Over the last decades management and organization researchers have paid quite a lot of attention to the rise of knowledge intensive companies and society's shift to a knowledge economy in general. Some researchers have noted that professional service companies will become "even more prominent in the economies the world over" (Greenwood, Deephouse & Li 2007: 4). At the core of knowledge intensive companies is this "little something" - esoteric knowledge - that although cannot be touched by hand, if used correctly, will turn into something powerful. However, the nature and distinction of professional service firms (PSFs) is still blurry. Which kinds of companies belong to this category and which do not? The existing theory and taxonomy of PSFs needs to be the subject of further empirical testing. Since a lot of the former literature has focused on the "classical" examples of PSFs, it is now essential to analyse some less studied industries.
On the other hand, it is clear that the IT sector and knowledge intensity are strongly tied to each other. Every year numerous new IT companies are established and a lot of hopes and finance is put into those. However, although knowledge also forms the core of the competitiveness of many IT start-ups, no relevant literature studying these types of companies from the perspective of knowledge intensive firms exists. This is necessary as attention to the employee side of start-ups may help to expand the understanding of start-ups and help them to overcome their challenges. For the organization sociological standpoint it is important to get a deeper understanding of software development companies and find out their position among other professional service firms. With this thesis in mind, I propose to highlight some aspects of IT start-ups, take a look at them as professional service companies and compare these empirical findings with the existing theory and typology of PSFs. An important analytical aim of this thesis is clarification of concepts - mainly the concept of professional service firms, but to a smaller extent also the concept of start-up companies. Therefore, much of the purpose of the chosen research methodology and the thesis in its entirety is such a clarification.
This study has four research questions:
1. Which are the main organizational and/or managerial characteristics of an IT start-up?2. To what extent do the organizational peculiarities of IT start-ups arise from their knowledge intensity and to what extent from their specific start-up context? 3. By which aspects are IT start-ups similar to and different from other types of professional service firms?4. How suitable is the existing theory and taxonomy of professional service firms to describing start-ups in the software development industry?
I approached the topic qualitatively, through a comparative case study. I combined secondary data on two cases - two IT start-ups - with interviews conducted with their founders, CEOs and knowledge workers. Empirical findings are seen through the lenses of former research on start-up companies and professional service firms. By doing that, the thesis analyses the suitability of the theory and taxonomy of professional service firms developed by Nordenflycht (2010) to describe professional service start-ups in the software development industry.
As a result of the study, I propose a three layer model which integrates influences and knowledge from the start-up world and industry side with peculiarities and knowledge coming from the worker side. I argue that start-ups in the software development sector can be seen as professional service firms and these are characterized by some common PSF peculiarities, challenges and organizational responses. On the other hand, many aspects that are found to characterize classic PSFs are missing in the case of start-ups in the software development industry. These are professionalization, an opaque quality problem, muted competition, trusteeship norms and organizational slack. This clear distinction of classic PSFs from other kinds of PSFs, and at the same time strong knowledge intensity within these firms, is proof of the need for taxonomy of PSFs. But, when comparing these features with the existing taxonomy of PSFs, these firms would not suit directly either of the categories. Therefore, I suggest that an additional category that includes these types of companies and reflects their peculiarities would be needed.