Business Growth in Knowledge-Based Services: How Relationalism Affects Demand Side Growth Opportunities

37 Pages Posted: 29 May 2019 Last revised: 2 Jul 2019

See all articles by John Mawdsley

John Mawdsley

Strategy & Business Policy, HEC Paris

Deepak Somaya

University of Illinois at Urbana-Champaign - Department of Business Administration

Date Written: May 3, 2019

Abstract

In contrast with extant theories of firm growth built on Penrosian ideas of resource and managerial slack, we examine the role of firms’ relational ties with buyers and how they affect growth through their impacts on demand opportunities. Combining insights from the relational view and demand-side strategy, we propose that the business growth of knowledge-based service firms is affected by the breadth of added value opportunities stemming from the relationalism they share with their portfolio of clients. Consistent with our hypotheses, we find that patent law firms suffer a growth penalty from greater relationalism, which is alleviated when firms simultaneously have greater cross-servicing ability and receive more relational commitment from clients, but the growth penalty is stronger when firms hold more client-specific knowledge and when their clients undertake more (internal) concurrent sourcing. In contrast with prior research that highlights the performance advantages of relationalism in dyadic firm-client relationships, our findings highlight the potential disadvantages for growth at the firm level accruing from unilateral relationalism with clients. In turn, our research demonstrates how attributes of a firm’s relationships with its portfolio of buyers can impact access to demand-side opportunities, and thus opens up new directions for research on firm growth.

Keywords: relational ties, firm growth, professional services, added value, clients

Suggested Citation

Mawdsley, John and Somaya, Deepak, Business Growth in Knowledge-Based Services: How Relationalism Affects Demand Side Growth Opportunities (May 3, 2019). HEC Paris Research Paper No. SPE-2019-1340. Available at SSRN: https://ssrn.com/abstract=3382294 or http://dx.doi.org/10.2139/ssrn.3382294

John Mawdsley (Contact Author)

Strategy & Business Policy, HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Deepak Somaya

University of Illinois at Urbana-Champaign - Department of Business Administration ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
17
Abstract Views
172
PlumX Metrics