Latent classes of accounting outsourcing firms

Abstract

Purpose Outsourcing of accounting increasingly attracts research interest, but research concerning the impact of the benefits of outsourcing on firm capabilities and performance across firms remains limited. This paper aims to reveal the unobservable latent classes of firms that outsource their accounting functions by testing a research model concerning the topic. Design/methodology/approach The authors build on accounting outsourcing research and adapt a research model from the literature on business services outsourcing. The authors analyze the data from 261 small and medium-sized enterprises in Europe using finite mixture structural equation modeling (FMSEM) and additional methods. Findings The authors reveal three latent classes with different research models. Thriving outsourcers (N = 103) have a positive attitude toward accounting outsourcing and associate competitive capabilities with mediating the relationship from outsourcing benefits to firm performance. Annoyed outsourcers (N = 143) are dissatisfied with their accounting service provider and only associate outsourcing benefits with competitive capabilities. Convenient outsourcers (N = 15) feel comfortable with their current accounting service provider and associate outsourcing benefits with neither capabilities nor with firm performance. Research limitations/implications The study initiates the discussion about the unobservable heterogeneity among accounting outsourcers. The study introduces the use of the FMSEM method in accounting outsourcing research. Practical implications The study offers novel insights concerning accounting outsourcers and proposes original explanations for their outsourcing decisions that would help both the outsourcers and accounting service providers. Originality/value The study might be the first to categorize accounting outsourcers using FMSEM.

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“…A more in-depth study from the point of view of the customers' psychological attitude towards outsourcing services was studied by J. Juntunen et al (2022), who divided outsourcing users into three latent classes: thrivers (have a positive attitude toward accounting outsourcing and associate competitiveness with mediating the relationship from outsourcing benefits to firm performance); dissatisfied (not satisfied with the accounting service, but see the advantages of outsourcing in competitive opportunities); contempt (satisfied with the accounting service and do not associate the benefits of outsourcing with the company's capabilities or performance). In support of this point of view, it is worth mentioning that reasoning the decisions of users opens up the possibility of studying and expanding the market of outsourcing services.…”

COVID-19 turbulence and positive shifts in online purchasing by consumers: modeling the enablers using ISM-MICMAC analysis

“…Kumar (2015) revealed that capabilities related to the buyer-supplier relationship are positively connected with the innovation performance of the buyer. Taponen and Kauppi (2020) suggested regular evaluation of service functions internally as a starting point for the outsourcing (Juntunen et al , 2022; Hanafizadeh and Ravasan, 2017) service decision-making process. Bag et al (2021) state that external purchasing and supply risk management pertains to single sources of supply, fluctuations of prices, inaccuracies of deliveries, supply of poor-quality materials, poor communications from suppliers and technologically backward suppliers.…”

Improvement and evaluation of the financial (accounting) services quality in the era of SARS-COV-2

“…In order to survive on the market, companies are forced to implement new tax and HR obligations in a timely manner. However, not all of them have appropriate technical or personnel resources at their disposal, hence more and more often they decide to outsource accounting services (Burko, 2022;Juntunen et al, 2022;Tsai and Compeau, 2021;Muangmee et al, 2021) Accounting outsourcing has gained importance in the pandemic times. Under the current epidemiological threat of the spread of the SARS-CoV-2 coronavirus, timely fulfilment of all tax obligations has proved difficult.…”

“…The situation created by the coronavirus pandemic has forced companies to change their management practices (Burko, 2022;Juntunen et al, 2022;). Accounting offices also had to adapt to the new reality.…”

“…Improving the quality of the accounting service has become particularly important. In assessing the quality of an accounting service, the accounting office clients' opinions should be taken into consideration (Gambal et al, 2022;Ingaldi and Ulewicz, 2018;Juntunen et al, 2022).…”