External accountants’ business advice and SME performance
Abstract
Purpose
This study aims to investigate whether “small- and medium-sized enterprises” (SMEs) benefit from their external accountants’ business advice through enhanced firm performance. Most SMEs draw on external support, and their main advisors are external accountants (Bennett and Robson, 1999). The resource-based view of the firm suggests that firms will seek external support if they perceive a gap in their internal resources.
Design/methodology/approach
Data were collected from a questionnaire mailed to a random sample of Australian SMEs, defined as businesses having between 5 and 200 full-time employees.
Findings
An analysis of 380 survey respondents confirms a positive relationship between the voluntary purchase of business advice and SME performance, and that SME performance is further enhanced when business advice is purchased jointly with auditing. These relationships apply to the small (5-49 employees) but not to the medium-sized (50-200 employees) businesses. Findings are consistent with smaller firms having narrower resource bases and thus a greater need to source business advice.
Practical implications
The accounting profession has long encouraged a broadening of its service base, and evidence that small businesses perceive a performance benefit from their accountants’ business advice provides support for the profession’s strategy.
Originality/value
This research extends the empirical literature investigating the link between the business advice of an external accountant and SME performance. It explains small firms’ demand for business advice by extending the application of the resource-based view of the firm and provides new evidence consistent with “knowledge spillover” from auditing to business advice in the small firm environment.
Keywords
Acknowledgements
The author is grateful for comments received for earlier versions of this paper from seminar participants at City University of Hong Kong and Monash University, and at the American Accounting Association, the International Symposium on Audit Research and the Accounting Association of Australia and New Zealand annual conferences. The comments of Roger Simnett and financial assistance in the form of an AU$10,000 research grant from CPA Australia are much appreciated.
Citation
Carey, P.J. (2015), "External accountants’ business advice and SME performance", Pacific Accounting Review, Vol. 27 No. 2, pp. 166-188. https://doi.org/10.1108/PAR-04-2013-0020
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited