Business Growth in Knowledge-Based Services: How Relationalism Affects Demand Side Growth Opportunities
37 Pages Posted: 29 May 2019 Last revised: 2 Jul 2019
Date Written: May 3, 2019
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
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