The impact of design choices and market factors on brokerage firms' efficiency

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. © Emerald Group Publishing Limited.