A multi-stage model of governance in ... - Cass Knowledge
A multi-stage model of governance in ... - Cass Knowledge
A multi-stage model of governance in ... - Cass Knowledge
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<strong>Cass</strong> Centre for Pr<strong>of</strong>essional Service Firms – Work<strong>in</strong>g Paper 004 - 2010<br />
<strong>in</strong>corporate (Empson, 2007; Greenwood & Empson, 2003). In addition to the<br />
challenges <strong>of</strong> <strong>in</strong>creas<strong>in</strong>g size and complexity which affect the <strong>governance</strong> <strong>of</strong> all firms,<br />
Greenwood and Empson’s (2003) study highlights five PSF-specific factors which<br />
have caused many pr<strong>of</strong>essional service firms to <strong>in</strong>corporate: <strong>in</strong>creas<strong>in</strong>g<br />
heterogeneity, capital-<strong>in</strong>tensity, commoditization, litigation, and the decl<strong>in</strong><strong>in</strong>g appeal<br />
<strong>of</strong> partnership. In certa<strong>in</strong> sectors, where these factors prevail, there has been a<br />
wholesale flight from partnership.<br />
A limited number <strong>of</strong> studies have begun to explore the implications <strong>of</strong> chang<strong>in</strong>g forms<br />
<strong>of</strong> PSF <strong>governance</strong> for issues such as strength <strong>of</strong> f<strong>in</strong>ancial performance, quality <strong>of</strong><br />
client service, and core pr<strong>in</strong>ciples <strong>of</strong> <strong>governance</strong>. Greenwood, Deephouse, and Li’s<br />
(2007) study <strong>of</strong> consult<strong>in</strong>g firms found that both private corporations and partnerships<br />
outperformed public corporations <strong>in</strong> terms <strong>of</strong> growth <strong>in</strong> revenue and staff numbers. In<br />
terms <strong>of</strong> quality <strong>of</strong> client service, VonNordenflycht’s (2007) study <strong>of</strong> publicly-quoted<br />
and privately-held advertis<strong>in</strong>g agencies found no difference <strong>in</strong> measures <strong>of</strong> creativity.<br />
In terms <strong>of</strong> the core pr<strong>in</strong>ciples <strong>of</strong> <strong>governance</strong>, Empson and Chapman (2006) found<br />
that corporations can ‘mimic’ the partnership form <strong>of</strong> <strong>governance</strong> through deliberate<br />
management <strong>of</strong> their systems and structures.<br />
These recent studies recognize the variety <strong>of</strong> ownership structures that exist with<strong>in</strong><br />
the pr<strong>of</strong>essional service firm sector and have begun to explore the consequences <strong>of</strong><br />
contemporary developments <strong>in</strong> PSF <strong>governance</strong>. However, they are essentially static<br />
<strong>in</strong> their orientation. In other words, they study alternative legal forms but say noth<strong>in</strong>g<br />
about how or why pr<strong>of</strong>essional service firms move between legal forms.<br />
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