schizas & jarvis icsb presentation 18 jun stockholm

The global body for professional accountants

Trust and confidence in SMEs’ use of advisers.

Prof. Robin Jarvis (Brunel University; ACCA)Emmanouil Schizas (ACCA)


THE AGENDA IN BRIEF

• Accountants are the most likely advisers of SMEs in many countries

• Traditional compliance work reduced• The future: business advisers (cross)

selling value-added services


Advice sought for

growth threat or

regulation

Adviser displays technical

skill

Social rapport

established

Adviser wins trust

and privileged

access

Client requests ad-hoc

services Adviser builds new

service line

Adviser acts as

broker to expert

partners

Adviser buys or

develops in house expertise

Adviser provides minimal advice

Blackburn, Carey & Tanewski (2010)

Jarvis & Rigby (2011)


BUT WE ALSO KNOW THAT...

• Few practitioners can market advice• Accountants and clients disagree re:

importance of rapport v. competence• Many SMEs don’t take advice at all• Few SMEs are willing to pay for advice• Studies are mostly qualitative, small n


QUANTITATIVE VALIDATION IS HARD

• The subject is the client only• Easiest to measure use, not trust etc• How would we know if we’re

measuring trust? • Previous studies were qualitative for a

reason!


OTHER REQUIREMENTS

• Trust and competence must be separate

• Variations in perceived expertise of adviser types by subject

• Compartmentalised trust• Trust and competence must interact


Distinguishing between Trust, Confidence and Familiarity (Luhmann 2000)

Dimension Trust Confidence Familiarity

Focus of disappointment (Barber 1983)

Fiduciary duty Effectiveness Natural / moral order

Dimension of 'trust' (1)(Mouzas et al, 2007)

Individual trust Business trust N/A

Dimension of 'trust' (2)(Tyler & Stanley, 2007)

Affective trust Calculative trust N/A

Nature of contingency Risk Danger Danger

Assumed characteristic Benevolence / affinity Competence Continuity

Attribution of outcomes Internal External Nonpersonal

Perception of alternatives High Low None


• 1,777 businesses with < 250 employees

• 6 countries: Canada, China, Italy, Singapore, S. Africa, UK

• 28% micros, 41% small, 31% medium

• Commissioned by ACCA, CGA-Canada and CNDCEC (Italy)

• Collected Nov 2010• Sourced from the

Forbes readership• VC bias, esp. in non-

English-speaking countries

THE FORBES INSIGHTS DATASET


• Friends and family• Trade & Prof. Assoc• Local bus. Assoc,

Chambers of Commerce

• Professional colleagues and network

• Accountants• Attorneys• Banks etc• Online resources• Others

• Taxation• Financing• Financial

Management• Legal and

regulatory• Marketing• Operations• Technology


KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .664Bartlett's Test of Sphericity

Approx. Chi-Square 17324.081

Df 2926

Sig. .000

Factor AnalysisPromax rotation (oblique)Input: all 7x11 adviser use dummiesOutput: 6 factors explaining much of the variation in use of advice by SMEs

Proxies for the need for confidence and trust


Table 7: A summary of factor loadings (see Table A.1 for details)

Component 1 2 3 4 5 6

InterpretationCommunity

crossover Use of Experts Internet UseFamily and

friends ‘Reading up’Business

associationsVariables with high loadings

Friends and family - Tax

Accountants - Tax

Internet - tax Friends and family -

Marketing

Government - Tax

Business association - Tax

Trade, prof assoc - Financing

Bank - Financing Internet - financing

Friends and family -

Operations

Government - Regulatory

Business association -

Financing

Business assoc. - Financial

Management

Accountants - Financial

management

Internet - Financial

management

Friends and family -

Technology

Internet - Marketing

Business association - Marketing

Prof. Network - Regulatory

Attorney - Legal and Regulatory

Internet - Regulatory

Books and magazines - Marketing

Business association - Operations

Accountant - Marketing

Internet - Technology

Internet - Marketing

Books and magazines - Operations

Business assocation - Technology

Attorney - Operations

Bank - Technology


TESTING THE ‘TRUST’ FACTOR

• Two tests against Luhmann (2000)

• Greater ‘need for trust’ should create more internal attributions for failure

• Greater ‘need for trust’ should lead to a wider use of ‘alternative’ advisers


Distinguishing between Trust, Confidence and Familiarity

Dimension Trust Confidence Familiarity

Focus of disappointment (Barber 1983)

Fiduciary duty Effectiveness Natural / moral order

Dimension of 'trust' (1)(Mouzas et al, 2007)

Individual trust Business trust N/A

Dimension of 'trust' (2)(Tyler & Stanley, 2007)

Affective trust Calculative trust N/A

Nature of contingency Risk Danger Danger

Assumed characteristic Benevolence / affinity Competence Continuity

Attribution of outcomes Internal External Nonpersonal

Perception of alternatives High Low None


RESULTS

• ‘Community crossover’ behaves like ‘trust seeking’ in determining attributions for failure to receive funding

• ‘Community crossover’ behaves like ‘trust-seeking’ in determining alternatives to expert advice


EstimateStd. Error Wald df Sig.

95% Confidence Interval

Lower Bound Upper Bound

Got all of the finance applied for 1.232 .299 16.990 1 .000 .646 1.819 Got most of the finance applied for .849 .275 9.551 1 .002 .311 1.388 Got some of the finance applied for .514 .274 3.518 1 .061 -.023 1.052 Got none of the finance applied for 0a . . 0 . . . Community cross-over .233 .241 .935 1 .334 -.239 .705 Expert -.011 .279 .002 1 .968 -.557 .535 Internet -.066 .071 .846 1 .358 -.206 .074 Friends and Family .018 .082 .051 1 .822 -.142 .179 Reading up -.058 .075 .590 1 .442 -.206 .090 Business Association -.196 .073 7.243 1 .007 -.339 -.053 Got all finance * Community -.896 .302 8.816 1 .003 -1.488 -.305 Got most finance * Community -.597 .273 4.793 1 .029 -1.132 -.063 Got some finance * Community -.596 .280 4.520 1 .033 -1.146 -.047 Got no finance * Community 0a . . 0 . . . Got all finance * Expert .153 .316 .233 1 .630 -.467 .773 Got most finance * Expert .146 .303 .232 1 .630 -.447 .739 Got some finance * Expert .150 .303 .246 1 .620 -.443 .743 Got no finance * Expert 0a . . 0 . . . Note: The regression analysis also controlled for employment, turnover, legal status, type of customer (B2B v. B2C), Turnover growth (past and expected) and country. Note also that the dependent variable was coded as (1 = total agreement … 5 = total disagreement).


Est.Std.

Error Wald df Sig.

95% Confidence Interval

Lower Bound

Upper Bound

Community cross-over 1.097 .080 190.002 1 .000 .941 1.252

Expert .047 .064 .546 1 .460 -.078 .173 Internet .752 .061 153.554 1 .000 .633 .871

Friends and Family .546 .068 64.034 1 .000 .412 .679

Reading up .455 .063 52.023 1 .000 .331 .578

Business Association .736 .063 135.503 1 .000 .612 .860

Less than $2m turnover -.518 .325 2.536 1 .111 -1.156 .120 $2m to $4.9m turnover -.266 .326 .667 1 .414 -.905 .373 $5m to $9.9m turnover -.573 .334 2.946 1 .086 -1.227 .081 $10m to $24.9m turnover -.380 .348 1.189 1 .276 -1.063 .303

Over $25m turnover 0a . . 0 . . . No employees -.683 .375 3.317 1 .069 -1.418 .052 1 to 9 employees -.662 .221 8.989 1 .003 -1.094 -.229 10 to 49 employees -.323 .179 3.241 1 .072 -.674 .029 50 to 99 employees .041 .206 .040 1 .841 -.362 .444 100 to 249 employees 0a . . 0 . . .

Note: The regression analysis also controlled for employment, legal status, type of customer (B2B v. B2C), Turnover growth (past and expected) and country; only significant effects are highlighted on this table.


-5 -4 -3 -2 -1 0 1 2 3 4 5

-5

-4

-3

-2

-1

0

1

2

3

4

5

Canada

China

Italy

Singapore

South Africa

UK

Need for trust

Need for con-fidence

Transaction

Casual/no relationship

Partnership

Conversation


Tax

Financing

Fin. Managment

RegulationMarketing

Operations

Technology

-0.5

0.5

1.5

2.5

Confidence

Trust

What accountants are good at v. what they are trusted with


Friends & family

Trade or prof. Body

Local business association

Prof. colleagues or network

Accountants

Attorney

Finance providers

Internet resources

Books and magazines

Government

-2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

ConfidenceTrust

Trust and confidence in advice on regulation


What about that interaction?


CONTACTManos [email protected]

mailto:[email protected]

schizas & jarvis icsb presentation 18 jun stockholm

Business

professional accountants

orderdimension of trust

requirements trust

weremeasuring trust

advice accountants

brief accountants

internet friends

operations financing