How professional service firms compete in the market: an exploratory study

Abstract

This study investigates how professional service firms (PSFs) compete in the market. Drawing on strategic marketing literature, a managerial rather than customer perspective is adopted. The study investigates the competitive positions sought by professional service providers and the specific marketing activities actually undertaken to achieve these positions. Thirty-seven depth interviews with senior management from a range of PSFs indicate that firms seek to differentiate themselves by developing long-term relationships, providing better service quality and greater value, and developing brands with strong reputations. Organisations typically seek such interrelated competitive positions simultaneously. A list of marketing activities used by the PSFs to achieve these competitive positions offers practical insights into the specific activities needed to achieve the various competitive positions sought.     

Governance and growth of professional service firms

We argue that partnerships are the optimal governance structure for professional service firms (PSFs) based on our analysis of their need for collegial controls, the use of tacit knowledge, and an investigation of agency costs. However, these factors and the resulting choice of partnership as a governance structure constrain the ability of PSFs to successfully pursue growth strategies. In addition, their growth potential is further circumscribed by diversification limitations, as well as reputational and resource constraints.     

Managerial routines in professional service firms: transforming knowledge into competitive advantages

This paper is about managerial routines in professional service firms (PSFs) and takes a resource-based perspective. It describes how managerial routines can be used to transform capabilities into competitive advantages. The empirical data explore three PSFs facing dilemmas concerning the management of their human resources and their professionals, and show how new managerial routines have been established. It further shows that PSFs' innovations are routine and are mainly reactive. Most routines are directed towards exploration, which is caused by the need to focus on projects for clients who in the daily routines supersede the need for developing HRM routines. Due to the importance of the projects and the markets the PSFs operate in, we will also look at the relations between PSFs and their markets. The concept of managerial routines is seen in relation to exploration and exploitation, which are subsequently used in an empirical analysis. In doing this, the analysis reveals a conflict between external demands from the clients and the internal utilization of the capabilities within the firms.     

Performance of professional service firms from emerging markets: Role of innovative services and firm capabilities

Professional service firms (PSF) from emerging markets face a financial dilemma: PSFs tend to utilize high-wage labor, yet their emerging market status makes foreign clients cautious regarding quality and less willing to pay high prices. To allay these concerns, PSFs may be able to develop attractive, highly innovative services, but as the resource-based view (RBV) notes, this requires emerging market firms to possess critical capabilities to support such a competitive advantage. Relying on services theory, we propose that entrepreneurial orientation (EO) of management and expert human capital (HC) are critical capabilities, enabling a PSF to develop and market innovative services profitably. In testing our model on 201 Indian PSFs, we find a mediating role for innovativeness whereby EO and HC drive service innovation which, in turn, accounts for financial performance. Further, we find EO positively moderates the innovative service–performance relationship as proactive, risk-tolerant managers improve foreign marketing. Insights for theory and practice are provided that enable PSFs to overcome the constraints and challenges of their emerging market origin.     

Delivering ‘effortless experience’ across borders: Managing internal consistency in professional service firms

This article explores how professional service firms (PSFs) manage across borders. When clients require consistent services delivered across multiple locations, especially across borders, then firms need to develop an organization that is sufficiently flexible to be able to support such consistent service delivery. Our discussion is illustrated by the globalization process of law firms. We argue that the globalization of large corporate law firms primarily takes place in terms of investments in the development of protocols, processes and practices that enhance internal consistency such that clients receive an ‘effortless experience’ of the service across multiple locations worldwide. Over the longer term the ability to deliver such effortless experience is dependent upon meaningful integration within and across the firm. Firms that achieve this are building a source of sustainable competitive advantage.     

Public policy influences on the formation of international joint ventures

The literature on international joint ventures (IJVs) devotes little attention to the influence of public policy on the formation of such alliances. This paper examines the influence on the recent growth in IJVs of U.S. and foreign governments’ antitrust, trade, and technology policies. Little evidence supports the claim that U.S. antitrust policy is a critical influence on the decisions of U.S. firms to collaborate with foreign enterprises. IJVs are rarely substitutes for the collaboration among U.S. firms that might develop in the absence of antitrust restrictions. The recent interest by governments in “strategic technology policy” and the growing importance of “managed trade” in some high-technology industries both have created new incentives for the formation of IJVs. There are some important parallels between recent international joint ventures and the international cartel agreements of the interwar period, but modern IJVs do not yet appear to have reproduced the cartelization associated with the international patent-sharing agreements of the interwar period. Nevertheless, the influence of these market-distorting government interventions on the incentives to form IJVs means that the effects of these alliances on economic welfare may be mixed and should be monitored carefully.     

Purchasing UK public sector property and construction professional services: competition v quality

The procurement of UK public services has seen considerable changes during the final 20 years of the millennium. Successive governments have legislated to impose firstly compulsion to compete on price, followed by a duty to achieve best value. Property and construction professional consultants were under an obligation to their professional bodies not to compete on price less than 20 years ago. The first part of this paper chronicles the main stages in this period of great change. Many commentators in the public and private sectors have predicted a decline in service quality as firms have been forced to cut costs in order to survive in highly competitive markets. The second part of the paper reports an empirical study that has investigated whether there is any substance to these predictions. One hundred and eighty nine public sector clients have assessed private sector consultants with a view to establishing whether those consultants appointed by competitive fee tendering perform less well than those appointed by other methods. The development of SURVEYQUAL, a 25 item service quality assessment scale is described briefly. Service quality is not significantly lower for those consultants appointed by competition. However the data suggest that public service clients can positively influence service quality by taking great care with the pre-selection of tenderers.     

武汉城市圈政策网络治理：参与主体与治理模式

武汉城市圈的发展既是提升区域竞争力的需要,也是中部崛起的中坚力量。但是,城市圈内各地方政府机构分属不同的行政区划,形成了版图利益的冲突。这种利益冲突通过更高一级的政府来协调,行政成本巨大,而且改变不了根本的利益诉求。此外,城市圈公共事务的复杂性和社会自组织机制的发展要求一种自下而上的权力分配格局。面对这种难题,经过国外大量实践证实的政策网络治理理论为问题的解决提供了思路。本文在对政策网络治理文献梳理的基础上,针对区域规划、公共产品供给、私人产品供给和民生等不同的政策领域,提出了政府机关为中心、政府引导下的私人企业与非营利组织参与、第三方和私人企业为主政府为辅和全部主体参与四种治理模式。     

Strategy and structure of service multinationals and their impact on linkages with local firms

Drawing on case studies of two leading UK service firms in five host countries (Argentina, Brazil, China, Korea and Malaysia), we examine how the strategy and organization of service multinationals shape the development of linkages with local firms in host economies. We find that there is reduced autonomy of subsidiaries to engage with local firms as a result of relatively centralized strategies of multinationals. Because of global policies ensuring consistency of services or global sourcing policies to reduce costs, service multinationals tend to prefer global suppliers. Backward linkages occur in a few cases when the relationship can be a vehicle for market expansion for the multinational in a particular host market. Local governments play an important role in the cases where backward linkages are developed.     

Pre-seed government venture capital funds

This paper analyses a Pre-seed Fund (PSF) government venture capital (VC) program for the purpose of improving our understanding about effective public policy towards entrepreneurial finance. The PSF program is a public-private partnership started in 2002 for the purpose of fostering more investment in nascent high-tech entrepreneurial firms in Australia. Data from Venture Economics indicate PSFs are the primary provider of seed stage VC in Australia, but PSFs are not more likely to invest in high-tech firms than other types of VC funds. PSFs have smaller portfolios (number of investees) per manager than other types of VC funds, and are more likely to invest in firms resident in the same state, but do not stage and syndicate more frequently than other types of VC funds. Overall, therefore, the structure of the program has given rise to mixed performance in terms of finance and governance provided to nascent high-tech entrepreneurial firms. As well, there is also suggestive evidence that the PSF program diminishes the incentives for Innovation Investment Funds (a previously existing Australian government VC fund program) to invest in seed stage ventures, and hence competing government initiatives appear to be crowding out one another. Further evidence suggests that among the four PSFs in existence, one PSF has outperformed the other PSFs in regards to the investee firm patents and financial statement performance, even though this fund has invested less money and charged lower management fees than its counterparts. Hence, a further implication is that the impact of government-sponsored VC funds depends not only on the design of the program but also on the selection of the VC managers carrying out the investments.

Unlocking the potential to influence government skills policy: a case study of the UK construction industry

Despite a series of national policy initiatives aimed at addressing skills shortages in a number of sectors, little evidence of longer‐term change is apparent. This paper examines concerns expressed by small businesses that their local views are not sought or considered when national training policies and initiatives are either being developed or being implemented, and that the investment in skills development does not appear to adequately represent their skills needs. The research was carried out on the UK construction industry, which is characterized by a small number of large contractors who employ mainly managerial and professional staff, and a large number of small, micro‐ and self‐employed firms that provide, on a subcontract basis, the majority of the industry's demand for a skilled manual workforce. The identification and delivery of vocational education and training at an industry level rests firmly on addressing the skills needs of the small and micro‐type organizations and not those of the large construction firms, although it is the voice of the larger firms that appears to dominate the skills and training development agenda. The public policy model that articulates the requirements for training and skills development in the UK is based on sector‐specific skills councils. This model is examined in relation to the construction sector by drawing upon the experiences of the South Wales region as a case study. Findings indicate that the current construction skills framework, upon which public policy is formulated and delivered, fails to adequately reflect the structure, skills and training priorities of the industry. The tensions that exist in this system are highlighted and the implications for reform of public policy articulation with regard to sector skills councils are discussed.     

Cross-Border Mergers & Acquisitions Policy in Service Markets

We provide facts showing that in service markets: (i) restrictions on foreign direct investment (FDI) are under reform, (ii) cross-border Mergers & Acquisitions dominate as the entry mode of FDI, and (iii) there is often a high market concentration. Based on these facts, we present a model for analyzing cross-border merger and acquisition policy in liberalized service markets taking into account efficiency and market power effects. Our findings suggest that a merger policy, but not a discriminatory policy towards foreigners, seems warranted. Moreover, policies ensuring competition for domestic target firms seem warranted. In this vein, harmonization of the EU takeover regulations may particularly benefit assets owners in countries with many target firms.     

Exploring Factors Influencing the Use of Enterprise Social Networks in Multinational Professional Service Firms

ABSTRACT

Organizations are increasingly implementing enterprise social networks (ESNs) for improved communication and collaboration, as well as enhanced knowledge sharing and innovation among employees. However, the paradoxical relationship between ESN implementation and the promised benefits has been attributed to employees’ underutilization. Our research focuses on factors influencing employees’ decision to use ESN in their work role and draws on case studies of two multinational professional service firms (PSFs) based in Australia. Qualitative data were collected during ten semi-structured interviews with employees from both organizations, to determine their perceptions of ESN usage and capture the factors that influence their use behavior. The findings illustrate that the likelihood of ESN use is significantly influenced by technological, organizational, social and individual factors. A successful ESN use within an organization involves the nexus between these four factors and recommendations are made, as guidelines for organizational actors about how ESNs usage can be increased.     

Harmonization of firm CSR policies across national contexts: Evidence from Brazil & Sweden

We empirically investigate differences in CSR policy adoption between Brazil and Sweden. We find that Brazilian firms adopt CSR policies to a greater extent than Swedish firms. These differences suggest that the Swedish institutional context, where the public sector is the dominant player in the social arena, may have unintended consequences on the adoption of CSR policies by the private sector. We also find that with internationalization, a trend towards harmonization in CSR policy adoption between Brazil and Sweden is likely to happen. These results suggest that Swedish firms seek to gain legitimacy through greater CSR policy adoption at the international level.     

The professional service firm (PSF) in a globalised economy: A study of the efficiency of securities firms in an emerging market

This study explores the efficiency of securities firms in Turkey and offers conceptual and managerial insights utilizing data envelopment analysis. Through a sample of local and foreign owned securities firms in Turkey, we examine the impact of liabilities of foreignness (LOF) and localness (LOL) upon knowledge intensive firm efficiency in an emerging market economy. We have extended this approach through our consideration of liability associated with market globalness (LOMG). Our findings indicate the importance of size for firm efficiency with bank affiliation and foreign ownership also having positive effects on efficiency. Our study makes a contribution conceptually, methodologically and empirically to a growing literature on emerging economies. We also make a valuable addition to the limited empirical work conducted on the securities industry to date. Finally, through our contextualization of Turkish securities firms as professional services firms (PSFs), our research extends the narrow focus on law and accounting which currently dominates the burgeoning research strand on PSFs.     

Corporate social responsibility disclosure in China: Do managerial professional connections and social attention matter?

We examine the effect of managerial professional connections and social attention on corporate social responsibility disclosure. Using a unique sample of Chinese listed firms that includes 7462 firm-year observations from 2009 to 2017, we hypothesize and provide supporting evidence that in emerging markets such as China, firms whose top managers have professional connections are more incentivized to improve corporate social responsibility disclosure. This is particularly the case when firms face significant public and media attention. Additional analysis shows that firms with professional connections tend to be more conservative when choosing accounting policies to maintain their professional reputations. Professional connections bring value to both firms and managers in that professionally connected managers are valued by external investors, have greater job security, and are better compensated. Our results are robust to a series of endogeneity tests and perform well in various robustness tests. Overall, our study suggests that corporate social responsibility decisions are shaped by managerial idiosyncratic characteristics and external institutions.     

A Gap Analysis of a CPA Tax Service and the Implications for Enhancing Service Quality

ABSTRACT

Certified Public Accounting (CPA) firms are “pure” services where the customer is buying the knowledge and expertise of the accounting professional. Marketing the “expertise” of certified public accounting firms is challenging because the client's expected and perceived levels of service quality is not clearly understood. This article presents a service blueprint of an income tax service and highlights potential failure points that can impact process and outcome qualities. Some recommendations are made for improving the tax service to achieve higher levels of service quality.     

Small and Medium-Sized Enterprises and IT Diffusion Policies in Europe

The main argument to justify an information technology (IT) diffusion policy for small and medium-sized enterprises (SMEs) is that IT could act as a catalyzer to the SMEs' growth, which is important because of the role played by these firms in innovation and regional development. However, due to the heterogeneity of SMEs, present IT diffusion policies in Europe are reaching only a limited number of these firms. The aim of this paper is to discuss the obstacles to the implementation of an IT diffusion policy for SMEs. The main arguments that justify a policy for IT diffusion in SMEs, and the main initiatives taken for IT diffusion in these firms in European countries are summarized. The shortcomings of present policies will be discussed, together with possibilities to increase IT diffusion in SMEs.     

Accounting Career Cycles

Abstract

This paper examines the career cycle of accountants in public firms in order to develop methods to extend intra-organizational careers and thus improve customer service. A model of the public accountant's career cycle is developed to facilitate this purpose and expose the effects internal CPA firm policies have on small business clients. Accounting firms are encouraged to revise existing career development patterns. Small businesses should consider implications of potential consultant career cycle policies on perceptions of engagement quality and costs.     

Rigidity in SME export commencement decisions

In an increasingly globalised world, firms generally have become more internationalised utilising a range of different modes of operation. In the case of small-medium sized enterprises (SMEs), exporting is the favoured mode of international market entry, at least in the early stages of internationalisation, and many governments have supported SME exports through export promotion policies because of the importance of SMEs in employment creation. However, in spite of this policy focus, in most countries, the proportional involvement of SMEs in exporting remains low, which raises an important question as to what factors are inhibiting firms that are successful domestically from exporting. In addressing this question, much scholarly research has focused on the broad concept of ‘export barriers’. These barriers, for example, tariffs, quotas and administrative obstacles, are seen as a primary source of export reluctance. This paper takes a different approach to previous studies and proposes that a firm's resistance to exporting can be better understood through an analysis of the behavioural decision process of firms in line with the Uppsala internationalisation model. We propose ‘lateral rigidity’, first introduced in the literature in the 1970s, as an important concept in export commencement. By applying factor analysis to a survey of Australian SMEs, we provide a measurement model for lateral rigidity, revealing its important factors and thus strengthening understanding of firms' export commencement decisions. We conclude by drawing implications for internationalisation theory, practice and public policy and suggesting ways to extend this work through future research.