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Author ORCID Identifier

0000-0003-0078-9091

Document Type

Open Access Dissertation

Degree Name

Doctor of Philosophy (PhD)

Degree Program

Economics

Year Degree Awarded

2019

Month Degree Awarded

September

First Advisor

Carol E. Heim

Second Advisor

Fidan Ana Kurtulus

Third Advisor

Donald Tomaskovic-Devey

Subject Categories

Economic History | Economics | Industrial Organization | Labor Economics | Political Economy

Abstract

This dissertation explores the consequences of institutional change in capitalist firms, focusing on vertical dis-integration, the legal boundaries of the firm and what David Weil has called workplace "fissuring," in which corporations place intermediaries (subcontractors, temp agencies, or franchisees) between themselves and workers, often with negative consequences for workers. It focuses specifically on franchising, a type of fissured workplace in which one firm outsources retail operations to smaller, legally independent franchisees. The first chapter uses archival sources to identify the legal and policy changes driving workplace fissuring in the franchising context: specifically the relaxing of antitrust prohibitions on vertical restraints (contractual controls on separate firms, such as price and supplier restrictions). These contractual mechanisms, which allow chains to achieve uniformity and control over their outlets without directly owning them, helped create fissured workplaces in the case of franchising. I show that franchising firms waged a struggle in courts and legislatures to expand their ability to impose vertical restraints, pulling in the legal boundaries of the firm and leaving workers outside.

With a formal model emphasizing the two-level principal-agent problem in franchising (between franchisors and franchisees, and franchisees and workers), the second chapter shows that franchise brands can induce very high levels of franchisee effort by leveraging product market power and one-sided contract terms to reduce the franchisee's bargaining position. Franchising in this context functions as a type of surveillance and labor discipline organizational technology, in which franchise contracts induce franchisees to surveil production workers and extract high levels of effort from them, reducing the investments in monitoring and/or efficiency wages that franchisors would otherwise have to make.

The third chapter exploits a new, hand-collected data set from 530 franchise contracts, to link, to my knowledge for the first time, vertical restraints to workforce characteristics. It uncovers an empirical relationship between contingent, relatively unskilled and low-wage workforces and the likelihood of franchisors imposing vertical restraints. I argue that franchisors impose vertical restraints to target a vulnerable and cheap workforce. By removing alternative profit-making strategies from the franchisees' decision set, these restraints incentivize franchisees to focus on minimizing labor costs and extracting effort from workers for their profit margins.

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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