Entrepreneurial signaling to attract resources: The case of franchising

Steven C. Michael

Research output: Contribution to journalArticlepeer-review


Why firms and individuals reveal information is the subject of considerable theoretical research, but little empirical work has been possible due to a lack of suitable data. In this paper we examine why entrepreneurs selling business opportunities (franchisors) reveal information regarding potential profits (termed earnings claims). Empirical analysis shows that: first, contrary to theory, only a small percentage of franchisors claim; and, second, the franchisors that do claim have lower costs or are responding to competition. In particular, the prediction of theoretical models from economics that resource providers will not transact if information is not disclosed is not supported; resource providers can and do make significant investments even when entrepreneurs refuse to disclose information.

Original languageEnglish (US)
Pages (from-to)405-422
Number of pages18
JournalManagerial and Decision Economics
Issue number6
StatePublished - Sep 2009
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation


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