business Research

journal homepage: www.elsevier.com/locate/jbusres

Just going through the motions? An empirical investigation of control, T

compliance, and performance in franchisor-franchisee relationships☆
⁎
Jody L. Crosnoa, , Pui Ying Tongb
a
Department of Marketing, College of Business & Economics, 1601 University Avenue, Room 209, West Virginia University, P.O. Box 6025, Morgantown, WV 26506-
6025, United States of America
b
Department of Marketing, College of Business, 225 State Farm Hall of Business, Illinois State University, Campus Box 5590, Normal, IL 61790-5590, United States of
America

A R T I C LE I N FO A B S T R A C T

Keywords: Recent channels research differentiates two forms of compliance—consummate and perfunctory compliance; yet
Behavioral control research stops short of examining how these nuances of compliance impact financial performance. This study
Outcome control fills this void. We assess our research model with longitudinal data collected from 119 franchisees in the United
Perfunctory compliance States. The results indicate outcome and behavioral control have differential effects on perfunctory versus
Consummate compliance
consummate compliance. Further, we find that relationship age moderates the control-compliance relationship
Performance
significantly, with behavioral control increasing consummate compliance in the early stages of franchisor-
franchisee relationships and outcome control increasing consummate compliance in the later stages. Lastly, we
find, unexpectedly, that consummate compliance decreases franchisee financial performance whereas perfunc-
tory compliance enhances franchisee performance.

1. Introduction this study examines different forms of compliance, namely perfunctory

Marketing theory and practice recognize that compliance is a key to
success in principal-agent relationships (Banerjee, Bergen, Dutta, &
Ray, 2012; Davies, Lassar, Manolis, Prince, & Winsor, 2011; Hackel,
2014). Franchisors, for example, require franchisee compliance to en-
sure a uniform market offering (Blair & Lafontaine, 2005) and to protect
the franchisor's brand name capital (Alchian & Demsetz, 1972; Brickley
& Dark, 1987). Noncompliance, in contrast, may result in “consumer
dissatisfaction, reduced sales, declining profitability, closure of units,
litigation and, eventually, the failure of the brand” (Cheng, 2014, p. 1).
To ensure contractual compliance and limit opportunism, principals
may use governance mechanisms, such as monitoring agent behaviors
and outcomes (Kashyap, Antia, & Frazier, 2012; Murry & Heide, 1998).
Yet monitoring and control may lead to perfunctory execution of role
behaviors (Ghoshal & Moran, 1996; John, 1984; Williamson, 1993).
Although marketing scholars have theorized that control may lead
to perfunctory compliance and, in turn, lower performance (e.g.,
Ghoshal & Moran, 1996), empirical research has yet to examine how
different forms of compliance influence performance. Whereas previous
studies on compliance in marketing largely focus on behavioral ad-
herence to rules (e.g., Kashyap et al., 2012; Payan & McFarland, 2005),
and consummate compliance, and their impact on financial perfor-
mance. Perfunctory compliance refers to “a strict adherence to con-
tractual obligations” (Kashyap & Murtha, 2017, p. 136); the agent does
not fully embrace the principal's policies and directives and, therefore,
the agent is simply “going through the motions.” Consummate com-
pliance, in contrast, refers to going above and beyond contractual ob-
ligations (Kashyap & Murtha, 2017), where the agent embraces the
principal's agenda and does more than what is required by the con-
tractual agreement (Kochanska, 2002). The important managerial
question, however, is whether it is worthwhile to distinguish between
these nuances of compliance from a financial standpoint. Does it matter
if agents are simply “going through the motions” as long as they are
going through the motions? Research in psychology, marketing chan-
nels, as well as the results of this study, suggests that, indeed, it is
worthwhile (e.g., Kashyap & Murtha, 2017;Kochanska, 2002; Maccoby
& Martin, 1983). Research in psychology demonstrates that con-
summate compliance is more generalizable to areas outside the con-
troller's reach, and it is consistently associated with successful sociali-
zation (Kochanska, 2002; Maccoby & Martin, 1983). Perfunctory
compliance, in contrast, is often “shaky,” meaning that it requires
continued external pressure to achieve behavioral adherence

☆
This research was supported by a Survey Research Grant, provided by the College of Business and Economics at West Virginia University.
⁎
Corresponding author.
E-mail addresses: jody.crosno@mail.wvu.edu (J.L. Crosno), ptong@ilstu.edu (P.Y. Tong).

https://doi.org/10.1016/j.jbusres.2018.08.003
Received 10 July 2017; Received in revised form 1 August 2018; Accepted 2 August 2018
Available online 17 August 2018
0148-2963/ © 2018 Elsevier Inc. All rights reserved.
J.L. Crosno, P.Y. Tong Journal of Business Research 92 (2018) 360–373

(Kochanska, 2002). More recently, research in marketing channels has conclude, a discussion of the results and implications for theory and
demonstrated that perfunctory compliance decreases customer sa- practice are put forth.
tisfaction, while consummate compliance increases customer satisfac-
tion (Kashyap & Murtha, 2017).
2. Forms of compliance
Given these findings, examining the antecedents, consequences,
and boundary conditions associated with these different forms of
In marketing channels, compliance has been defined as “overt be-
compliance is warranted. One of the boundary conditions we un-
havioral adherence to rules or norms” (Brill, 1994, p. 212) and “acting
cover in this research is relationship age. Based on self-determination
in accordance with an influence attempt” (Payan & McFarland, 2005, p.
theory (Deci & Ryan, 1985), we argue that newer franchisees have a
72). Although both definitions focus on behaving accordingly, ex-
stronger need for competence, whereas mature franchisees have a
amining behavior alone may not capture the nuances of compliance
stronger need for autonomy. We argue that a match between the
(Brill, 1994). Specifically, focusing on behavioral adherence to rules
control type and franchisees' needs will result in consummate com-
does not capture the attitude of those who comply and/or the degree of
pliance; however, a mismatch between the control type and fran-
effort put forth to comply (Brill, 1994; Kashyap & Murtha, 2017). As an
chisees' needs will result in perfunctory compliance. For example,
example, Kashyap and Murtha (2017) quote a franchisee: “After 8 p.m.,
the guidance and feedback offered through behavioral control in-
I might sell one pizza, but I have to stay open till midnight. So, I do what I'm
forms the franchisees how to perform operational activities
supposed to, but with no personality. Customers don't get that good feeling.”
(Anderson & Oliver, 1987) and, therefore, is particularly well-re-
The franchisee in this example is only half-heartedly complying with
ceived earlier in the relationship as franchisees are developing
the franchisor's guidelines. To capture these nuances, research has
competence. Later in the relationship, once franchisees develop the
identified and differentiated two forms of compliance: consummate and
skills and capabilities to manage their outlets effectively, they may
perfunctory compliance.1
come to resent behavioral control as it impinges on their autonomy
Consummate compliance has been defined as “wholehearted,
(Blut et al., 2011; Oxenfeldt & Kelly, 1968).
willing, and self-regulated compliance” in which one party fully em-
This study contributes to marketing channels literature in several
braces the other party's agenda and values (Kochanska, 2002, p. 339).
ways. First, contrary to extant research, this study examines the effects
This form of compliance is internally motivated and self-sustained
of two forms of governance mechanisms, namely behavioral and out-
(Kochanska, 2002; Kochanska, Aksan, & Koenig, 1995). In franchising,
come control, on perfunctory and consummate compliance. Previous
franchisees may take the initiative to perform above and beyond the
channels research examining perfunctory and consummate compliance
contractual requirements of the franchisor because they believe in the
merged these two forms of governance into one overarching construct
franchisor's mission and values. These franchisees are devoted to fol-
(e.g., monitoring), masking the meaningful differential effects of be-
lowing the contractual requirements even when they are not being
havioral and outcome control on these two forms of compliance.
monitored by the franchisor (Kochanska, Aksan, & Carlson, 2005;
Second, drawing on self-determination theory, this study argues
Maccoby & Martin, 1983).
that behavioral and outcome control satisfy different needs—namely,
Perfunctory compliance, in contrast, occurs when one party com-
the need for competence and autonomy, respectively—and these needs
plies but does not embrace the other party's agenda and values
change over the course of the franchisor-franchisee relationship.
wholeheartedly (Kochanska, 2002). This form of compliance often re-
Although most channels research on governance and control focuses on
quires sustained external control (Kochanska, Coy, & Murray, 2001),
the need for autonomy, research in psychology underscores the im-
such as monitoring and frequent prompting to ensure adherence to
portance of satisfying the need for competence in garnering positive
rules (Spinrad et al., 2012). Therefore, perfunctory compliance has
outcomes, such as intrinsic motivation (Gagné & Deci, 2005). The need
been described as “shaky” (Kochanska, 2002), “half-hearted”
for competence may override the need for autonomy in some situations
(Kochanska, Tjebkes, & Forman, 1998), and “contingent” on external
(Deci & Ryan, 1992; Ryan & Deci, 2000). For example, new franchisees,
control (Kochanska, 2002). Although research in marketing channels
who often lack certain skills and capabilities (Oxenfeldt & Kelly, 1968),
alludes to the downsides of perfunctory compliance (e.g., Ghoshal &
may forego some autonomy to ensure it is gaining competence in
Moran, 1996; John, 1984; Kashyap & Murtha, 2017), empirical re-
managing their outlets effectively. Once the need for competence is
search has not examined how this form of compliance affects channel
satisfied, franchisees will strive to satisfy their need for autonomy, as
outcomes such as opportunism and financial performance. To fill this
both are needed to sustain intrinsic motivation (Gagné & Deci, 2005).
gap, a research model of perfunctory and consummate compliance is
Satisfying these needs is the thrust of our theoretical argument for the
developed in the next section.
moderating effects of relationship age on the control–compliance re-
lationship. Indeed, the moderator results suggest that behavioral con-
trol yields consummate compliance in the early stages of the franchisor- 3. Research model and hypotheses
franchisee relationship, whereas outcome control produces con-
summate compliance in the later stages. Drawing on institutional economics (Bergen, Dutta, & Walker, 1992;
Third, this study extends previous research (e.g., Kashyap & Murtha, Williamson, 1985) and self-determination theory (Deci & Ryan, 1985),
2017) by examining additional outcomes of perfunctory and con- a model of perfunctory and consummate compliance is developed (see
summate compliance. Specifically, we examine how perfunctory and Fig. 1). Outcome control and behavioral control are examined as
consummate compliance impact conflict, opportunism, and, most im- antecedents of perfunctory and consummate compliance, and re-
portantly, financial performance. Surprisingly, our results show that lationship age is examined as a moderator of the control-compliance
consummate compliance is related negatively to franchisee financial relationships. Conflict, opportunism, and financial performance are
performance, whereas perfunctory compliance is related positively to examined as consequences of perfunctory and consummate compliance.
franchisee performance. Hence, as our final contribution, this study
brings to light a potential downside to consummate compliance—going 1
Consummate compliance is also referred to as committed compliance
above the contractual agreement takes resources and these additional
(Kochanska, 2002), receptive compliance (Maccoby & Martin, 1983), or mature
resources may hinder financial performance. compliance (Crockenberg, 1991; cf. Kochanska, 2002). To be consistent with
The paper is organized as follows: First, drawing on research in extant research in marketing channels (e.g., Ghoshal & Moran, 1996; John,
marketing channels and psychology, consummate and perfunctory 1984; Kashyap & Murtha, 2017), the terms consummate and perfunctory
compliance are defined. Next, the research model and hypotheses are compliance will be used rather than committed and situational compliance,
discussed. Then, research methods and results are presented. To respectively, which are often used in psychology.

361
J.L. Crosno, P.Y. Tong
Fig. 1. Research model.
3.1. Control → compliance
Control refers to a firm's set of procedures for monitoring, directing,
evaluating, and compensating agents (e.g., franchisees, trading part-
ners, employees, etc.) (Anderson & Oliver, 1987). Extant research has
focused on two types of control – outcome control and behavioral
control (Anderson & Oliver, 1987; Heide, Wathne, & Rokkan, 2007;
Jaworski, 1988). Outcome control is the development, monitoring, and
evaluation of performance outcomes, such as sales revenue, market
share, product quality, order accuracy, and customer satisfaction. Be-
havioral control, in contrast, is the development, monitoring, and
evaluation of the procedures used to achieve such outcomes (Jaworski &
MacInnis, 1989). Behavioral control is based on guidelines regarding
how procedures should be executed (Heide et al., 2007; Kashyap et al.,
2012). Examples of behavioral control include monitoring and pro-
viding feedback on sales calls, on-site inspections of manufacturing
processes and/or operating procedures, and examination of storage and
handling practices (Anderson & Oliver, 1987; Heide et al., 2007).
Firms use outcome and behavioral control to “assure that agents
comply with their contractual agreements” (Crosno & Brown, 2015, p.
301). Outcome and behavioral control reduce “information asymmetry
that otherwise would permit noncompliance” with contractual obliga-
tions (Murry & Heide, 1998, p. 61). Furthermore, control motivates
agents to perform on the firm's behalf (Anderson & Oliver, 1987) and
discourages agent shirking and other opportunistic behaviors (Jensen &
Meckling, 1976; Stump & Heide, 1996).2
Research, however, has uncovered mixed results, with both out-
come and behavioral control leading to disciplining and crowding out
effects (Crosno & Brown, 2015). Disciplining effects occur when control
produces the desired effect – increasing agent motivation, compliance,
and, ultimately, performance. Bello and Gilliland (1997), for example,
find that outcome control is related positively to channel performance.
Crowding out effects, in contrast, occur when control produces
2 the principal's control impinges on the agent's autonomy, leading to
Although not hypothesized, we also modeled the direct effect of behavioral
and outcome control on conflict, opportunism, and performance, as previous
research has established these direct effects (e.g., Crosno & Brown, 2015; Heide
et al., 2007; Kashyap et al., 2012). Similarly, in line with extant research, we
model the effects of opportunism and conflict on performance (Crosno &
Dahlstrom, 2008; Eshghi & Sourav, 2016).
362
Journal of Business Research 92 (2018) 360–373
unintended, negative effects – decreasing agent motivation, com-
pliance, and performance. Aulakh, Kotabe, and Sahay (1996), for ex-
ample, report a negative relationship between outcome control and
performance of the partnership. The disciplining and crowding out ef-
fects of control are discussed further in the next two sections.
3.1.1. Disciplining effects of control
Agents, such as franchisees, determine the amount of work effort to
put forth for the principal. More effort yields higher returns for the
agent, through monetary remuneration and social recognition, but
comes at higher costs to the agent (Frey, 1993). Effective monitoring
and control motivate agents to put forth more effort on behalf of the
principal (cf. Crosno & Brown, 2015). These disciplining effects of
control occurs for two reasons. First, effective controls may reduce the
marginal cost of agent effort (Frey, 1993). Control, for example, may be
informative, signaling to the agent which activities to home in on to
improve performance (Anderson & Oliver, 1987). Second, the like-
lihood of the principal uncovering agent opportunism increases with
tighter controls; therefore, the marginal cost of shirking increases (Frey,
1993). There are potential financial costs (e.g., fines) and nonfinancial
costs (e.g., relationship termination) associated with shirking; these
costs align interests by decreasing the agent's net payoff from shirking
(Antia, Bergen, Dutta, & Fisher, 2006). In short, effective control (be-
havioral or outcome) aligns agents' interests with the principal's and,
therefore, motivates them to comply with the principal's directives.
3.1.2. Crowding out effects of control
Research has found that both types of control may produce unin-
tended, negative effects (e.g., Crosno & Brown, 2015; Heide et al., 2007;
Ramaswami, 1996). These crowding out effects may arise when control
reduces the agent's incentive and/or motivation to perform on the
principal's behalf (Frey, 1993). Crosno and Brown (2015) identify four
possible explanations for the crowding out effect: 1) the agent experi-
ences high costs associated with acceding to the principal's control, 2)
reactance effects, 3) the principal's control signals distrust of the agent,
and 4) the agent perceives the principal's control as unfair.
In short, control mechanisms may undermine autonomy and signal
distrust (Frey, 1993; Kashyap et al., 2012; Murry & Heide, 1998), which
in turn engender disaffection and less commitment (John, 1984).
J.L. Crosno, P.Y. Tong
Ultimately, control mechanisms may lead to “perfunctory execution of
role behaviors,” where agents are uninspiringly performing only the
bare minimum of the contractual requirements (John, 1984, p. 280).
3.2. Moderating effect of relationship age on the control → compliance
relationship
We argue that relationship age moderates the effects of behavioral
and outcome control on perfunctory and consummate compliance. The
age of a franchisor-franchisee relationship influences whether controls
generate disciplining or crowding out effects and, subsequently, the
franchisees' level of perfunctory and consummate compliance. The ar-
guments are developed based on self-determination theory (Deci &
Ryan, 1985). This theory posits that competence and autonomy are
fundamental needs, and the satisfaction of these needs drives intrinsic
motivation (cf. Chae, Choi, & Hur, 2017). Competence describes the
ability to achieve desired outcomes and to succeed at optimally chal-
lenging tasks (Baard, Deci, & Ryan, 2004), and autonomy is the ability
to act with a sense of volition and to have the ability to freely choose
one's course of action (Gagné & Deci, 2005).
The central premise of our argument is that these needs change over
the course of the franchisor-franchisee relationship, just as the needs
and desires of individuals evolve as they experience successive stages of
life (e.g. Eccles, Wigfield, Harold, & Blumenfeld, 1993; Kenrick,
Griskevicius, Neuberg, & Schaller, 2010; LaFontana & Cillessen, 2010).
Depending on one's goals and needs, there are cognitive and develop-
mental priorities where some needs precedes others (Kenrick et al.,
2010). Similarly, we argue that early in franchisor-franchisee re-
lationships, franchisees have a stronger need for competence, whereas
those in longstanding relationships have a stronger need for autonomy.
Further, we view competence as a prerequisite for autonomy; fran-
chisees desire autonomy only when they are competent enough to
manage the business on their own. This shift in needs over time (Deci &
Ryan, 1992; Ryan & Deci, 2000) is the thrust of our argument for the
moderating effects of relationship age on the control–compliance re-
lationship.
3.2.1. Behavioral control → perfunctory compliance
The use of behavioral control is particularly effective and well re-
ceived in the early stages of the franchisor-franchisee relationship. This
type of control satisfies inexperienced franchisees' strong need for
competence (Oliver & Anderson, 1994). Early in the franchisor-fran-
chisee relationship, franchisees often lack certain skills and capabilities
and, therefore, require more guidance and direction from the franchisor
(Blut et al., 2011; Oxenfeldt & Kelly, 1968). The guidance and feedback
offered through behavioral control informs the franchisees how to
perform operational activities as well as how to rectify any performance
deficits, which enhances their competence (Anderson & Oliver, 1987;
Oliver & Anderson, 1994). Hence, newer franchisees should be more
capable of carrying out their contractual obligations.
Further, because of their desire to gain competence and their de-
pendence on franchisors' expertise, they will have a higher tolerance to
franchisor behavioral control (Bucklin, 1973; Seggie, Griffith, & Jap,
2013). As described in Bucklin (1973), dependency increases an agent's
willingness to endure the feeling of burden and sacrifice caused by the
principal's control. Therefore, we expect franchisees to be more tolerant
of behavioral control early in the relationship, resulting in lower levels
of perfunctory compliance.
As the relationship ages, however, franchisees develop the expertise
needed to manage the franchise effectively. Franchisees become more
competent, and therefore are less dependent on the guidance and
feedback offered by franchisor behavioral control. As argued by
Oxenfeldt and Kelly (1968), as the relationship ages, franchisees often
come to resent the very control they welcomed initially in the re-
lationship:
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Journal of Business Research 92 (2018) 360–373
“Because of his lack of certain important skills (for instance, planning) he
may initially welcome the close attention and training provided by the
franchisor. Through time, and especially as he grows, he acquires man-
agerial skills of his own. His self-esteem grows, and he comes to resent the
constraints placed upon his actions by the franchisor. Allied to the in-
crease in self-confidence are enhanced financial capabilities if he is
successful. Again these gains in his strengths would militate against ac-
cepting passively the controls imposed by the franchisor.”
As franchisees acquire the skills and expertise needed to manage the
franchise successfully, their need to gain competence will diminish.
These experienced franchisees are less tolerant of the close monitoring
of activities under behavioral control (Bucklin, 1973). As they acquire
“local market know-how,” more experienced franchisees believe that
they are capable of operating their outlet more successfully than the
franchisor (Blut et al., 2011; Windsperger & Dant, 2006, p. 263). As a
result, franchisees may perceive the franchisor's control as impinging on
their ability to perform. In short, we expect more experienced fran-
chisees to be less tolerant of behavioral control (compared to newer
franchisees), resulting in higher levels of perfunctory compliance.
H1. The association between behavioral control and perfunctory compliance
is less positive earlier in the relationship than in later stages of the
relationship.
3.2.2. Outcome control → perfunctory compliance
Outcome control, in contrast, may not adequately satisfy in-
experienced franchisees' need for competence. Early in the relationship,
franchisees lack the skills and capabilities to manage their outlets ef-
fectively “despite the initial training provided by the franchisor” (Blut
et al., 2011, p. 309). Outcome control communicates the desired goals
or output levels to be achieved by franchisees but offers little guidance
and feedback to assist franchisees (Anderson & Oliver, 1987; Jaworski
& MacInnis, 1989). New franchisees will be overwhelmed as they strive
to figure out how to manage day-to-day activities to ensure they meet
the performance goals of the franchisor. As a result, the franchisees will
experience a high level of burden under outcome control early in the
relationship (Bucklin, 1973). Several studies have demonstrated that
the use of outcome control is associated with higher levels of stress and
job tension (cf. Jaworski & MacInnis, 1989). Further, franchisees may
perceive the franchisor as unsupportive and come to resent the fran-
chisor for its lack of assistance and guidance, resulting in higher levels
of perfunctory compliance early on.
In the later stages of the relationship, franchisees have more ex-
perience to draw on and, as a result, are more capable in achieving the
desired outcomes (Oxenfeldt & Kelly, 1968). Hence, experienced fran-
chisees (compared to new franchisees) feel less burden under outcome
control. Once franchisees develop the skillset and expertise needed to
manage the franchise successfully, they welcome the autonomy that
outcome control provides. Stated differently, franchisees' need for “self-
determination will increase with the duration of the relationship” (Blut
et al., 2011, p. 310). Outcome control is well suited for fulfilling this
need. In short, we expect outcome control to yield higher levels of
perfunctory compliance early in franchisor-franchisee relationship and
lower levels of perfunctory compliance later in the relationship, once
the franchisees have honed their skills and gained the competence
needed to fulfill contractual obligations.
H2. The association between outcome control and perfunctory compliance is
more positive earlier in the relationship than in later stages of the
relationship.
3.2.3. Behavioral control → consummate compliance
At the outset of the franchisor-franchisee relationship, franchisees
have a strong need for competence because they lack the knowledge
and skills to manage their outlets effectively (Blut et al., 2011). The
J.L. Crosno, P.Y. Tong
information offered through behavioral control provides specific di-
rection to the franchisees on how to perform operational activities and
rectify performance deficits (Anderson & Oliver, 1987). This form of
control enables new franchisees to become competent as they are at-
taining sales and profitability (Oliver & Anderson, 1994). According to
self-determination theory, satisfying the need for competence will in-
trinsically motivate franchisees and compel them to put forth more
effort (Chae et al., 2017; Gagné & Deci, 2005). We, therefore, expect a
more positive relationship between behavioral control and consummate
compliance early in the relationship.
Later in the relationship, as franchisees have developed the skillset
and expertise to manage their franchise successfully, their need for
autonomy will play a larger role (than their need for competence) in
sustaining their intrinsic motivation. Behavioral control in the later
stages of the relationship will stymie franchisees' needs for autonomy
and, as a result, quell their intrinsic motivation (Deci & Ryan, 1985).
The lack of autonomy in the later stages may lead to resentment,
frustration, and work-to-rule practices (Frey, 1993; Ghoshal & Moran,
1996; Heide et al., 2007; John, 1984). Strict, external constraints on
behavior also undermine cooperative attitudes (Ghoshal & Moran,
1996; Williamson, 1993). As a result, franchisees are less likely to put in
extra effort to go above and beyond contractual requirements. There-
fore, we expect behavioral control to yield a higher level of con-
summate compliance earlier in the franchisee-franchisor relationship.
H3. The association between behavioral control and consummate
compliance is more positive earlier in the relationship than in later stages
of the relationship.
3.2.4. Outcome control → consummate compliance
Early in the relationship, outcome control may not meet franchisees'
need for competence. Outcome control provides more autonomy but it
comes at the expense of less guidance and direction that can build
franchisees' competence (Anderson & Oliver, 1987). The inherent lack
of direction under outcome control can be both confusing and frus-
trating for franchisees; the franchisees may feel lost when franchisors
provide little guidance on how to carry out the day-to-day operations or
how to rectify performance deficits (Anderson & Oliver, 1987; Blut
et al., 2011). Without franchisor guidance and feedback on the day-to-
day activities, inexperienced franchisees are likely to feel incompetent
(Oliver & Anderson, 1994) and, consequently, demotivated (Chae et al.,
2017). Stated differently, outcome control may thwart the need for
competence and undermine intrinsic motivation early in the relation-
ship. Franchisees may struggle to achieve the bare minimum of the
desired outcomes, not to mention devoting extra effort to go above the
requirements.
As relationships age, franchisees acquire the knowledge and skills to
manage their outlet effectively. As franchisees gain competence, their
needs shift toward autonomy—the ability to act of their own volition.
As franchisees become more familiar with the business and local
market, they may know how to satisfy their local market needs better
than the franchisor (Windsperger & Dant, 2006). Because outcome
control only specifies the required outcomes and allows franchisees to
decide the means to achieve such outcomes (Jaworski & MacInnis,
1989), it satisfies franchisees' need for autonomy. Hence, the agent
maintains a sense of autonomy and self-determination, which should
foster intrinsic motivation and consummate compliance (Deci & Ryan,
1985; Frey, 1993).
H4. The association between outcome control and consummate compliance
less positive earlier in the relationship than in later stages of the relationship.
3.3. Compliance → conflict
Conflict has been defined as “tension between two or more social
364
Journal of Business Research 92 (2018) 360–373
entities (individuals, groups, or larger organizations) which arise from
incompatibility of actual or desired responses” (Raven & Kruglanski,
1970, p. 70). Although conflict may be inevitable in marketing channels
(Gaski, 1984), compliance, especially consummate compliance, may
reduce conflict in channel relationships (Maccoby & Martin, 1983).
Compliance is often not a matter of a single request by the prin-
cipal followed by a single response by the agent; rather, there is often
a sequence of events in principal-agent relationships with earlier
events influencing later events (Brown, Lusch, & Muehling, 1983;
Maccoby & Martin, 1983). For example, if an agent fails to comply
with the initial request, the principal may increase the level of
pressure. Both the failure to comply and the resulting increased
pressure escalate conflict in the principal-agent relationship (Antia,
Zheng, & Frazier, 2013). Conflict arises, therefore, as principals at-
tempt to control agents' behavior and agents resist such attempts
(Gaski, 1984; Pondy, 1967). When the agent embraces the principal's
agenda and values wholeheartedly, the agent will assent to the
principal's directives freely (Bachrach & Baratz, 1969; cf. Gaski,
1984), circumventing conflict.
As discussed, consummate compliance does not require external
pressure (Kochanska, 2002; Kochanska et al., 2005). Rather, the agent
embraces and adheres to the principal's directives willingly, which
should result in less conflict. In contrast, perfunctory compliance re-
quires sustained external pressure (e.g., monitoring and frequent
prompting) (Kochanska, 2002; Spinrad et al., 2012). This form of
compliance is expected to escalate tension and conflict as agents
comply with directives to which they are not committed whole-
heartedly. Further, once the agent is “out-of-sight” of the principal, the
agent is unlikely to comply with the principal's directives (Kochanska,
2002). The principal may respond by increasing the external pressure
for the agent to comply, further exacerbating conflict in the relationship
(Brown et al., 1983; Kochanska et al., 1998; Maccoby & Martin, 1983).
Hence, we posit:
H5a. Perfunctory compliance is related positively to conflict.
H5b. Consummate compliance is related negatively to conflict.
3.4. Compliance → opportunism
Opportunism refers to guileful, self-interest seeking behaviors
(Crosno & Dahlstrom, 2008; Williamson, 1985). Examples of this be-
havior include quality shirking, lying, cheating, and “calculated efforts
to mislead, distort, disguise, obfuscate, or otherwise confuse”
(Williamson, 1985, p. 47). Although compliance and opportunism may
seem like two sides of the same coin, they are conceptually distinct
constructs (see Kashyap et al., 2012 for discussion). Research in psy-
chology suggests that compliance, or lack thereof, will affect future
opportunistic behavior (Kochanska, 2002; Spinrad et al., 2012).
For example, perfunctory compliance may undermine moral con-
duct by fostering a view of the self as one who challenges rather than
accepts rules and values (Kochanska, 2002). As this view becomes
“normalized,” more guileful behaviors may follow (Jap, Robertson,
Rindfleisch, & Hamilton, 2013, p. 224). Furthermore, agent frustration
stemming from adhering to directives to which s/he is not affectively
committed may engender opportunistic behavior (John, 1984). As a
result, perfunctory compliance is expected to increase opportunism.
Consummate compliance, in contrast, fosters a view of the self as moral,
which in turn “comes to serve as a regulator of future moral conduct”
(Kochanska, 2002, p. 340). Hence, consummate compliance is more
likely to generalize to other areas (Maccoby & Martin, 1983), helping to
mitigate opportunistic behaviors. Further, empirical research has de-
monstrated a consistent link between consummate compliance and
socialization (Kochanska et al., 2005), which can serve to limit op-
portunism (Wathne & Heide, 2000), but no such link has been found
J.L. Crosno, P.Y. Tong
between perfunctory compliance and socialization. Therefore, we an-
ticipate:
H6a. Perfunctory compliance is related positively to opportunism.
H6b. Consummate compliance is related negatively to opportunism.
3.5. Compliance → performance
Performance is viewed in terms of productivity and efficiency
(Kumar, Stern, & Achrol, 1992). Research suggests compliance is cri-
tical for effective performance in principal-agent relationships (Davies
et al., 2011; Fama & Jensen, 1983), yet perfunctory compliance may
undermine performance. As discussed, perfunctory compliance is
“shaky” and contingent on sustained external control (Kochanska et al.,
2001). As noted by O'Reilly and Chatman (1986, p. 493), failure to
move beyond simple (i.e., perfunctory) compliance “may require the
organization to bear the increased costs associated with more detailed
and sophisticated control systems.” For the principal, more extensive
monitoring and prompting to ensure compliance increases transaction
costs (Dahlstrom & Nygaard, 1999). For the agent, this level of control
may undermine intrinsic motivation (Deci & Ryan, 1985), resulting in
more to work-to-rule behaviors (Ghoshal & Moran, 1996). Furthermore,
these work-to-rule behaviors (i.e., just going through the motions) may
undermine the quality of market offerings and decrease customer sa-
tisfaction (Kashyap & Murtha, 2017), and, ultimately, affect principal
and agent long-term sales growth and profitability adversely (Wathne &
Heide, 2000).
On the contrary, when agents embrace the principal's agenda
wholeheartedly, they will follow the principal's directives in a “self-
regulated, proactive manner” (Kochanska et al., 1998, p. 1378). Hence,
consummate compliance requires less monitoring and control to sustain
(Kochanska, 2002; Kochanska & Kim, 2014). Further, this form of
compliance often engenders pride and satisfaction in carrying out the
principal's directives (Kochanska, 2002), which should result in a more
consistent, quality market offering (Wathne & Heide, 2000). These self-
initiated behaviors are increasingly needed to ensure strong perfor-
mance (Ghoshal & Moran, 1996; Maccoby & Martin, 1983). Therefore,
we posit:
H7a. Perfunctory compliance is related negatively to performance.
H7b. Consummate compliance is related positively to performance.
4. Research methods
4.1. Data collection
The empirical context for this study is franchisor-franchisee re-
lationships in a variety of industries (e.g., commercial cleaning,
building and construction, automotive, lodging, fast food, and sports
and recreation). Franchisor-franchisee relationships are a fitting
context to test the proposed model; these relationships are subject to
principal-agent problems as franchisees have an incentive to renege
on their performance over the course of the relationship (Antia et al.,
2013). A longitudinal field study was conducted, with an 18-month
time lag between the first and second waves of data collection.
Outcome control, behavioral control, relationship age, perfunctory
compliance, and consummate compliance were measured at Time 1,
and conflict, opportunism, and performance were measured at
Time 2.
The sampling frame was a national email list of 4800 franchisees in
the United States. A personalized email invitation to participate in a
research study examining franchisor-franchisee relationships was sent
to the franchisee manager (with a $20 Amazon.com card incentive for
completing the online survey). Of the emails sent, 535 were un-
delivered, resulting in 4265 valid emails sent. Of the valid emails, 417
365
Journal of Business Research 92 (2018) 360–373
respondents clicked through to the survey, resulting in a click-through
rate of 9.8%.
Of the 417, 15 respondents did not qualify to complete the survey as
they were not currently a franchisee and 36 respondents were directed
out of the survey for failing to read the questions carefully,3 leaving 366
respondents. An additional 161 surveys were deleted due to incomplete
responses,4 leaving 205 completed surveys (a response rate of 4.8%).
The sample was comprised mostly of single-outlet owners (67.8%). The
number of years the respondent managed the franchise ranged from 1
to 33 years, with an average of 11.3 years.
Eighteen months after the first wave, the same 205 franchisees were
contacted via email and asked to complete a follow-up survey. Respondents
were given a $30 Amazon.com gift card as an incentive for completing the
survey. Thirteen of the 205 emails sent were undelivered (i.e., thirteen
could not be contacted for the follow-up survey). Of the deliverable emails,
158 respondents clicked through to the survey (80%). Eleven respondents
were directed out of the survey for failing to read the questions carefully3,
and 26 incomplete surveys were excluded from the analysis4. Finally, two of
the respondents had switched positions and, therefore, were excluded from
the analysis, resulting in 119 completed surveys at Time 2. The final sample,
therefore, consisted of 119 matched questionnaires from Time 1 and Time 2
(58% of the 205 franchisees from Time 1).
The 119 franchisees who completed the second wave of data collection
were compared to the franchisees who participated only in the first wave of
data collection. Their responses on the study variables collected at Time 1
were evaluated and only one difference was uncovered. Franchisee man-
agers who only completed the first survey reported a higher level of
agreement on one item of the behavioral control scale (“We are held ac-
countable for following standard operating procedures regardless of the
results we achieve.”). No other significant differences were found.
4.2. Measurement
Multi-item, reflective scales were used to measure the key variables
in the model. The scale items are reported in the Appendix A, and de-
scriptive statistics are included in Table 1.
4.2.1. Perfunctory and consummate compliance
Multi-item scales were developed for perfunctory and consummate
compliance using procedures outlined by Churchill (1979). First, a search of
marketing and psychology literature was conducted to identify research
examining some form of compliance (e.g., Brill, 1994; Ghoshal & Moran,
1996; Kashyap et al., 2012; Kochanska, 2002; Maccoby & Martin, 1983;
Payan & McFarland, 2005). Drawing on this research, definitions of per-
functory and consummate compliance were developed and items were
generated for each form of compliance. Perfunctory compliance is defined as
compliance in which the franchisee does not fully embrace and, therefore,
reluctantly adheres to the franchisor's policies or directives. Consummate
compliance, in contrast, is defined as compliance in which the franchisee
wholeheartedly embraces and willingly adheres to the franchisor's policies
and directives, often going above and beyond (Kashyap & Murtha, 2017)5
3
Two items were integrated into the survey to assess how carefully the re-
spondents were reading the survey questions: 1) Click “Disagree” for this
question to continue, and 2) Leave this question blank (i.e., do NOT click any
answer for this question). Respondents who responded to either of these
questions incorrectly were immediately bumped out of the survey.
4
Most of the incomplete surveys were click throughs that either did not begin
the survey or did not answer any questions.
5
Previous channels research conceptualized perfunctory and consummate
compliance in terms of behavior—strictly adhering to the contractual agree-
ment or going beyond contractual obligations, respectively (e.g., Kashyap &
Murtha, 2017). Drawing on 25+ years of research in psychology (Kochanska,
2002; Maccoby & Martin, 1983), this study also incorporates the attitudinal
component of compliance as well—to what extent does the agent embrace or
buy-in to the contractual obligations.
J.L. Crosno, P.Y. Tong Journal of Business Research 92 (2018) 360–373

Table 1
Correlations, means, and standard deviations.
BC OC YR BY OY PC CC CON OPP PER NUM FEE UNC DEP

Behavioral Control (BC) 1.00

Outcome Control (OC) 0.60 1.00
Relationship Age (YR) 0.00 −0.10 1.00
BC*YR (BY) 0.00 0.09 0.00 1.00
OC*YR (OY) −0.04 0.00 0.00 0.54 1.00
Perfunctory Compliance (PC) −0.19 0.01 0.05 0.14 0.13 1.00
Consummate Compliance (CC) 0.34 0.22 −0.04 0.00 0.00 −0.40 1.00
Conflict (CON) −0.15 −0.14 −0.02 −0.01 0.04 0.28 −0.22 1.00
Opportunism (OPP) 0.11 0.12 −0.20 0.06 −0.02 0.23 −0.24 0.37 1.00
Performance (PER) 0.27 0.24 −0.08 0.01 −0.12 −0.05 −0.08 −0.39 −0.04 1.00
Number of Stores (NUM) 0.09 0.10 −0.08 0.06 −0.04 −0.07 0.05 −0.04 0.11 0.09 1.00
Franchising Fee (FEE) 0.10 0.16 −0.14 0.03 −0.04 −0.14 0.11 0.02 0.15 0.17 0.01 1.00
Environmental Uncertainty (UNC) −0.28 −0.16 0.05 −0.14 0.03 0.19 −0.08 0.29 −0.04 −0.43 −0.13 −0.28 1.00
Franchisee Dependence (DEP) 0.30 0.39 −0.13 −0.13 −0.15 −0.19 0.23 −0.38 0.08 0.35 0.20 0.16 −0.32 1.00
Mean 4.42 4.01 11.06 0.00 0.00 3.04 4.44 2.92 2.43 4.80 1.69 2.36 3.50 4.47
Std. Deviation 1.48 1.47 7.19 10.33 11.91 1.09 1.08 1.32 1.16 1.28 1.69 2.51 1.45 1.64
Alpha 0.85 0.77 – – – 0.83 0.85 0.86 0.91 0.90 – – – –
Composite Reliability 0.85 0.79 – – – 0.84 0.85 0.86 0.91 0.90 – – – –
Avg. Variance Extracted 0.60 0.50 – – – 0.57 0.59 0.68 0.63 0.76 – – – –

N = 119; Note: Correlations that are statistically significant are bolded (p ≤ .05).

Once defined, 12 items were generated to capture the domain of
each form of compliance, totaling 24 items. Many of these items were
adapted from existing compliance scales (e.g., Kashyap et al., 2012;
Payan & McFarland, 2005). The content validity of the items was as-
sessed by three expert judges—two representing the area of marketing
channels and one representing the area of psychology. First, the judges
were given the definitions of perfunctory and consummate compliance
and the 24 items in random order. The judges performed a sorting task,
in which they were asked to place the scale items into the perfunctory
group, consummate group, or neither if they felt that the item was not
representative of either form of compliance. In addition, the judges
were provided an open-ended opportunity to give feedback regarding
the wording of the items and the validity of the scales (i.e., What, if any,
questions would you delete from the scales? Please explain).
Based on their feedback, the directions for the scale were modified
to ensure we were capturing the nuances of compliance rather than
noncompliance. In addition, six items were dropped as they were not
perceived as representative of one of the two forms of compliance (e.g.,
“We fully comply with the franchisor's demands.”6). The revised items
were further evaluated based on item-to-total correlations and ex-
ploratory factor analysis (using Time 1 data). Three additional items
were dropped due to low item-to-total correlations. Lastly, principal-
factor analyses identified low-loading and cross-loading items, which
were also dropped from the scales. This process resulted in a five-item
Likert scale for perfunctory compliance and a four-item Likert scale for
consummate compliance. The remaining items were evaluated based on
the conceptual definitions of perfunctory and consummate compliance
to ensure these items represented the domain of the constructs.
4.2.2. Antecedents
Outcome control refers to the franchisor's monitoring and evalua-
tion of franchisee performance goals. Outcome control was measured
with a five-item Likert scale adapted from Jaworski and MacInnis
(1989). Behavioral control, in contrast, captures the franchisor's mon-
itoring and evaluation of franchisee behaviors and procedures. Beha-
vioral control was measured with a four-item Likert scale adapted from
Jaworski and MacInnis (1989). Relationship age refers to the number of
years that the franchisee has been part of the franchise system. It is a
6
Feedback from one of the judges: “Demands” suggests a non-collaborative
perspective. This could be endorsed by someone who felt they met the letter but
rejected the spirit of the agreements and requests. Or, it could indicate con-
summate compliance.
one-item measure. The interaction terms for behavioral control and
relationship age as well as outcome control and relationship age are
calculated based on the residual centering method outlined in Little,
Bovaird, and Widaman (2006).7
4.2.3. Outcomes
Conflict refers to the level of disagreements between the franchisee
and the franchisor (Gilliland, Bello, & Gundlach, 2010). A four-item
Likert scale was adapted from Gilliland et al. (2010) and Jap and
Ganesan (2000). Opportunism, or guileful, self-interested behaviors by
franchisees, was measured with a six-item Likert scale adapted from
John (1984), Brown, Dev, and Lee (2000), and Kashyap et al. (2012).
Performance captured the franchisee's self-reported sales growth,
overall profitability, and cash flows. The three-item Likert scale was
based on Lusch and Brown (1996) and Palmatier, Dant, and Grewal
(2007).
4.2.4. Control variables
Four control variables – initial franchise fee, number of units fran-
chised, franchisee dependence, and environmental uncertainty – are
also posited to influence conflict, opportunism, and performance, and
are, therefore, modeled as control variables. The larger the initial
franchise fee, the more the franchisee is invested in the relationship.
This should motivate the franchisee to refrain from opportunism, as the
franchisee has much to lose from relationship dissolution. Adherence to
operating guidelines, in turn, should reduce conflict and bolster per-
formance. Indeed, a study conducted by FranData reports a positive
relationship between initial franchise fee and revenue growth (Maze,
2013).
Multi-unit franchisees may be less likely to strictly adhere to fran-
chisor operating guidelines. Research suggests the multi-unit fran-
chisees desire more independence and autonomy than single-unit
franchisees (Dant, Weaven, Baker, & Jeon, 2013). The ownership of
multi-unit franchising stores may increase conflict and fuel opportu-
nism in a franchise system. Further, multi-unit franchisees are more
familiar with the latitude that franchisors will give them in their daily
7
Residual centering method provides stable regression coefficients. The
coefficients of the first order-effect terms (e.g., behavioral control, outcome
control, and relationship age) remain unchanged when the interaction terms
are entered into the equation. The method also eliminates multi-collinearity
problems because the interaction term is uncorrelated with the first-order effect
terms (Hair, Hult, Ringle, & Sarstedt, 2016; Little et al., 2006).

366
J.L. Crosno, P.Y. Tong
operations. Hence, multi-unit franchisees know which guidelines they
must adhere to and which ones they can shirk. Lastly, multi-unit owners
can capitalize on economies of scale, best practices, and knowledge
sharing between its franchised units, which may enhance performance.
Franchisee dependence is defined as a franchisee's need to maintain
the relationship with the franchisor in order to achieve its desired goals
(Frazier, 1983). Research suggests that when one party in an exchange
relationship is more dependent than the other party, there will be more
dysfunction in the relationship (Anderson & Weitz, 1989), including
higher levels of conflict (Kumar, Scheer, & Steenkamp, 1995) and op-
portunistic tendencies (Gundlach & Cadotte, 1994); ultimately, it will
affect performance adversely (Scheer, Miao, & Palmatier, 2015). Fran-
chisee dependence is measured with a three-item Likert scale based on
Lusch and Brown (1996).
Environmental uncertainty is defined as unanticipated changes in
the circumstances surrounding an exchange (Noordewier, John, &
Nevin, 1990). Volatile, unpredictable business environments make it
more difficult to control agents (Anderson, 1985). This difficulty is
expected to exacerbate agent opportunism and conflict in the principal-
agent relationship. Furthermore, volatile environments may undermine
the consistency of the market offering and/or impact franchisee per-
formance (i.e., sales growth, cash flows, and profitability).
4.3. Measurement validation procedures
First, we examined the item-to-total correlations to identify and
drop items that were not capturing the construct domain. Next, the
internal consistency of the measures was assessed. Cronbach's alpha
and composite reliability for all the scales meet the criterion of > 0.70
(Fornell & Larcker, 1981; Nunnally, 1978) and the variance extracted
exceeds the recommended value of 0.50 (Hair, Anderson, Tatham, &
Black, 1998). Next, measure validation procedures outlined by
Anderson and Gerbing (1988) were used. Confirmatory factor analysis
was conducted to determine the convergent and discriminant validity of
the constructs. Satisfactory goodness-of-fit indices for the overall mea-
surement model were achieved: χ2 = 444.31, df = 329, p < .01;
RMSEA = 0.046, CFI = 0.96, NNFI = 0.96. Supporting convergent va-
lidity, all items loaded significantly (p < .001) on their respective
constructs. Fornell and Larcker's (1981) test demonstrates discriminant
validity for all pairwise relationships. Jointly, these results indicate
satisfactory reliability and validity of the measures.
4.3.1. Common method variance
We conducted Harman's single factor test to address the issue of
common method variance (CMV) (Podsakoff, MacKenzie, Lee, &
Podsakoff, 2003). Specifically, we conducted a confirmatory factor
analysis with all the items loaded on one single construct. The results
suggest that a single factor cannot explain the majority of the variance
(χ2 = 1748.57, df = 350, p < .01; RMSEA = 0.23, CFI = 0.54,
NNFI = 0.50). We further evaluated the potential bias of CMV by ap-
plying Lindell and Whitney's (2001) marker variable technique. This
approach suggests measuring a marker variable that is conceptually
distinct from all the variables in the study. The smallest correlation
between the marker variable and the other variables in the model
serves as a proxy for CMV. Materialism of the franchisee manager is
used as the marker variable in this study. Materialism is measured with
a three-item Likert scale (with 1 = strongly disagree and 7 = strongly
agree) (Sirgy et al., 1998): 1) “It is important to me to have really nice
things,” 2) “I would like to be rich enough to buy anything I want,” and
3) “I would be happier if I could afford to buy more things.” The
smallest correlation between the marker variable (i.e., materialism) and
the other variables in the model was 0.000038; therefore, the correla-
tions between the variables are adjusted by this amount. The sig-
nificance of correlations remains unchanged after the adjustment.
Taken together, these two tests suggest that common method variance
is not a problem in terms of interpreting the data.
367
Journal of Business Research 92 (2018) 360–373
4.3.2. Non-response bias
The demographics of early and late respondents are compared to
detect non-response bias (Armstrong & Overton, 1977). For the first
wave, early and late respondents are not statistically different based on
the number of stores, year of franchising, age, gender, and education
level. But early respondents earn a higher annual revenue and have
more employees than franchisees who responded late. We also compare
early and late respondents' answers to questions about behavioral
control, outcome control, perfunctory compliance, and consummate
compliance. The only significant difference between the two groups is
that late respondents agree more strongly with the statement “We re-
ceive feedback from the franchisor on the extent to which we achieve
our goals.” Similar to the first wave, early respondents from the second
wave of the study earn higher annual revenues than late respondents
but there are no differences in other attributes. Also, early and late
respondents are not significantly different in their answers to oppor-
tunism, conflict, customer satisfaction, and performance questions.
Together, these results suggest that non-response bias is not a concern
for this study.
5. Results
The hypotheses were tested by estimating the structural equation
model depicted in Fig. 1. The data fit the model acceptably
(χ2 = 730.65, df = 512, p < .01, RMSEA = 0.051, CFI = 0.94,
NNFI = 0.92). The statistical model explains 29% of the variance in
conflict, 32% of the variance in opportunism, and 36% of the variance
in performance. Table 2 reports the parameter estimates of the struc-
tural equation model. Although we did not hypothesize direct effects,
behavioral control is related negatively to perfunctory compliance
(γ = −0.56, p ≤ .05) and related positively to consummate compliance
(γ = 0.54, p ≤ .05). Outcome control is related positively to perfunc-
tory compliance (γ = 0.44, p ≤ .05) but has no association with con-
summate compliance.
5.1. Hypothesis testing
We hypothesized in H1 that, as the relationship ages, the negative
association between behavioral control and perfunctory compliance
will weaken; therefore, we expect the interaction term to have a posi-
tive sign. Although significant, the interaction term is not in the pre-
dicted direction (γ = −0.32, p ≤ .05). H1, therefore, is not supported
(see Fig. 2). For H2, we expect a negative interaction term as we pro-
posed that the positive relationship between outcome control and
perfunctory compliance will weaken over time. Although it is sig-
nificant, the interaction term is not in the predicted direction (γ = 0.51,
p ≤ .05). Hence, H2 is not supported.
For H3, we expect to see a negative interaction term, indicating that
the positive association between behavioral control and consummate
compliance weakens as a relationship ages. The results support H3
(γ = −0.32, p ≤ .05). Contrarily, a positive interaction term is pro-
posed in H4, as we expect that the negative relationship between out-
come control and consummate compliance will weaken as a relation-
ship ages. Hence, the results provide support for H4 (γ = 0.53, p ≤ .05).
Perfunctory compliance is related positively to conflict (β = 0.27,
p ≤ .05) while consummate compliance is not significantly related to
conflict, lending support to H5a but not H5b. As predicted, perfunctory
compliance is related positively to opportunism (β = 0.36, p ≤ .05) and
consummate compliance is related negatively to opportunism
(β = −0.27, p ≤ .05). Hence, both H6a and H6b are supported.
Contrary to H7a and H7b, perfunctory compliance is related positively
to performance (β = 0.26, p ≤ .05) and consummate compliance is
related negatively to performance (β = −0.25, p ≤ .05). These results
will be further discussed in the next section.
J.L. Crosno, P.Y. Tong Journal of Business Research 92 (2018) 360–373

Table 2 to conflict and opportunism, whereas consummate compliance is re-

Results for structural equation model. lated negatively to opportunism and not related significantly to conflict.
Direct paths Std. estimate t-Value Hypotheses Finally, and unexpectedly, perfunctory compliance is related positively
(Exp. sign) to performance and consummate compliance is related negatively to
performance. Managerial and theoretical implications of these findings
Control → Compliance
will be discussed in the next two sections.
Behavioral Control −0.56a −2.50
(BC) → Perfunctory Compliance
Behavioral Control → Consummate 0.54a 2.51 6.1. Managerial implications
Compliance
Outcome Control (OC) → Perfunctory 0.44b 1.99 Our study provides several implications for managers. First, man-
Compliance
agers should be cognizant of how the age of the franchisor-franchisee
Outcome Control → Consummate −0.11 −0.51
Compliance relationship impacts the effect of control on compliance. Our results
Relationship Age (YR) → Perfunctory 0.07 0.56 suggest that behavioral control fosters consummate compliance early in
Compliance franchisor-franchisee relationships. We argue that less experienced
Relationship Age → Consummate −0.04 −0.30
franchisees value the close guidance and feedback offered by the
Compliance
BC*YR → Perfunctory Compliance −0.32 a
−2.11 H1 (+)
franchisor through behavioral control. Behavioral control can be in-
OC*YR → Perfunctory Compliance 0.51a 2.08 H2 (−) formative, providing direction on how to improve business practices
BC*YR → Consummate Compliance −0.32a −2.16 H3 (−) early on (Anderson & Oliver, 1987). Gaining knowledge and compe-
OC*YR → Consummate Compliance 0.53a 2.23 H4 (+) tence about their own operations increases franchisees' intrinsic moti-
Compliance → Outcomes vation and consummate compliance. After franchisees have learned the
Perfunctory Compliance → Conflict 0.27a 2.44 H5a (+) day-to-day operations and developed the skills, knowledge, and cap-
Consummate Compliance → Conflict −0.15 −1.36 H5b (−)
abilities needed to manage the franchise effectively, they value the
Perfunctory 0.36a 3.15 H6a (+)
Compliance → Opportunism direction and feedback from behavioral control less (Oxenfeldt & Kelly,
Consummate −0.27a −2.36 H6b (−) 1968), resulting in less consummate compliance in the later stages of
Compliance → Opportunism the franchisee-franchisor relationship.
Perfunctory 0.26a 2.03 H7a (−) In contrast, the association between outcome control and con-
Compliance → Performance
Consummate −0.25a −2.08 H7b (+)
summate compliance is negative in the early stages of the relationship.
Compliance → Performance Early in the relationship, franchisees may view outcome control as
unhelpful and unsupportive because, by its nature, outcome control
Other Outcomes → Performance
Conflict → Performance −0.37a −3.19 offers little guidance and direction (Anderson & Oliver, 1987). Fran-
Opportunism → Performance −0.15 −1.30 chisees may feel confused and frustrated and, therefore, they are less
Controls → Outcomes likely to reciprocate with consummate compliance. As franchisees gain
Environmental UncertaintyConflict 0.27a 2.98 experience and become more familiar with the operations, they need
Environmental 0.09 1.07 less guidance and feedback and welcome the autonomy provided by
Uncertainty → Opportunism outcome control. Outcome control allows the franchisees to use their
Environmental −0.22a −2.38
own discretion to determine the best means to achieve the end (Crosno
Uncertainty → Performance
Number of Stores → Conflict 0.09 1.00 & Brown, 2015). This form of control signals to the franchisees that the
Number of Stores → Opportunism 0.15b 1.78 franchisors trusts them to operate the franchised outlets effectively.
Number of Stores → Performance 0.06 0.71 Thus, the experienced franchisee responds to outcome control with a
Franchising Fee → Conflict 0.17a 2.00
higher level of consummate compliance.
Franchising Fee → Opportunism 0.18a 2.19
Franchising Fee → Performance 0.14b 1.65 Interestingly, more experienced franchisees are also more likely
Franchising Dependence → Conflict −0.25a −2.86 (than less experienced franchisees) to engage in perfunctory com-
Franchising 0.12 1.41 pliance when the franchisor uses outcome control. Although this ap-
Dependence → Opportunism pears contradictory, it is possible that experienced franchisees learn
Franchising 0.20a 2.27
where they can do the bare minimum without hindering their perfor-
Dependence → Performance
mance. Stated differently, experienced franchisees may go “above and
a
p ≤ .05. beyond” where it matters and scale back their efforts in areas that do
b
p ≤ .10. not provide a high return when they are given the leeway to make these
decisions. Behavioral control, contrary to our prediction, appears to
keep perfunctory compliance in check later in the relationship. There
6. Discussion are several possible explanations for this unexpected finding. First, even
experienced franchisees may perceive some benefit from the direction
This research examines empirically the antecedents and con- and feedback from the franchisor. Hence, behavioral control may
sequences of two forms of compliance – consummate and perfunctory – continue to bolster franchisee competence, resulting in less perfunctory
in franchisor-franchisee relationships. The differential effects of the compliance in the later stages of the relationship. Another possible
antecedents as well as divergent outcomes underscore the importance explanation is that behavioral control, with its more hands on ap-
of investigating the nuances of compliance. Our findings suggest that proach, provides ample opportunities for the franchisee and franchisor
behavioral control is related positively to consummate compliance and to interact. Through these interactions, relational norms may develop
negatively to perfunctory compliance. Outcome control is not related and/or franchises may develop a sense of relatedness with the fran-
significantly to consummate compliance, yet it is related positively to chisor (Deci & Ryan, 1992), quelling perfunctory tendencies. Finally, it
perfunctory compliance. Further, the relationships between both forms is possible that behavioral control ensures that more experienced
of control and compliance are moderated significantly by relationship franchisees do not use their knowledge and experience to take ad-
age. Specifically, behavioral control increases consummate compliance vantage of the franchisor by performing in a perfunctory manner.
in the early stages of franchisor-franchisee relationships, whereas out- Second, while franchisors may seek consummate compliance from
come control increases consummate compliance in the later stages. franchisees, this form of compliance may not yield higher financial
In terms of outcomes, perfunctory compliance is related positively returns. Our study shows that consummate compliance has a direct,

368
J.L. Crosno, P.Y. Tong
Fig. 2. Interactions of control and relationship age on perfunctory and consummate compliance.
negative effect on franchisee financial performance. It is suspected that
wholehearted, willing compliance requires additional resources and
this form of compliance does not necessarily enhance the franchisee's
financial performance.8 Furthermore, consummate compliance may
deter franchisees from evaluating the relevance of the franchisor's po-
licies, procedures, new products, promotions, etc. in their local markets,
which could stymie sales growth. Also, there is likely a time lag be-
tween market changes and the corresponding updates of the franchisor
policies. Solely following extant policy may lead to a failure to respond
to market changes, especially in unstable environments.
The research findings of this study lead us to the following question:
Is it truly beneficial for a franchisee to buy into every policy and di-
rective put forth by the franchisor? The answer is “yes” if the focus is on
ensuring customer satisfaction (Kashyap & Murtha, 2017).9 But the
answer is “no” if the focus is on franchisee financial performance.
Franchisors, however, may also benefit financially from franchisees that
challenge their policies and procedures in a constructive manner in-
stead of buying into even the most frivolous policies. Kashyap and
Murtha (2017, p. 141), for example, report that one franchisee im-
proved upon operating guidelines and was reprimanded, but its im-
provement later became a “brand standard.” Franchisors and fran-
chisees, therefore, should evaluate the merits of consummate
compliance and work cooperatively to find a happy medium.
Lastly, perfunctory compliance is related positively to franchisee
8
Kashyap and Murtha (2017) give examples of hotel franchisees going above
and beyond formal obligations at their own expense: 1) implementing an op-
tional, electronic reservation system, 2) exceeding breakfast standards, and 3)
putting additional supplies in the rooms.
9 Further, our findings suggest that perfunctory and consummate com-
Although not reported in the paper, we developed an alternative model
where customer satisfaction, along with conflict and opportunism, are modeled
as the outcomes of perfunctory and consummate compliance. Aligning with the
results from Kashyap and Murtha (2017), we found that consummate com-
pliance has a positive, significant effect on customer satisfaction (β = 0.25,
p ≤ .10). Given the marginal effect, we report the more parsimonious model's
results.
369
Journal of Business Research 92 (2018) 360–373
performance. One explanation is that franchisees are going through the
motions but not contributing anything more; hence, perfunctory com-
pliance conserves franchisee resources while meeting the bare
minimum of the franchisor's guidelines. The franchisee's financial per-
formance may be improved because this form of compliance reduces its
costs. In addition, perfunctory compliance may increase franchisee sales
when franchisees are complying perfunctorily so that they can adapt to
market changes. Yet, this form of compliance may deteriorate fran-
chisor-franchisee relationships as it heightens conflict and increases
franchisee opportunism, which may hurt the franchisee's offerings and/
or brand equity in the long-term (Wathne & Heide, 2000). Hence,
franchisors and franchisees should consider the potential costs and
benefits of both forms of compliance.
6.2. Theoretical implications
Drawing on self-determination theory, this study posits that fran-
chisee needs change over the course of the franchisor-franchisee re-
lationship. Early in franchisor-franchisee relationships, franchisees
have a stronger need for competence; yet later in the relationship,
franchisees have a stronger need for autonomy. The central tenet of self-
determination theory is that satisfying these needs increases intrinsic
motivation and subsequent performance (Deci & Ryan, 1985). Our re-
sults support this theoretical argument for consummate compliance but
not for perfunctory compliance.
Hence, self-determination theory appears adept at explaining per-
formance “above and beyond” contractual requirements, but this theory
does not shed light on the “going through the motions” behavior.
pliance do not move in tandem (i.e., an increase in consummate com-
pliance does not necessarily correspond to a decrease in perfunctory
compliance). As a result, we suspect that there are different motives and
theoretical underpinnings of these compliance behaviors (see future
research for other theories that may shed some insight on these dif-
ferent forms of compliance).
J.L. Crosno, P.Y. Tong Journal of Business Research 92 (2018) 360–373

Regardless of the underlying motives, this study underscores the
importance of examining perfunctory versus consummate compliance
in predicting relational and financial outcomes. Although institutional
economics identifies control as a means to ensure contractual com-
pliance (Eisenhardt, 1989; Jensen & Meckling, 1976; Wathne & Heide,
2000; Williamson, 1985), it does not explicitly consider the nuances of
compliance. We draw on psychology literature to extend the perspec-
tive of institutional economics. Aligned with the findings in psychology
research, consummate compliance leads to desirable relational out-
comes while perfunctory compliance has the opposite effect. Extending
research in psychology and institutional economics, our study examines
financial performance and finds that consummate, rather than per-
functory, compliance is related negatively to franchisee financial per-
formance (i.e., a potential downside to consummate compliance).
Lastly, although the monitoring aspect of behavioral control may
have potential crowding out effects (e.g., Crosno & Brown, 2015; Heide
et al., 2007), this study demonstrates the upside to this form of control.
Behavioral control may be perceived as “informative,” particularly
early in franchisor-franchisee relationships, leading to more positive
outcomes (Anderson & Oliver, 1987). This form of control signals which
behaviors are needed to be successful and it provides feedback that is
germane to improving the agent's performance and competence
(Anderson & Oliver, 1987). Future research on the informative versus
controlling nature of behavioral control would further our under-
standing of its effects in principal-agent relationships.
6.3. Limitations and future research
Several limitations provide additional avenues for research. First,
this research focuses on ex post control mechanisms (e.g., behavioral
control). Future research should also examine ex ante governance me-
chanisms, such as contractual terms (e.g., contractual completeness,
contractual one-sidedness) and incentive structures (Kashyap et al.,
2012). Franchisees may be more likely to wholeheartedly embrace di-
rectives and policies that are outlined in the contract. Yet incentives
may quell consummate compliance as the behavior is attributed to
external forces (Anderson & Oliver, 1987; Deci & Ryan, 1985). Second,
future research may benefit from examining relational mechanisms,
such as norms, commitment, and trust, as well as the interaction effects
of formal control mechanisms and relational mechanisms on con-
summate and perfunctory compliance (Brown et al., 2000).
Another area for future research is examining the underlying me-
chanisms that lead to perfunctory versus consummate compliance.
Drawing on other theories, such as power-dependence theory (Gaski,
1984; Scheer et al., 2015), equity theory (Adams, 1965), regulatory
focus (Higgins, 1998), and reciprocity and gratitude (Emerson, 1976;
Palmatier, Jarvis, Bechkoff, & Kardes, 2009) may shed some additional
insight. Morgan and Hunt (1994, p. 33), for example, argue that power
and control “yields compliance because firms are compelled to” comply
rather than wanting to comply. Equity theory may also shed light onto
compliance behaviors. This theory suggests that franchisees compare
their inputs and outcomes to a referent other (Adams, 1965). Com-
pliance behaviors (perfunctory and consummate) serve as inputs into
the equity ratio. Franchisees may feel motivated to go beyond con-
tractual requirements in the areas that yield better outcomes, but they
may scale back in other areas to ensure a balanced equity ratio. Ex-
amining the mechanisms underlying different compliance behaviors
will provide managers some more direction on transitioning agents
toward consummate compliance behaviors.10
Yet franchisors should be cognizant of the potential benefits of
perfunctory compliance. Although perfunctory compliance is generally
viewed negatively, this form of compliance may be a franchisee's effort
to respond to the market in a timely manner. Future research, therefore,
may consider defining perfunctory compliance with good attitude/in-
tent and bad attitude/intent.11 Along the same lines, consummate
compliance may result from franchisee self-interest seeking rather than
the franchisee embracing the franchisor's agenda and values. In short,
future research should delve even further into the nuances of com-
pliance.
Finally, future research should also address the methodological
limitations of this research. The sample for this study consisted of
franchisees in the U.S., which may limit the generalizability of the
results. For example, behavioral control may be perceived as “in-
formative” in a franchise system, leading to consummate com-
pliance, yet “controlling” in a buyer-supplier relationship, leading to
perfunctory compliance. In addition, the sample size of this study is
relatively small which increases the chance of failing to reject a false
null hypothesis. Despite this limitation, many hypothesized effects in
the model are still significant, suggesting that these relationships are
quite strong. The 18-month time lag between data collection could
also allow other factors to impact performance. Additional insight
may be gained by examining the model at different intervening
periods. Lastly, data were collected from franchisees. Although there
is no evidence of common method bias, future research should em-
ploy dyadic data to gain a more holistic view of compliance in ex-
change relationships.
7. Conclusion
Attaining agent compliance is essential to ensuring a uniform
market offering and achieving long-term profitability. This study
extends our understanding of compliance by examining the nuances
of compliance and its effect on performance in franchise relation-
ships. Our results suggest behavioral control bolsters consummate
compliance early in the franchisor-franchisee relationship, whereas
outcome control increases consummate compliance later in the re-
lationship. Consummate compliance, in turn, decreases opportunism
and, unexpectedly, performance. Controls, however, are only one of
the many mechanisms principals can leverage to influence the be-
havior of agents. Other ex ante and ex post control mechanisms are
viable avenue for future research. We hope that our study prompts
additional research on the nuances of compliance in principal-agent
relationships.
Acknowledgements
The authors thank James R. Brown for his helpful suggestions on an
earlier version of this manuscript.
Appendix A. Measurement items
A.1. Outcome control (adapted from Jaworski & MacInnis, 1989)
To what extent do you agree with the following statements
(1 = strongly disagree and 7 = strongly agree):
1. The franchisor sets specific performance goals for my firm.*
2. The franchisor evaluates the extent to which we attain the perfor-
mance goals.
3. Our contract requires that we attain certain performance goals.
4. We receive feedback from the franchisor on the extent to which we
achieve our goals.
5. Any reward that we receive from the franchisor depends on how our
performance compares with the goals set by the franchisor.

10
Frazier and Sheth's (1985) framework may also offer some initial steps in
11
this regard. We thank one of our anonymous reviewers for this suggestion.

370
J.L. Crosno, P.Y. Tong
A.2. Behavioral control (adapted from Jaworski & MacInnis, 1989)
To what extent do you agree with the following statements
(1 = strongly disagree and 7 = strongly agree):
1. The franchisor monitors the extent to which we follow established
procedures.
2. The franchisor regularly monitors the quality control that my firm
maintains.
3. Any reward that we receive from the franchisor depends on how
well we follow its standard operating procedures.
4. We are held accountable for following standard operating proce-
dures regardless of the results we achieve.
A.3. Relationship age
How many years have you been a franchisee in this franchise
system?
A.4. Perfunctory compliance
When you comply with your franchisor, to what extent do you agree
with the following statements (1 = strongly disagree and 7 = strongly
agree):
1. We reluctantly accommodate the franchisor's requests.
2. We do the bare minimum to adjust to the franchisor's needs.
3. We somewhat comply with the franchisor's rules and procedures.
4. We are not fully committed to following the policies established by
the franchisor.*
5. When it comes to the franchisor's operating guidelines, we “go
through the motions.”
A.5. Consummate compliance
When you comply with your franchisor, to what extent do you agree
with the following statements (1 = strongly disagree and 7 = strongly
agree):
1. We willingly accommodate the franchisor's requests.
2. We wholeheartedly comply with the franchisor's rules and proce-
dures.
3. We are fully committed to following the policies established by the
franchisor.
4. When adjusting to the franchisor's requests, we do more than is
asked of us.
A.6. Conflict (adapted Gilliland et al., 2010; Jap & Ganesan, 2000)
To what extent do you agree with the following statements
(1 = strongly disagree and 7 = strongly agree):
1. The franchisor and we disagree on how to manage our business.
2. We disagree with this franchisor over how each firm's respective
goals can be best achieved.
3. The relationship between the franchisor and us can be best de-
scribed as tense.*
4. We frequently clash with the franchisor on issues relating to how we
should conduct our business.
A.7. Opportunism (adapted from John, 1984; Brown et al., 2010; Kashyap
et al., 2012)
To what extent do you agree with the following statements
(1 = strongly disagree and 7 = strongly agree):
371
Journal of Business Research 92 (2018) 360–373
1. Sometimes we have had to alter the facts slightly in order to get
what we need from our franchisor.
2. We have sometimes promised our franchisor that we would do
things, though we had no intention of following through.
3. We sometimes breach our formal agreement with the franchisor for
our benefit.
4. On occasion, we have had to lie to our franchisor about certain
things in order to protect our interests.
5. Sometimes we have presented facts to the franchisor in such a way
that made us look good.
6. In order to meet our goals, we have occasionally failed to do things
that are expected based on our agreement with the franchisor.
A.8. Performance (based on Lusch & Brown, 1996; Palmatier et al., 2007)
Compared with other franchisees offering similar products, our
performance is very high in terms of (1 = strongly disagree and
7 = strongly agree):
1. Sales growth
2. Overall profitability
3. Cash flows
A.9. Control variables
A.9.1. Franchisee dependence (Adapted from Lusch & Brown, 1996)
To what extent do you agree with the following statements
(1 = strongly disagree and 7 = strongly agree):
1. We are dependent on our franchisor.
2. Our franchisor would be difficult to replace.
3. Our franchisor would be costly to lose.
A.9.2. Environmental uncertainty (adapted from Anderson, 1988; Heide &
John, 1988)
Describe the business environment for your products (or services).
1. Stable environment – Volatile environment
2. Certain – Uncertain
3. Stable market conditions – Erratic market conditions
4. Predictable demand – Unpredictable demand
A.9.3. Franchising fee
What was the size of your initial franchise fee?
A.9.4. Number of stores
How many franchised outlets do you operate for this franchisor?
*Dropped items.
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Jody L. Crosno (PhD, University of Kentucky) is an Associate Professor at West Virginia
University.
Pui Ying Tong (PhD, West Virginia University) is an Assistant Professor at Illinois State
University.