PROFESSIONAL REFERRALS: KEEPING-WHILE-GIVING, RECIPROCATION, AND THE TRANSFER OF OPPORTUNITIES AMONG ENTREPRENEURIAL PROFESSIONALS

Abstract

Through inductive research, I explored the dynamic process between entrepreneurial professionals in sending and receiving professional referrals. I define a professional referral as an entrepreneurial professional advising a client to instead do business with a specific other professional within the same industry. While considering the needs of the client, these entrepreneurs involved in the professions must transfer a valuable opportunity to a competitor. Prior research indicates that entrepreneurial professionals should refer opportunities based on skill and specialty, should receive fees for referrals, and should select referral recipients based on tie formation mechanisms, trust, and reputation protection. Yet professional referrals involve unique complexities, as they occupy a vague conceptual space between economic and social exchange. This paper addresses the interplay of these obligations. By using a grounded theory methodology, I was able to generate an emergent model and mid-level theory. I interviewed 42 lawyers, using semi-structured interviews. The model is arranged into three transitional decisions: refer the opportunity, select a referral recipient, and establish (or terminate) a referral routine. For the first decision, in addition to referrals based on objective skill and specialty, I found that entrepreneurial professionals will refer business on subjective costs, including emotional toll and being morally compromised; I term this new dimension social referrals. Next, the entrepreneurial professional must decide to whom the referral will be sent. I found that entrepreneurial professionals are possessive of their clients, as each client represents a long-term revenue stream. Possessiveness results in reciprocity expectations, the most important of which is keeping-while-giving, or the expectation of the return of the same client relationship. Entrepreneurial professionals also set dependability expectations. Expectations directly impact selection, and these relationships are amplified by the presence of tie formation mechanisms. Finally, entrepreneurial professionals establish referral routines; they repeatedly send their referral business to no more than three individuals within a given dimension for exchange. Breaching reciprocity and dependability expectations can cause routines to be terminated, but overall, this final transitional decision occurs by default and can continue indefinitely. These interconnected steps combine to form a middle-range theory of professional referral dynamics.