Yours, mine, and ours: Franchising as a means of enhancing the value of intellectual capital for third sector organisations
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The application of the franchise structure can increase the effectiveness of management of intellectual property (IP) in the third sector and so enhance the sector’s economic and social welfare contributions to the global economy.
Third sector enterprise constitutes a significant and growing part of the global economy and is a sector that is growing faster than the general economy in many countries (UN NPI Handbook 2003 and Salamon et al. 2007). Not only is the third sector important because of its economic contribution; it is significant also for its potential to improve the quality of public services and reduce the machinery of the state, while increasing social engagement and development of social capital (Evans and Shields 2000). With this growth and increasing importance, however, comes a range of challenges (Lyons 2001, Powell 2006, Snyder 2006, and Woodworth 2007).
Creative approaches to meeting the challenges of social enterprise are proliferating, becoming more diverse, and extending far beyond the familiar classifications (Lyons 2001, Billis 2010, Fairbourne 2008, Sireau 2011). These new forms of enterprise must be governed and regulated within accepted definitions or in ways necessitating their revision. The selection of the appropriate business structure for any given enterprise is critical to the success of that enterprise (Roberts 2010). Because no single organizational structure can be expected to suit every social enterprise context, it is important to understand how different structures can be employed to serve particular circumstances, objectives and requirements. Determining the right structure for any enterprise is a complex and dynamic process that must encompass considerations of tax liability, personal liability (shareholders, directors, etc), access to capital, managerial and administrative control, purpose of the enterprise, and costs of the structure, among others.
While some research has considered organizational alternatives for third sector initiatives generally, this study considers the significance of the organizational framework with a focus on one structure, the franchise structure, and on one criterion of choice of structure, that of IP management. IP constitutes a significant part of an organization’s value and its operations (Maio 2003); the efficient management of IP is part of good governance (Andayani 2008). Further, while the importance of IP management in the success or failure of commercial enterprise is well documented (King 2003), it has not been studied extensively in the context of social welfare entrepreneurship with its obvious differences, for example in ownership, distribution of profits, and motivations (Farrar 2008, Gollin 2008, Kong 2010). The choice of structure for an organization must therefore include consideration of management of intellectual assets, and the harnessing of the power of IP by and for the beneficiaries of social welfare initiatives.
Given the evidence that some social enterprise fails to adequately manage its IP (Gollin 2008 and Kong 2010) the paper examines the many practical and philosophical reasons for this, reasons that need to be clearly understood in order that they can be effectively addressed. Using a grounded theory approach the study develops a framework of factors and conditions within which to identify and evaluate the particular challenges of IP management for social enterprise (Cane and Kritzer 2010). The chief objective of this research is to examine how franchising as an organizational structure may assist third sector enterprise to efficiently and effectively manage IP. The study therefore applies this framework to assess the efficacy of the franchise model of organization for the management of IP in social enterprise. What is fundamentally important for this research is that franchising is a form of governance that is designed to maximize the value of IP and so offers potential to improve IP management in social enterprise (Spencer 2011).
Despite the controversies that surround legal regimes for the protection of IP, this study outlines the reasons why determining the appropriate legal infrastructure for IP management in the social enterprise context can lead to more efficient practice and increase the potential for productive reforms. The research suggests that franchising as a structure could provide a useful organizational strategy for many of the issues in IP management in social enterprise. NFP organizations can, through the use of the franchise model, formulate viable and effective IP management strategies consistent not only with their operational needs, but also with their philosophical orientations.
It is hoped that this preliminary research will not only stimulate conference discussion, but also may elicit valuable feedback for the progress of further research in this topic and the broader area of choice of structure for third sector enterprise.
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This document has been peer reviewed.