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The chapter investigates the determinants of the extent of foreign services multinationals originating SMOPECs. An inverted U-shaped relationship between the level of technological knowledge and extent of foreign services provision is found, stemming from the facilitating and inhibiting effects of technological knowledge on foreign services provision. Standardization of services and their automation positively moderates this relationship. Overall, the chapter highlights the increased importance of relatively small global service providers from SMOPECs as a new type of multinational that is likely increase in its dominancy in the near future.

As an answer for the limited growth potentials of diversification and internationalization, services became increasingly important for industrial firms in recent years. Based on existing and established business concepts, companies explore new segments in their traditional value chains beyond traditional market penetration strategies: they pursue service transition strategies to open up new sources for growth, even in markets that do not promise great expansion potential. Our paper addresses the issue of economies of scope of service transition. In this context, we first explore the question, to what extent the insights about product diversification strategies from physical goods sectors can be transferred to the service sector. Using competence-based considerations on diversification we focus on dynamic economies of scope, whose central idea is exploration and development of new resources rather than the static exploitation of existing ones. Furthermore, we integrate the largely neglected issue of how the phenomenon of service diversification depends on the industry's life cycle stage. In a small empirical study of the German mechanical engineering industry we demonstrate that diversification steps into services require a shift in the resource and competence base of firms. Using a dynamic perspective, we construct a conceptual framework for analyzing and explaining the advantages of service transition strategies. The developed model describes a service diversification trajectory and points out that the establishment of a profitable service business requires the exploration and development of competences and adequate organizational structures.

Though KIBS constitute only a small proportion of all services, researchers frequently accord them a significance beyond that indicated by their share in employment or value added (Tether & Hipp, 2002; Gallouj, 2002). For example, KIBS are held to play ‘an increasingly dynamic and pivotal role in ‘new’ knowledge-based economies’ (Howells, 2000, p. 4), as sources of important new technologies, high-quality, high-wage employment and wealth creation (Tether, 2004). Unfortunately, while much of the rhetoric seems intuitively reasonable, one inevitably encounters definitional difficulties in delimiting the specifics of innovation in KIBS, with a variety of, more or less operational, working definitions employed by the academic literature (Wong & He, 2005).

Tax professionals in public accounting firms must meet professional standards in working with their clients, but may also face pressure from both their clients and firms when making ethical decisions. The purpose of this study is to examine the influence of client factors on tax professionals’ ethical decision-making. Furthermore, we also investigate how client service climate and different ethical climate types affect these ethical decisions. Based on an experimental design with 149 practicing tax professionals, results indicate that tax professionals are not swayed by client importance or social interaction with the client when making ethical decisions. However, tax professionals are more likely to engage in ethical behavior when their own accounting firm monitors and tracks the quality of client service, whereas unethical behavior is more common when public accounting firms emphasize using personal ethical beliefs in decision-making. The results of the study suggest the importance of strong policies and procedures to promote ethical decision-making in firms.

Despite the importance of the service sector in developed economies and the growth of foreign investments in this sector during the last decade, few studies have undertaken to empirically analyze the factors influencing entry mode choice. The special characteristics of the service sector increase the complexity of the analysis and, thus, traditional explanations of entry mode choice in manufacturing sectors may need to be complemented by other moderating influences. Based on 174 entry decisions of service firms, our results suggest the importance of including strategic variables and the specific nature of services to understand a complex phenomenon, which is not always associated just with efficiency and value-based considerations but also with strategic issues and industry characteristics.

The leading frameworks of internationalization have contributed significantly to our knowledge of how firms internationalize, but do not fully explain how firms actually create and capture value from customers when internationalizing their activities. Understanding the value creation and capture activities defining their business model(s) is critical for firms moving into less familiar markets, and is particularly relevant for service firms where variability is an inherent feature of the firm/client experience. To address this gap, we take a business model perspective to analyze 144 internationalization events of 10 professional service firms. We find that the case firms adopted four different business models when internationalizing, and that single firms may utilize portfolios of business models. Our findings contribute to both the services internationalization and business model literatures by showing how variability in the internationalization process substantiates the need for business model portfolios.

This paper reviews extant contemporary literature in the area of entry mode choice in service firms and analyzes 14 empirical studies conducted in the area. The review is limited to articles which focus specifically on entry mode choice and the determinants of such a choice. The publication time frame covers the period from 1977 to 2003. The review observations in relation to factors such as the origin of the research, the theoretical frameworks underpinning existing entry mode research, methodological approaches and other relevant patterns are presented. The analysis highlights the paucity of empirical research in the area, which in turn has been largely fragmentary and exploratory in nature. It suggests that research sites need to be extended into Europe, alternative research designs need to be considered and the opportunity to conduct some form of collaborative research warrants exploration.

We explore factors that influence the circulation of client–service firm relationships between firms in the same market for professional services. Circulation refers to the dissolution of a client–service firm market tie and the formation of a new tie involving the same client but a new professional service firm. Building on research in social embeddedness and the structure of markets, we argue that the circulation of client–service firm relationships is affected by three social signals: the mobility of exchange managers between professional service firms, the size and market strategy of professional service firms, and the similarity of new service firms to clients’ previous exchange partners. Using data on advertising agency–client market ties, we find that client ties are more likely to circulate to large agencies, agencies with many market ties, and to agencies that are similar to a client's previous advertising agency. The circulation of client ties is also more likely when new agencies hire exchange managers from a client's previous agency. This effect is stronger when exchange managers circulate to agencies of equal or higher status as their previous employer. We discuss the implications of our findings for social embeddedness research and for the study of professional service firms.