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Offshoring of Accounting Services: Should I Tell My SME Client?
Authors: Sven Tuzovic (QUT, Australia), Rebekah Russell-Bennet (QUT, Australia), Rory Mulcahy (University of the Sunshine Coast)
Offshoring of services, which refers to the subcontracting of service activities to offshore providers, has emerged as a relevant phenomenon in international business (Bunyaratavej et al. 2011; Grappi et al. 2013; Pisani and Ricard 2016). While prior to the turn of the century, offshoring was mostly confined to the manufacturing sector, services offshoring is a relatively new and growing phenomenon, and it is related to the evolution of global business services (Wirtz et al. 2015). According to macroeconomic research business services are the fastest growing segment in the world economy in terms of value added, employment, and trade (Wirtz et al. 2014). The phenomenon of outsourcing has also influenced the entire accounting industry which now offers wide range of services, from bookkeeping, accounts payable, debt collection, billing and invoicing, to complex tax returns preparation (Daley 2008; Mrsik 2017).
Research on offshoring has been conducted in a number of disciplines (e.g., economics, public policy, international business) as well as on different levels of analysis (Musteen et al. 2017). While much attention has focused on the drivers of offshoring (Vecina et al. 2012) and the impact on cost savings and productivity (Yoon 2014), less attention has been paid to the negative effects of offshoring business services on the provider-client relationship. Some researchers argue that offshoring practices can evoke ethical or moral reactions in the public (see Grappi et al. 2013). For managers it is thus critical to understand the mechanisms of why, how and when business clients might evaluate offshoring decisions and practices unfavourably. Furthermore, some scholars argue that only scant attention has been paid to the unique attributes of small ﬁrms (Musteen et al. 2017).
Based on moral theory, status quo bias theory, and literature on innovation resistance, this paper investigates customers’ objections to offshoring accounting services in a business-to-business context. Utilizing panel data from Qualtrics, we conducted an online survey among small and medium sized companies (SMEs) in Australia (n = 268). The model is tested by structural equation modeling methods.
Results indicate that B2B customers have predispositions about services offshoring. Transparency, animosity and perceived risks are negatively related to acceptance of offshoring. This research provides insights on consumers’ behavioral reactions (negative word of mouth, loyalty, switching intentions) towards offshoring in a business-to-business context. The study will help businesses to prevent customer backlash towards their offshoring strategies as they will better understand why clients evaluate offshoring strategies less favorably.