T. de Groot
- The impact of design choices and market factors on brokerage firms' efficiency
- Journal of European Real Estate Research
- Volume | Issue number
- 4 | 1
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Purpose - The purpose of this paper is to explore how scale and scope of operations, firm age, and the choice to join a franchise formula influences brokerage firms' efficiency.
Design/methodology/approach - Four-year data of 1,282 Dutch real estate brokerage firms is used to compute a relative efficiency measure for all firms. Consecutively, variation in this efficiency measure is explained from the firm and market characteristics.
Findings - The results show that scale and scope have a non-linear, U-shaped, relationship with efficiency. A reversed U-shaped relationship is found between age and efficiency. Finally, being a member of a franchise does not necessarily lead to improved efficiency, but it depends on the franchise formula terms used.
Practical implications - Based on these results, managers of real estate brokerage firms are able to reconsider their own organizational design choices.
Originality/value - Compared to prior studies, this study uses data from multiple years. Further, the analysis also incorporates non-linear effects of scale, scope and age on efficiency. Finally, prior research has only compared efficiency of franchise versus independent firms. This study shows that benefits of a franchise depend on the contract terms.
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