Sequential Decisions for Location and Service Intensity by Professional Service Firms with Geographically Dispersed Clients

초록

The issues of inseparability, the difficulty of knowledge transfer, and the limited number of service providers requires professional service firms(PSFs) to develop unique service delivery systems to serve geographically dispersed clients. This study examined service location and intensity decisions for a multi-location service delivery system. in other words, this study examined two inter-related questions; 1) how they chose locations in which to practice that lay outside the urban areas where their home offices resided, and 2) how much resources they allocated to the selected location. These two sequential questions are investigated with a generalized Tobit model. This research tested hypotheses using a unique data set of medical oncology specialty group practices in the state of Iowa in the U.S. for the period 1989–2001. This study focused on the service delivery decisions made by these specialized physicians regarding practicing in rural areas near the urban center where they are located. Specifically, this study examined their decisions regarding the locations and intensity of service via visiting consulting clinics(VCC) in rural hospitals. This study found that the practice locations in a given year were determined by the benefits of the location as well as the opportunity costs to serve that location. Furthermore, past experience played an important role in the choices made by these professional service firms. However, the data showed that the number of incumbent competitors does not affect PSF’s location decision. With respect to the level of resource allocation(service intensity) to these locations, the decisions by the PSFs in the sample of this study were driven by many of the same factors as their choices to practice there in the first place. Locations with larger client bases and lower opportunity costs enjoyed higher levels of service intensity. The PSFs also allocated more resources to locations that were not overly attracted to competitors. Although the number of competitors did not affect the choice decision, the service intensity of the incumbent competitors affects the focal PSF’s service intensity. In other words, once a PSF decides to enter the market the PSF tends to provides high level of service intensity when the competitors are allocating more resources.

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