In the last few decades, the global business environment has changed dramatically through the rise of emerging economies, liberalization of markets, and advancements in information and communication technologies. As a result, global services, especially professional services, have become one of the faster growing sectors of the world economy (Dotzel, Shankar, & Berry, 2013; Brock & Alon, 2009; Javalgi, Gross, Joseph, & Granot, 2011). Particularly important is the rapid growth of services in emerging markets such as India, where service contributions to GDP as well as service exports far outpace the global average (UNCTAD, 2015).

Often perceived as low-cost providers of basic services, many emerging market service firms are attempting to increase financial performance by climbing the value chain and are increasingly offering high-value, professional services (Milberg & Winkler, 2013). Professional service firms (PSFs) are specialized providers of knowledge-intensive, high-skill services that utilize a welleducated, professional workforce (Reihlin & Apel, 2007), and are traditional in fields such as law, accounting, management consulting, and engineering (von Nordenflycht, 2010). Reflecting the economic development of emerging markets, many emerging market firms are offering traditional professional services as they shift to higher-value offerings, attracted by the promise of higher profits and greater revenue associated with professional services (Gupta, Seshasai, & Ganguly, 2008).

Yet many of these professional service firms struggle to be profitable, as they confront economic problems associated with their emerging market origins (Javalgi & White, 2002) Emerging market firms face a financial dilemma as they move up the services value chain: PSFs encounter a rising cost structure because they intensively utilize higher-wage labor, yet their emerging market status weakens their pricing power to foreign clients who often areunfamiliar with and resist procuring professional services from emerging markets (Oshri, Kotlarsky, & Willcocks, 2011). Rising wage levels at home and price resistance from foreign clients who continue to associate India and other emerging markets with lowcost outsourcing threaten PSF profitability (Fairell, Noshir, & Sascha, 2005; Milberg & Winkler, 2013). To meet these challenges, some successful PSFs have developed capabilities to offer highly innovative services that provide unique, high-quality offerings that are differentiated from the traditional professional services of competitors. Importantly, the services literature (Lee, Ginn, & Naylor, 2009) recognizes that innovativeness of a service is crucial, since innovation tends to enhance financial performance by differentiating offerings, better satisfying user requirements through novel, high-value service solutions (Lowendahl, 2000).