Multinational Company (MNC) Client Influence on the Internationalization of Professional Services Firms: A Panel Data Analysis

Purpose - This paper investigates how the internationalization of professional services firms such as corporate law firms is affected by their multinational corporate clients and further explores firm-level characteristics moderating this relationship. Design/Methodology/Approach - The author has analyzed panel data on overseas branch openings of 233 U.S. corporate law firms from 1986 to 2008 using the negative binomial regression. The author also confirmed the robustness of the results by using the two-stage regression model to address some of the endogeneity issues raised in modeling the relationship between multinational corporate clients and their law firm internationalization. Findings - This study found that professional services firms such as corporate law firms are more likely to open overseas branches when they have been more dependent on multinational companies (MNCs) for their business. Moreover, additional results indicate that the effect of multinational corporate clients on the internationalization of U.S. corporate law firms varies by a particular firm-level characteristic such as firm orientation toward external expansion. Research Implications - By emphasizing existing relationships with the prominent market exchange partners (i.e., MNCs) as interorganizational antecedents of firm internationalization in the professional services sector, our study contributes to the literature on service firm internationalization and the adoption (and diffusion) of organizational forms and practices. This study also offers valuable insights for professional services industry participants and managers alike by shedding light on the interaction between the firm’s external environments and its strategy orientation.