Reputation, Diversification, and Organizational Explanations of Performance in Professional Service Firms

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

270 Scopus Citations
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Author(s)

  • Royston Greenwood
  • Stan X. Li
  • Rajshree Prakash
  • David L. Deephouse

Detail(s)

Original languageEnglish
Pages (from-to)661-673
Journal / PublicationOrganization Science
Volume16
Issue number6
Publication statusPublished - Nov 2005
Externally publishedYes

Abstract

Growing interest in knowledge as a competitive asset suggests the benefit of studying professional service firms (PSFs). These firms are highly successful examples of organizations whose ability to manage knowledge is critical to their success. Furthermore, they are worthy of study because they constitute a significant sector of the economy, whether measured by their size, numbers, or influence. Despite their significance, little is known of the determinants of their performance. This paper proposes that the core tasks of PSFs raise unusual strategic and organizational challenges, the resolution of which affects organizational performance. We elaborate the effects of reputation and diversification and contrast them to theory for goods-producing industries. We also hypothesize that PSF managers face a choice in designing structures between the retention and motivation of the professional workforce and transferring knowledge from partners to other professionals. These predictions are tested and supported by data from the largest 100 U.S. accounting firms for the period 1991-2000. The paper thus contributes to a theory of professional service firm management. © 2005 INFORMS.

Research Area(s)

  • Diversification, Leverage, Professional service firms, Reputation

Citation Format(s)

Reputation, Diversification, and Organizational Explanations of Performance in Professional Service Firms. / Greenwood, Royston; Li, Stan X.; Prakash, Rajshree; Deephouse, David L.

In: Organization Science, Vol. 16, No. 6, 11.2005, p. 661-673.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review