LEVERAGING OR OVERCOMING DISTANCE? GLOBAL STRATEGY AND STRUCTURE OF PROFESSIONAL SERVICE FIRMS

Abstract

In this study, we examine how geographic distance has influenced the strategy and structure of professional service firms as they internationalize. By drawing on three theoretical lensesglobal value chains, virtual teams, and ecosystemswe identify eight governance structures in use by PSFs which rely on one of two distance logics: distance-as-enabler and distance-asbarrier. The tension in location decisions that arise from the two logics is resolved by firms' strategic decisions and is reflected in their governance structure. When the logic of distanceas-enabler is prioritized, PSFs choose a structure that is more unified at the global level. When the logic of distance-as-barrier is upheld, PSFs give greater autonomy to local units or establish loosely connected regionally autonomous partnerships. By differentiating between professional governance and professional practice we further show that greater distance necessitates professional work to be more codified and modularized, while proximity preserves professional work's bespoke nature.

Keywords: Distance, Professional Services, Global Value Chains, Virtual Teams, Platforms