FRANCHISING IN GOVERNMENT - CAN A PRINCIPAL-AGENT PERSPECTIVE BE THE FIRST STEP TOWARD THE DEVELOPMENT OF A THEORY

In 1995, the federal government started five pilot Franchise Funds (FF ), to study their feasibility for improving productivity through the i ntroduction of competition and capitalizing on specialization and econ omy of size. This paper describes the current approach to the use of F F. It suggests that the relationship between the PF and those that con tract them for service resemble what economists call ''principal-agent relations'' and what they study as ''agency theory.'' The paper concl udes that the vast research on agency relations may help the developme nt of a theory or a conceptual framework for studying and managing FF and contracts with them.