Strategic resource decisions to enhance the performance of global engineering services

Abstract

This paper extends our understanding of the internationalisation and firm performance (I-FP) relationship of service firms by considering the influence of strategic decisions on three types of slack resources. The research focusses on an important type of service operations − global engineering services, which are a major part of the global economy and represent a distinctive business model in the contemporary business environment. In doing so, we theorise the I-FP relationship by addressing the knowledge-intensive, project-based and people-centric features of engineering service firms (ESFs); and test the relationship with a carefully assembled dataset containing 12 years’ data from 242 ESFs. We identify a negative overall I-FP relationship, i.e. ESFs’ international expansion leads to worse financial performance in general. The presence of slack resources explains why such a result exists. Our findings have significant implications, both for future research on internationalisation and performance and for firms to effectively deploy their resources to support global service operations in a strategic manner.