The purpose of this research is to clarify the influence of clients on resource accumulation and organizational performance. More specifically, we analyze how client scope affects resource scope and organizational performance. Previous studies revealed that organizations’ resource accumulation is highly influenced by their clients. Defining client scope, therefore, is a fundamental strategic choice for organizations. Though relations among client, resource and organizational performance are of great importance, previous studies are confined to normative analyses and qualitative case studies. Thus, we performed a quantitative analysis of professional service firms (PSFs) in a knowledge-intensive industry.
Based on previous research, the following six hypotheses are built and tested.
Hypothesis 1a: The broader the client scope, the broader the resource scope will be.
Hypothesis 1b: The broader the client scope, the narrower the resource scope will be.
Hypothesis 1c: Client scope has marginal effect on resource scope.
Hypothesis 2a: The broader the client scope, the better the organizational performance will be.
Hypothesis 2b: The broader the client scope, the worse the organizational performance will be.
Hypothesis 2c: Client scope has marginal effect on organizational performance.
Our targets are the top 100 patent firms in China. The data was collected from the “Chinese Patent Firm Yearbook 2015” published by HATSUMEI-TSUSHIN SHA. Because of missing data, the final dataset contains 79 patent firms.
As the results of our two regression analysis Hypothesis 1a, 1c, 2a and 2c are supported. In other words, we found that organizations which have broader client scope tend to have broader resource scope and organizations which have broader client scope tend to have higher performance. However, we observe similar effects, known as being “stuck in the middle”, between customer scope and organizational performance. Unless the client scope exceeds a certain point, organizational performance is decreasing.
