[We’re pleased to welcome authors Carolina Castaldi of the School of Innovation Sciences, Eindhoven University of Technology and Marco S. Giarratana of the Department of Strategy, IE Business School, IE University. They recently published an article in the Journal of Service Research entitled “Diversification, Branding, and Performance of Professional Service Firms,” which is currently free to read for a limited time. Below, Dr. Castaldi reflects on the inspiration for conducting this research:]
What motivated you to pursue this research?
We have been interested for a while in figuring out how service companies manage to grow despite the absence of clear economies of scale/scope. Management consulting firms are an example of firms that define themselves as providing high-end customized services to organizations. If this is the value added that they propose, how can they manage to expand beyond simply hiring more professionals to deliver those specific services? The answer had to be found in the specific way in which these professional service firms diversify.
In what ways is your research innovative, and how do you think it will impact the field?
There is already extensive research on how diversification is at the core of companies’ growth. In this paper we are looking at a very specific type of diversification, namely the transition from offering only services to adding products. In the case of management consulting firms, several new business models are appearing that are based on ICT solutions embedded in software and other tools. These solutions offer clear economies of scale but they change the very nature of the service being offered to clients. What our results suggest is that diversification only translates in economic benefits when it is bounded to services. Moreover, it appears important for these firms to opt for branding strategies based on specialized narrow brands developed for each new service segment.
What advice would you give to new scholars and incoming researchers in this particular field of study?
We would like to encourage more scholars to exploit trademarks data in empirical research at the firm level. In this study we have used trademarks to capture both the product diversification of professional service firms and their branding strategy. Trademarks are registered for specific product and/or service classes. Here we have captured the transition to products by looking at companies shifting their trademark applications towards including service classes. One can also use trademarks to capture the opposite process, namely servitization, i.e. adding services next to products. Trademarks are used extensively across all economic sectors, including service sectors. They are also used by firms of all sizes. These are two properties that make them salient data for constructing novel indicators of market strategies. For more ideas, check out our other papers as well.