Cultural and culture-related barriers to the expansion of international hotel companies in Italy. A focus on franchising entry mode.

As a result of the saturation of most domestic markets, in order to guarantee their survival, international companies are seeking to expand internationally (Altinay 2005).
The literature related to the globalization and internationalization of the multinational organizations, has been grouped in two different schools of perspectives: international strategic management and international business (Zhao and Olsen 1997).
The former is more concerned with the assessments and analyses of external environment and internal strengths and weaknesses within an organization. The latter seeks to explain the way international organization expand into foreign markets, including a wholly owned subsidiary at one end, and asset light strategies, such as management contracts and franchising agreements, at the other. Eclectic and transaction cost theories have underpinned researches in international business area.
The eclectic theory, developed by Dunning in 1981 focuses on the relationship between three main variables: ownership-specific advantages of organizations, location-specific advantages of countries and market internalization advantages (Altinay 2007). Dunning and McQueen (1982. Cited by Altinay, 2007) applied for the first time the eclectic theory to the international expansion of hospitality firms.
According to the transaction cost theory, companies can expand internationally through no integration, full integration or by an intermediate degree of integration. The best method is the one that implies the lowest transaction costs (Altinay 2007). This paradigm has remained one of the most influential and has been extensively tested, albeit it has been pointed out that it is unable to explain the level, structure or location of international production (Johnson and Vanetti 2005). Similarly, eclectic theory has been harshly criticized, particularly by Macharzin and Engelhard in 1991.
Overall, although the mentioned models have developed new insights, they remain partial (Altinay 2007). As a result in the 1990s many scholars tried to combine the two models in order to achieve an exhaustive model able to answer "why, where and how" (Altinay, 2007, p.399) international hospitality firms expand internationally (e.g. Erramilli et al. 2002; Contractor and Kundu 1998).
Good summaries of the companies' internationalisation literature has been provided by Litteljohn et al. (2007) and the table 1.6 below lists the factors which have been found to exert an influence on the entry mode choice. What appears to be interesting is that these researches show the tendency to focus on those factors which are believed to be discriminant between the equity and non-equity entry modes, whilst studies on the choice between the different limited resource commitment entry modes such as franchising and management agreements has been analysed by a very limited number of scholars (e.g. Dimou et al., 2003; Dev et al., 2002; Erramilli et al., 2002).

With regard to franchising, two theories have a prominent role in the literature, namely resource scarcity theory and agency theory. Research has mainly focused on domestic, (US) and manufacturing activities (Altinay and Miles, 2006). According to resource scarcity theory franchising is seen as a consequence of and response to a shortage of the necessary resources for expansion. In other words, franchisors use franchising to obtain availability of those resources at disposal of franchisees, such as local market knowledge (Norton, 1988), human and financial capital or managerial talent (Lafontaine and Kaufmann, 1994). However, these authors argued that there are companies which, although having access to credit and capital markets, still prefer to expand through franchising. This preference, obviously cannot be explained exclusively in the light of resource scarcity theory. According to Taylor (2000), agency theory seeks to address this anomaly and it analyses the agency problem arising from the different goals, objectives and perspectives between the parties involved in the agreement. In this regard some studies focused on the relationship between principals and agents. According to Fulop and Forward (1997), in order to achieve a lasting and bearable relationship it is important for franchisors to identify franchisees who are knowledgeable about system demands and with whom it is easy to work. Similarly, Fulop (2000) argued that the success of a franchising network rests upon the promotion and creation of a co-operative environment and the minimization of power and control conflicts.
The first attempts to understand international franchising were made by Etzel and Walker (1973) and Hackett (1976, 1977), focusing on US based franchisors and investigating their international expansion plans (Aydin and Kacker, 1990). The research carried out by Aydin and Kacker (1990), rather focused on understanding why franchisors were mainly focusing on domestic (US) market and underestimating international expansion possibilities. Subsequently, Eroglu (1992) developed a conceptual model of the underlying factors of the American franchise networks' expansion.
Inevitably, these two studies encountered and analysed cultural aspects in relation to international franchising expansion and afterwards, in turn, backed up many other researches exploring the same ground. These and other studies will be reviewed in the following paragraphs, in the attempt to define the role and importance of culture in the internationalisation and international franchising literature. Before this, however, a brief analysis of the concept of culture is provided. After all, as Hofstede (1994) titled one of his papers, the business of international business is culture.