The Importance of Resources in the Internationalization of Professional Service Firms: The Good, the Bad, and The Ugly

Abstract

We need more knowledge about the bases of internationalization and how the resources used can affect the outcomes of this strategy. Specifically, we examine the importance of valuable firm resources, human capital and relational capital (with corporate clients and with foreign governments), to internationalization and their moderation of the internationalization-firm performance relationship in professional service firms. The results show that human capital and relational capital generally have a positive effect on internationalization (however, relational capital with corporate clients is only positive when teamed with strong human capital). Additionally, we find that human capital positively moderates the relationship between internationalization and firm performance. However, neither form of relational capital moderates the internationalization-firm performance relationship. While relational capital with corporate clients has a strong positive effect on firm performance, relational capital with foreign government clients has a negative effect on firm performance.

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

“…Since research on the globalization of law firms from a strategic management perspective (e.g. Brock et al, 2006;Hitt et al, 2006) is limited, we therefore regarded an exploratory approach to this research as the most promising. We sought rich data.…”

“…PSFs have begun to reorganize themselves to provide services on this basis. On the supply side, pressure has arisen from high costs, professional staff recruitment and retention problems, pressure on fees, and the changing nature of competition (Aharoni & Nachum, 2000;Hitt et al, 2006). Therefore, the globalization of the marketplace for professional services is both supply-and demand-led.…”

Knowing your boundaries: Integration opportunities in international professional service firms

“…Seeking to exploit its human capital in new markets, the firm becomes international (Hitt, et al, 2006), leading to increased internal differentiation in the business models delivered by the PSF. Clients also require an 'effortless experience' of professional services across multiple locations worldwide, which increases the need for the global integration of international professional services (Segal-Horn & Dean, 2009).…”

“…Their service deliveries are often provided in close cooperation with clients (Greenwood, et al, 2005;Hitt, et al, 2006;Løwendahl, 1997;Maister, 1993;Robertson, Scarbrough, & Swan, 2003). The value-creation process of professional services can be described as a 'value shop' (Stabell & Fjeldstad, 1998) because the goal is to solve specific client problems (Bettencourt, Ostrom, Brown, & Roundtree, 2002;Løwendahl, Revang, & Fosstenløkken, 2001;von Nordenflycht, 2010).…”

“…Professional services are generally considered to be difficult to standardize (Løwendahl, 1997;Maister, 1993) since knowledgeable individual local experts are central to what these firms offer. Nevertheless, an increasing number of professional service firms (PSFs) are internationalizing and, thereby, gaining scale advantages (Boussebaa, 2009;Brock, 2006;Brock & Powell, 2005;Faulconbridge, Beaverstock, Muzio, & Taylor, 2008;Greenwood & Empson, 2003;Hitt, Bierman, Uhlenbruck, & Shimizu, 2006;Segal-Horn & Dean, 2009, 2007. Our empirical investigations involve different business models in two mature IPSFs that serve both local and global markets.…”