The Impact of Clients on Knowledge Scope and Organizational Performance

An Analysis of Professional Service Firms

Abstract

The purpose of this research is to examine the impact of clients on knowledge and organizational performance. The research question is how breadth and depth of client relationships affect breadth and depth of organizational knowledge and organizational performance. We collected data of the top 100 patent-law firms in Japan for 5 years to construct panel data and employed fixed effect panel regression. The results of empirical analysis show the following three points. First, breadth and depth of client relationships increases breadth of organizational knowledge. Second, depth of client relationships enhances depth of organizational knowledge, meanwhile breadth of client relationships does not. Third, breadth and depth organizational knowledge increase organizational performance, but client relationships have no effects. In sum, client relationships do not directly contribute to organizational performance but they affect organizational performance through accumulated organizational knowledge.