Business Growth in Knowledge-Based Services: Relational Embeddedness and the Breadth of Added Value Opportunities
In: HEC Paris Research Paper No. SPE-2019-1340
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In: HEC Paris Research Paper No. SPE-2019-1340
SSRN
Working paper
In: Organization science, Band 32, Heft 4, S. 1009-1032
ISSN: 1526-5455
The current paper complements and extends traditional Penrosean theories of firm growth by examining how a (supplier) firm's relational embeddedness with its portfolio of existing buyers affects its business growth. Our theorizing rests on the foundation that a firm's business growth stems from its breadth (or volume) of opportunities for creating added value with buyers, which more fully realizes the Penrosean vision that firm growth can be explained by a dynamic interaction between productive resources and demand-side market opportunities. Although relational embeddedness may give a supplier dyadic advantages with focal buyers, which supports business growth, we theorize that it can also lead to narrower added value business opportunities with the supplier's entire portfolio of buyers. Critically, we hypothesize that the effect of relational embeddedness on business growth is moderated by a set of relational and demand-side attributes. These hypotheses are tested on a panel data set of patent law firms (suppliers) and their relationships with corporate clients (buyers). We find that greater relational embeddedness is associated with slower supplier business growth, and consistent with our hypotheses, this negative effect is alleviated when these firms have greater cross-servicing ability and receive more relational commitment from buyers but exacerbated when suppliers hold more buyer-specific knowledge and when buyers undertake more (internal) concurrent sourcing. In turn, our research demonstrates how the attributes of a supplier's relationships with its portfolio of buyers can impact access to new business opportunities and thus opens up new directions for research on firm growth, demand-side strategy and buyer-supplier relationships.
In: Mawdsley, J.K., Paolella, L., & Durand, R. 2022. A Rivalry-Based Theory of Gender Diversity. Forthcoming at Strategic Management Journal.
SSRN
In: HEC Paris Research Paper No. SPE-2017-1216
SSRN
Working paper
In: Organization science, Band 33, Heft 2, S. 518-540
ISSN: 1526-5455
Collaborations between individuals in firms have important implications for the development of relational and human capital. In knowledge-intensive contexts where collaborations are formed to deliver services to clients, collaboration decisions can involve nontrivial tradeoffs between short-term and long-term benefits: individuals and firms must carefully manage the tradeoffs between leveraging existing relational and human capital for the reliable performance of repeat collaboration and creating new relational and human capital through new collaboration. Building from the premise that servicing clients is central to collaboration decisions in human asset–intensive firms, we examine how client-related factors shape collaboration decisions among lawyers (partners) in UK law firms providing M&A legal advisory services. We focus on three key client-related dimensions that we predict govern collaboration decisions: the depth of individual- and firm-level relationships with the focal client, key client attributes that reflect the client's status and its use of different firms to undertake its outsourced work, and client-driven individual- and firm-level resource constraint. Our empirical findings support our proposition that client-related factors influence the pattern of collaborations between individuals in firms. We also reveal how client-related factors at the individual level can have opposite effects on collaboration decisions from those at the firm level. Overall, our findings contribute to research on relational capital, strategic human capital, team formation, professional service firms, and the microfoundations of strategy.