Business services markets are very competitive and a key challenge for knowledge-intensive
business service (KIBS) firms is delivering effective solutions for business customers. As
solution providers, KIBS firms need to invest competencies that supports their capacity to solve
customers’ problems. We examine how KIBS firms address this challenge by investigating
how solution-provision competence (SPC), as a firm-level competence, contributes to the
delivery of effective solutions, and how and when KIBS firms leverage SPC to transform
knowledge gained from various search paths into effective solutions for customers. The results
show that distal search enriches knowledge diversity, which helps foster solution-provision
competence but only up to a point, after which the relationship turns negative, with distal search
showing a diminishing effect on solution-provision competence. In addressing the diminishing
returns of distal search to solution-provision competence, we show that higher levels of
proximal search and strategic flexibility reverse the diminishing effect of high levels of distal
search on solution-provision competence; however, employee collaboration did not help
counter the diminishing returns (e.g., marginal benefits). Finally, we demonstrate that solutionprovision
competence helps KIBS firms offer effective solutions tailored to business customers’
specific needs