The dynamics of interorganizational relations in the market for professional services

Carnegie Mellon University, Pittsburgh PA

Investigators

Abstract

This study asks how industrial markets for auditing and advertising services operate. In particular, how are ties between service providers and their clients formed and sustained? Such ties form interorganizational networks that influence the social structure of our economy. The particular research focus in this project is how interpersonal individual attachments between key executives and directors in client firms strengthen or weaken interorganizational relations. Sustained ties may be a basis for continuity but also a basis for rigidity. How are the needs for continuity and renewal balanced? How do they affect performance in the relationship? The study will be conducted using data collected from past research by the PI, archival sources, and industrial databases. These data will be merged and analyzed primarily using event history methods. In the case of auditing, we will examine if and when continuity in auditor-client relations can threaten auditor independence. This in part was the problem with audit failures at Enron. The broader impacts of the proposed work are several. The work provides opportunities for graduate student research and training. The project will generate data of interest to other researchers that will be made readily available to them along with software tools to use the data. The results will be disseminated in classroom teaching, executive education, journal articles, professional conferences and meetings. For policy makers this study of auditor independence will provide insight into the conditions under which longer-term attachments between auditors and clients threaten auditor independence.