Profitability of the Management Consulting Industry in Norway : An empirical study of factors influencing the profitability of the management consulting industry in Norway

Abstract

Building on resource-based view (RBV) as a theoretical foundation, the purpose of this thesis is to identify and investigate firm specific factors influencing the profitability of management consulting firms operating in Norway. The investigated variables are firm size, firm age, growth rate, productivity, location and lagged profitability. Consequently, the dependent variable is profitability, measured by ROA. The source of data used in this study is secondary data from the database Proff Forvalt in the period 2014-2021. The regression analysis shows that there is a significant relationship for the variable growth rate, productivity, and lagged profitability on profitability. The results of the regression coefficient indicates that growth rate, productivity and lagged profitability have a positive influence on profitability. The empirical results suggest that productivity is the most significant determinant of profitability. No statistically significant relationship was found for the variable firm size, firm age and location on profitability. The lack of significance can be due to several factors that characterize the management consulting industry. Such as, high employee turnover, high flow of experience and digitalization. The nature of the industry counteracts the potential positive relationship of firm size, firm age and location on profitability. This study provides further empirical evidence in a research area where previous studies have conflicting findings, by investigating an unexplored context. Our study uses theories from the RBV in order to better understand the conflicting findings in this research area.