1- Introduction

2- Development of theoretical framework

3- Method

4- Results

5- Discussion and conclusion

References

Abstract

Prior literature informs us that a company’s decision to outsource a business process depends on process characteristics such as how frequently the process is performed or how specific the assets required by the process are. In this article, we compare the effects of accounting process characteristics on outsourcing decisions across users of traditional and cloud-based accounting information systems (AIS). By focusing on outsourcing of accounting processes among small and medium sized enterprises, we investigate the effect of five business process characteristics (frequency, human asset specificity, uncertainty, information intensity, and need for customer contact) on the outsourcing decision. Our results reveal that process frequency has a weaker negative effect on the outsourcing decision among users of cloud-based AIS. This appears to contribute to users of cloud-based AIS outsourcing a larger variety of accounting processes. Compared to traditional AIS, the inherent properties of cloud-based AIS such as ubiquitous access, scalability, and integration seem to encourage users of cloud-based AIS to also outsource processes that are frequently performed.

Introduction

During the last few decades, the business process outsourcing (BPO) market has expanded rapidly as more and more companies outsource a wider range of business functions to professional service providers (Asatiani et al., 2019; Lacity et al., 2016). The rationale for outsourcing processes within these functions is simple: it is often cheaper to acquire (buy) services from a professional from the market than it is to develop and maintain the required competence to do (make) them in-house (Fill and Visser, 2000). This make-or-buy decision lies at the core of the substantial body of literature on outsourcing, in which one of the main questions has been whether the business process characteristics influence this decision. The increasing BPO trend can be partially attributed to the increased use of cloud-based information systems that facilitate outsourcing by reducing transaction costs associated with setting up an outsourcing relationship (Clemons et al., 1993; Gurbaxani and Whang, 1991; Han and Mithas, 2013). A key mechanism through which the use of cloud-based information systems enables outsourcing is that it allows the business process groups to be disaggregated into smaller processes1 that can transcend organizational or geographic boundaries (Apte and Mason, 1995; Quinn, 1992), which, in turn, allows the processes to be organized more efficiently between the outsourcer and the outsourcing service provider. This increases flexibility in how the delivery of processes can be organized, thus enabling companies to both reduce costs and concentrate on core processes (Apte and Mason, 1995; Jacobides, 2005; Kedia and Mukherjee, 2009; Mithas and Whitaker, 2007). However, disaggregation can also complicate outsourcing decisions. Instead of merely choosing whether to outsource a business process, companies that practice disaggregation need to make many processlevel micro-decisions. This disaggregation of business processes is especially prevalent in accounting. In today’s accounting outsourcing market, a company can decide to outsource only payroll tax calculation and retain control over the other payrollrelated processes, such as payments and reporting to government agencies. Therefore, to achieve the most efficient work arrangement, the company would need to carefully consider which parts of the process group to outsource.

We develop a measure to capture an audit firm’s competitive position in a local audit market based on the transaction costs of changing audit firms included in DeAngelo’s (1981) multi-period audit pricing model. Audit markets in the U.S. and elsewhere have clearly become more concentrated since the late 1980s after several rounds of consolidation among the largest public accounting firms (Ferguson et al., 2014). The nature of competition among audit firms has been of concern to regulators (e.g., Subcommittee on Reports, Accounting and Management of the Commission on Government Operations U.S. Senate, 1977; Government Accountability Office [GAO], 2003, 2008) and of interest to researchers (e.g., Dopuch and Simunic, 1980). Regulators’ concerns center on the possibility that a lack of competition among audit firms will lead to higher audit prices, lower audit quality, and hence a lower quality of financial reporting by companies. Auditor competition is therefore an important issue, but to understand the nature of competition, it is essential for auditors’ competitive positions to be properly measured. We develop our measure based on the effects of variations in the size of suppliers (audit firms) in a market on audit service production and pricing. It is well known that client companies retain their audit firms for multiple years, rather than changing them every few years, presumably because the transaction costs (i.e., audit firm learning costs and client-incurred switching costs) of audit firm change are non-trivial. This leads to the multi-period pricing of audit services analyzed in DeAngelo (1981), Magee and Tseng (1990), and Sabac and Simunic (2001). We argue that the competitive pressure on any incumbent audit firm’s fees depends fundamentally upon the ease with which the audit firm’s clients can switch to a competing audit firm. If the transaction costs are low, the ability of the incumbent audit firm to extract economic rents from clients is limited;1 conversely, high costs of changing auditors give an incumbent auditor greater pricing power. We conjecture that transaction costs are decreasing in the relative operational size differences among competing audit firms in a market. The greater the operational size difference between the largest available supplier (auditor) and the incumbent supplier, the lower will be the transaction costs for a client of the incumbent firm to switch to the largest supplier and hence the lower the incumbent’s audit fee.

مقاله سال 2016

There has been significant recent debate about the place of government-funded collaborative research in Australia. In particular, the ability of the flagship vehicle for collaborative applied research between the university sector and industry, namely the Australian Government’s Cooperative Research Centre (CRC) Program, to deliver financially sustainable, long-term engagement between the two sectors has been questioned. Indeed, the CRC Program has been criticised in a number of official reports, such as the Commission of Audit Report (2014), the Productivity Commission (2007) and the O’Kane (2008) review. For example,the Commission of Audit Report (2014) claims that collaborative research does not appear to rank highly on the agenda of industry, with Australian businesses not necessarily seeing the lack of collaboration with academia as an impediment to innovation (ABS, 2012). These pessimistic thoughts would appear to have guided the Australian Government’s recent decision to cut back the Program’s budget by $80 million. This move suggests that there is some doubt about the CRC Program’s ability to deliver what the Chief Scientist of Australia, ProfessorRalphSlatyer,had inmind whenhe oversaw the Program’s establishment in 1991, this being the creation of financially self-sufficient CRCs that, in time, would not require additional governmentfunding (O’Kane, 2008; Allen Consulting Group, 2012).

Numerous program reviews have demonstrated the broader economic benefits associated with the CRC Program (e.g. Howard Partners, 2003; O’Kane, 2008; Allen Consulting Group, 2012). It remains unclear, however, if the current CRC model is the most appropriate vehicle to achieve ongoing, financially sustainable collaborative relationships between industry and academia. In fact, O’Kane (2008, p. 54) observed that ‘self-sufficiency has proven to be out of reach’ and that ‘there has been a potential for CRC energies to be diverted from the main game’, which, of course, is the facilitation of interaction between universities and industry. The University of Queensland, in a submission to the National Innovation System (NIS) review in 2008, highlighted the alterative goal that a CRC’s prime objective is survival as an organisation after the cessation of government funding, rather than the facilitation of interaction between universities and industry. Attempts at organisational survival rather than nurturing ongoing industry-university collaboration also adversely affect the Program’s capacity to support innovation. This is because established CRCs crowd out new centres by re-bidding for CRC funding (O’Kane, 2008). From a national perspective, cross-sector specific grant funding such as the CRC Program, in addition to R&D tax concessions gained by businesses contributing to CRCs, may skew investment decisions by industries and only benefit the private sector, with ‘the risk of providing support to projects with low potential spill-overs and those that would be undertaken in the absence of public subsidies’ (Productivity Commission, 2007, p. 450).

In view of the above, a thorough investigation into the ability of the current CRC model to deliver longer-term collaboration between industry and academia is required. This, of course, is a problem that drives to the very core of contemporary debates relating to the role of universities in national science and technology (S&T) policy, the more so given that cross-sector collaborative research and development (R&D) has increasingly been promoted as a means to harness pre-competitive as well as missioncritical technologies by bringing together scientific and technical capacities (Boardman and Gray, 2010). Yet Australia’s apparent underperformance in the intensity of collaboration between industry and universities, at least when compared to that of other developed countries (OECD, 2013), suggests that Australian businesses have been looking for research providers outside of academia, or have preferred in-house research to some extent. All this ostensibly suggests that the benefits of collaborative applied research to the entities engaging in the current CRC Program are not sufficient to cover the implicit costs to maintain ongoing relationships between academia and industry after the initial funding periodhas expired, atleast without additional governmentfunding. This article therefore aims to unpack the implicit costs associated with the CRC governance model using transaction cost theory (hereafter TCT). It also intends to propose a framework of broad structural prescriptions necessary for the development of genuinely sustainable research collaborations that do not rely unduly on government funding

مقاله سال 2016

 مجله اسکاندیناویایی مدیریت – Scandinavian Journal of Management

1. Introduction

International joint ventures (IJVs) are among the most prominent modes of international business today (Madhok, 1995; Mainela & Puhakka, 2008; Park & Harris, 2014). Yet IJVs have been reported as having a high rate of failure (Hsieh, Rodrigues, & Child, 2010; Kobernyuk, Stiles, & Ellson, 2014). This has led researchers to investigate the factors that enhance or impede their performance (see Ren, Gray, & Kim, 2009 for a review). In particular, inter-partner opportunism has been proposed in the literature as a major cause of unsatisfactory IJV performance, because it hampers inter-partner confidence, commitment and reciprocity; impairs collaborative effects and synergy creation; increases transaction costs; and impedes IJV evolution and growth by increasing uncertainty (Hennart & Zeng, 2005; Luo, 2007a). Researchers have identified various sources of interpartner opportunism in IJVs. These sources include: weak property rights of invested resources in IJVs (Hennart & Zeng, 2005), external uncertainty, inter-partner goal disparity, resource misfit, cultural dissimilarity, bargaining asymmetry, and internal uncertainty (Luo, 2006), external uncertainty and inter-firm psychic distance (Katsikeas, Skarmeas, & Bello, 2009), inter-partner asymmetric dependence, payoff inequity, cultural diversity, goal incompatibility and pressures for quick results (Das & Rahman, 2010). These investigations advance our understandings of the sources of inter-partner opportunism, however we have limited understanding of the mechanisms that reduce opportunism in IJVs (Hennart & Zeng, 2005).

The study of IJVs has been a prolific area of research, even though there are different interpretations of IJVs. Hennart (1993) points out that IJVs are joint hierarchy, and therefore require many structural factors to curb opportunism. Ouchi (1979) suggests that IJVs are ‘clan-like’ organizational forms that require many relational qualities to curb opportunism. Corresponding to these interpretations, two different research streams have emerged (see Hennart & Zeng, 2005 for a literature review). One stream, rooted in transaction cost economics (TCE), is mainly concerned with examining the underlying structural characteristics of IJV as an explanation for reducing opportunism in IJVs. For instance, Parkhe (1993) and Zhang and Rajagopalan (2002) empirically verify the important role of inter-partner dependence in curtailing opportunism. Hennart and Zeng’s (2005) theoretical study proposes dependence and resource complementarity between IJV partners as potential solutions to opportunism. Luo (2007a) empirically validates the importance of contract and equity share between IJV partners in reducing opportunism. Das and Rahman’s (2010) conceptual study suggests inter-partner equity share and dependence as structural solutions to opportunism. Hence, in this stream, the various structural characteristics of IJV are considered to be mechanisms that reduce opportunism in IJVs.

The other stream, rooted in social exchange theory (SET), is mainly concerned with examining the underlying social characteristics between IJV partners as an explanation for reducing opportunism in IJVs. For example, Wathne and Heide (2000) introduce the notion that inter-partner socialization efforts, which are based on cultural adaptation and trust, can be potential deterrents to opportunism along with monitoring and control. Kale, Singh, and Perlmutter (2000) empirically show that relational capital between partners, which is based on trust and interaction, deters opportunism. Deeds and Hill (1998) find significant evidence that a strong relationship between partners is a more effective deterrent of opportunistic behaviour than hostages or rigorous contractual arrangements. Hence, in this stream, the various social characteristics between IJV partner firms are considered as mechanisms that reduce opportunism in IJVs. Rarely have the two streams been combined in order to provide a comprehensive understanding of social and structural mechanisms that reduce opportunism in IJVs (Luo, 2007a). Further, a growing number of studies share the view that the economic structure of IJV exchange is socially embedded, and therefore social and structural mechanisms jointly improve IJV performance (e.g., Luo, 2002a, 2002b, 2008; Yan & Gray, 1994). These scholars have views that both social and structural mechanisms have some weaknesses and when used together complement each other’s weaknesses and enhance IJV performance. However, prior research has not investigated the interactions between structural and social mechanisms in reducing opportunism. Hennart and Zeng (2005), Luo (2006, 2007a) and Jiang, Li, Gao, Bao, and Jiang (2013) maintain that future study is needed especially to investigate the interactions between structural and social mechanisms in reducing opportunism because understanding the way these mechanisms interact in curtailing opportunism is very important.