“The Impact of Long-Term Client Relationships on the Performance of Business Service Firms.”

In this paper, we empirically examine the impact oflong-term client relationships on the performance ofbusiness service firms. On the basis ofthe information contained in the Compustat and Comnact Disclosure sets of databases, we find that, over the long run, relationship-oriented business service firms achieve higher returns on their investment than transaction-oriented firms. Importantly, our findings suggest that, unlike for relationshiporiented suppliers ofbusiness goods, such as component parts, long-term client relationships do not improve the productivity ofrelationship-oriented service firms. However, such relationships help business service firms resist price pressures from their customers and add more value to their services over time.