What is a Professional Service Firm? Towards a Theory and Taxonomy of Knowledge Intensive Firms

Abstract

A growing literature on professional service firms is hindered by the ambiguity of its central concept, which leads to an overly-narrow empirical focus and to over-generalizations that may tout inefficiencies as best practice. To address this ambiguity, I develop a theory of the distinctive characteristics of professional service firms and their organizational implications. I identify three distinctive characteristics--knowledge intensity, low capital intensity, and professionalized workforce - with which I propose a taxonomy of four types of knowledge intensive firms - Classic PSFs, Professional Campuses, Neo-PSFs, and Technology Developers - whose varying degrees of professional service intensity predict different organizational features. The analysis highlights the danger of conflating the implications of professionalization with those of knowledge intensity and calls for comparative research across a wider range of professional services.

Keywords: knowledge intensive firms, knowledge intensity, professional services, law firms, human capital

JEL Classification: J44, J54, l23, l84