Professional as Agent and Co-Producer: Asymmetry and Mutuality in the Value Creation of Professional Service Firms.
Peer reviewed, Journal article
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Original versionProceedings IFKAD 2016, 11:16-28
Purpose – This conceptual paper address es the nature of value creation in professional service firms (PSFs). An extensive number of scholars have been looking at PSFs within law, consulting and engineering to understand knowledge as sour ces of competitive advantage. A dominant part of this literature build on agency t heory to suggest that information asymmetry is an important characteristic and precon dition of value creation in professional services. This p aper identifies a contradiction in the notion of information asymmetry in refer ence to professional services firms. Design/methodology/approach – The paper reviews theoretical contributions explaining the value creation processes in PSFs. While the context of prof essional services might be considered marginal in reference to agency theory, knowledge ha s been identified as one of the key sources of competitive advantage in the 21st century , and understanding how to develop and leverage such sources of advantage has gained exten sive interest. In addition, the context of knowledge intensi ve and professional services ha s been referred to as extreme and strategically relevan t to understand knowledge base d value creation. Originality/value – We argue that it is necessary to revisit the assumption of inf ormation asymmetry for two main reasons: First, any asymmetry that is pr oposed to exist is that of knowledge rather than information. Secondly, value creation in the context of PSFs is characterized by mutuality rather than asymmetry as co-producti on with clients as a core component in PSFs value creation. While PSFs might have superio r esoteric professional knowledge, buyers often have superior knowledge of their own co ntext and problem. Both of these types of knowledge are relevant in the value crea tion in PSFs due to the contextual and customized nature of the services they provide. Practical implications – Two important contributions are suggested in the paper: Firs t, the characteristics of value creat ion of PSFs should be revised and extended by the 17 inclusion of knowledge asymmetry and mutuality. This is importa nt for practitioners in that the co-operative and mutual nature of value creation needs to be recognized and nurtured, which has impact of the conduct of both suppliers and buyers of professional services. Secondly, this more complex nature of value creation needs to be recognized from an institutional perspectiv e in that the certification of professionals should incorporate and promote the mutuality and the importance of cli ent needs while at the same time emphasising esoteric professional knowledge and attit ude and the desire to deliver what is objectively best for the client