Assessing the firm-level financial consequences of clustering


Clustering of same-brand outlets has been shown to impact various outlet-level outcomes. However, the effect of clustering on a firm’s overall financial performance is yet to be fully assessed. This study investigates the impact of clustering on the firm’s short-term financial performance, measured as return on assets (ROA). It also assesses the moderating effects of the firm’s share of ownership and marketing spend. An examination of quarterly data of the five large publicly listed quick service restaurant firms operating more than 46,000 outlets across 50 US states from 2018 to 2021 finds that clustering hurts a firm’s ROA. The share of ownership partially helps, whereas marketing spend registers a more robust moderating impact in improving a firm’s ROA. Further, our post hoc analysis finds a significant effect of clustering on a firm’s long-term financial performance measured as stock returns. These results provide important insights to scholars, business owners, and managers.

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