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As competitive pressures intensify, smaller firms are forced to lessen their costs and create new opportunities through optimized utilization of external resources (Mahmoodzadeh et al., 2009). Evidently, the new competitive environment is more complex (Espino Rodríguez and Padrón-Robaina, 2004), and furthermore, SMEs cannot control the markets in which they operate (Bennett, 2008). Consequently, the majority of SMEs tend to fail because of the lack of planning, marketing knowledge, or absence of managerial skills and competencies (Dyer and Ross, 2008). Therefore, SMEs are seen as most needy recipients of business support and advice as a result of both their economic contribution and their vulnerability to market imperfections (Lowe and Talbot, 2000). In this context, many claim that external accountants can assist SMEs operating in a competitive environment, to integrate operational considerations within long-term plans (Mitchell et al., 2000; Ismail and King, 2005) to enhance their sustainability.
Given that SMEs operate within uncertain environments (Mole, 2004), the idea behind the business links was that they must be the entry point for SMEs to seek advisory services and support (Lowe and Talbot, 2000). In this context, external accountants can seize opportunities to support owner/managers of SMEs to address succession issues by using their analytical skills, commercial expertise and broader industry perspectives to knowledge of clients' succession situations (Martin, 2005). It is evidenced that the main source of professional and support services for SMEs in the competitive market in the Asian business community are professional accountants (Dhaliwa, 2003). Hence, increasing attention has been given to the external accountant as business advisor and to the multidisciplinary practice concept, a focus partly precipitated by a downswing in economic activity (Greenwood et al., 2002; Samujh and Devi, 2008; IFAC, 2010). Specialization is a key to success, with many smaller accounting service providers concentrating on particular services (Martin, 2005). One form of specialization can be the provision of integrated solutions for SMEs, exceeding the traditional role of the professional accountant and, possibly, extending into employment and training, sales and marketing and customer care (Martin, 2005). Furthermore, in more complex conditions, external accountants are in a unique position to provide approaches and assist SME owner/managers to achieve their business objectives (Martin, 2005; Devi and Samujh, 2010).
Empirical studies examined the effect of the use of accountants' advisory services on SME performance (Berry et al., 2006; Robson and Bennet, 2000; Bennett and Robson, 1999). However, these are conducted in more developed economies where the effect of advisory services on SME performance is examined. Moreover, the results are inconclusive. Devi and Samujh (2010) evidence a shift towards provision of more non-compliance services to SMEs among professional accountants in Malaysia, an emerging economy  . However, the relationship between external accountants' services and SME performance has not been examined in an emerging economy context. It is also argued that empirical evidence from the most developed economies may not be as applicable to economies such as Malaysia or Iran  (Mashayekhi and Mashayekh, 2008) due to differing institutional context (Devi and Samujh, 2010) and level of state intervention in economic activities (Ismail and Zin, 2009; Ismail and King, 2006). For example, there are several reasons that Iranian SME environment differs from that of developed economies: (1) inadequate accounting and management, (2) The cost of access to information is too high, (3) financial barriers, (4) public policy shortcomings, (5) poor management and (6) unskilled workers (UNIDO, 2003).
Given that, the nature of accountants' services is people-intensive and SMEs lack people and capability, it is interesting to examine whether there is an association between the provision of external accountantsÊ¹ advisory services and SME performance in an emerging economy. Hence, this paper aims to identify the factors that influence Iranian SMEs to obtain advisory services from external accountants and to explore the link between the advisory services and firm performance by applying resource-based View (RBV) in the Iranian manufacturing sector.
The rest of the discussion is organised as follows: Section 1 provides the review of literature and develops hypotheses utilizing the resource based view (RBV) to guide the framework to investigate the use of advisory services. Section 2 explains the research methodology. Section 3 presents the findings. Section 4 discusses the implications. Section 5 concludes with suggestions for future research.
1. Review of Literature
1.1. The Role of External Accountants in SMEs
Due to privatization in 1991, financial reporting has gained importance in Iranian companies concerning international pressures from the World Bank and the International Monetary Fund (Mashayekhi and Mashayekh, 2008). Thus, the requirement for financial reporting has been increased in connection with privatization of economic entities (Salehi and Azary, 2008). To meet with this requirement, the Iranian Association of Certified Public Accountants (IACPA) was established in 2001 as an independent professional body (non-government association) (Mirshekary and Saudagaran, 2005). Professional accountants play an important role in Iranian SMEs because they comprise ninety percent of companies of Iran (Mirshekary and Saudagaran, 2005). Based on IACPA (2003) and interviews with selected Iranian professional accountants and SME owner/mangers, it is revealed that the accounting, audit and advisory services that a firm needs and are applicable in Iranian SMEs.
Although smaller companies access to wide variety of advisory services, such as banks, it is expected that the external accountant would play a key role in assisting SME owner/managers to manage their firms effectively (Mole, 2002). External accountants are perceived to be of significant support to the owner/managers in running the firm specifically when it came to the introduction and implementation of changes (Gooderham et al., 2004). The role of the external accountant is primarily perceived by SME owner/managers as helping them to cope with tax requirements, even though empirical evidence suggests that services provided by the external accountants went beyond traditional works (Marriott and Marriott, 2000). In actual fact, external accountants perform a number of roles in the SME community: they not only provide accounting and auditing services with regard to compliance issues but also prepare advisory services upon a range of broader business-management issues (Marlow and Carter, 2005). External accountants are main advisers to all businesses on all aspects of doing business (Leung et al., 2008). Indeed, external accountants maintain a broad base of expertise, enabling them to contribute to the success of companies beyond traditional services (e.g. accounting and auditing) (Greenwood et al., 2002).
1.2. External Accountants' Advisory Services
In New Zealand, Lewis et al. (2005) revealed that, of a range of advisors, external accountants were ranked first by SME owner/managers in terms of frequency, usefulness and significance of advice obtained. In the UK, Berry et al. (2006) found 85 percent of small enterprises used their external accountant as a source of advisory services. In addition, Berry et al. (2006) report that 69 percent of small firms utilize their external accountant for statutory advice, 33 percent as business management advice and 31 percent for financial management support work. In the UK and Canada, Blackburn et al. (2006) claim that external accountants are main source of support and advice to SME sector in contrast to other source of business advisors such as banks and solicitors. In Australia, Leung et al. (2008) reports that external accountants have provided much of the financial management and taxation support for the SME sector and have long been seen as the preferred professional adviser to SMEs.
In the UK, Kirby et al. (1998) distinguish statutory services from non-statutory services in the SME environment. They concluded that SMEs utilized external accountants as source of "non statutory services". In Norway, a study of utilization of external accountants as a source of support and advice to small companies was conducted by Gooderham et al. (2004). This study indicated that external accountants are a reliable deliverer of advisory services and support in small companies. In Australia, Carey et al. (2005) examines the role of accountants in providing business advice to SMEs. They found that 67 percent of SMEs utilize external accountants as a source of business advice and also indicate that there is room for external accountants to increase the amount of business advice they provide to SMEs. In the UK, Scott and Irwin (2009) revealed that external accountants were the main sources of advice in the SME environment. In summary, whilst this research was undertaken in more developed economies, literature on role of professional accountants in developing countries such as Iran is missing except for the limited studies conducted in Malaysia (Devi and Samujh, 2010; Jayabalan 2009). Given that the above studies are conducted in the more developed economies, it will be useful to examine what factors impact decision to engage external accountants' services and whether in the Iranian context, there is an association between the use of accountants' advisory services and firm performance.
1. 3. Theoretical Framework and Hypotheses
As discussed above, one key distinguishing factor in the emerging economies' context is the lack of resources in terms of expertise (Jayabalan et al., 2009; UNIDO, 2003; Ismail, 2002). For example, the RBV indicates what factors influence decision of a firm to engage external accountants as a source of advice and support services, particularly in SME context (Marriott et al, 2008; Everaert et al., 2006; Doving and Gooderham, 2005; Gooderham et al, 2004; Bennett and Robson 2003). The RBV concentrates what extent a firm seeks knowledge and advice from external sources to achieve competitive benefits (Johnson et al., 2007). However, knowledge and information are important for SME and they should obtain them from external sources to attain a competitive advantage in their competitive environment (Johnson et al., 2007). For example, SMEs suffer from the absence of managerial knowledge, which can be complemented by external sources, particularly external accountants (Gabrielsson et al., 2004). In actual fact, in consistent to RBV, SMEs use external accountants as sources of advisory services and decision making to fill up gaps in their internal resource (IFAC, 2010; Marriott et al 2008; Gooderham et al., 2004). Hence, RBV has been successful in a number of respects in regard to accounting for differences in the provision of advisory services by external accountants (Doving and Gooderham, 2005). The RBV is imperative to the study of external sources, as higher performance and suggests that firm performance can be increased via improving the strategic and information skills of SMEs (McIvor, 2009; Bennett and Robson, 2004). The inference of RBV is that if firms are to grow, they need to become more skillful at seeking expert knowledge from external service providers and then embed the knowledge they acquire into their firms (Worrall, 2007).
1.3.1. Owner/ Manager Knowledge
RBV explains that majority of SMEs cannot carry out the accounting tasks(services) in-house because they face with the inadequate knowledge and unqualified employees or resource constraints(Jayabalan et al., 2009; Everaert et al., 2006). For example, many claim that SMEs lack the necessary skills and resources (i.e. experience, knowledge and expertise or people) to perform accounting functions internally; access to the expertise and knowledge was clearly the most important reason to engage professional accountants (Jayabalan et al., 2009; Everaert et al., 2007; Ismail, 2002; Marriott and Marriott, 2000; Holmes and Nicholls, 1988). Hence, external accountants are in a unique position to provide professional and support services to SMEs (Breen et al, 2003). However, many reported that SME owner/managers are often not aware of the range of support services and advice available to them (Ismail and Zin, 2009; Ismail and King, 2007; Liddicoat and Stringer, 2005). Because they do not have sufficient evidence of the benefits of such services (Watson, 2003), or they do not know enough about the area in which they search for information and support (Curran and Blackburn, 2000). In fact, sophisticated SME owner/managers may understand the benefits of compensating for their own inadequate knowledge or skills by utilizing external service provider (Ismail and King, 2007; Watson, 2003). For example, Audet and St-Jean (2007) found that the SME owner/managers, who knew more about the external services, utilized those services more than SME owner/managers who did not have any information about these services. However, less sophisticated and incapable SME owner/managers might be unaware of their own weaknesses to ask for advice and support, believing they can perform it all themselves (Watson, 2003). Therefore, the predicted relationship is examined by means of the following hypothesis.
Hypothesis 1: Firms with owner/managers having high levels of knowledge in accounting will utilize external accountantsâ€² advisory services more than those firms that with owner/managers having low levels of knowledge.
1.3.2. Technical Competence
The RBV aims to support owner/managers to understand why competences should be acquired as valuable resources to improve firm performance (Caldeira and Ward, 2003). RBV suggests that functions not significant to core competencies must be obtained from external service providers (Gilley et al., 2004). For instance, SMEs should acquire the activities that are not core competences to improve firm performance (Gilley et al., 2004; Espino Rodríguez and Padrón-Robaina, 2004). The largest parts of SME owner/managers have no professional, management and other formal qualifications (Stanworth and Gray, 1992). One possible way for a smaller firm to obtain competencies is to utilize qualified persons (Gooderham et al, 2004). Therefore, by relying on external sources, smaller firms can get the competence they need from external service providers (Carey et al., 2006; Gilley et al., 2004). Moreover, the reliance by SMEs on external accountants is perceived to be a result of the perceptions of SMEs that external accountants are competent and can provide a value-for money in providing advisory and support services (Leung et al, 2008). However, empirical research evidenced that technical competence of the external accountant were positively associated with the use of accountantsÊ¹ advisory services (Gooderham et al., 2004; Carey et al. 2005). Consequently, the earlier arguments are summarized in the following hypothesis:
Hypothesis 2: The more the perception that an external accountant has high technical competent in offering accounting tasks, the greater the propensity the use of external accountants' advisory services.
1.3.3. Competitive Intensity
Competitive pressures force SMEs to source significant competencies for survival and development (Gooderham et al, 2004). For example, SMEs are unable to continue when they face intense competitive pressure because its limited resource does not permit it to adapt its product (Gooderham et al, 2004). In consistent with RBV, the firm that faces intense competition needs more resources and support than the firm does not face with competitive pressure (Worrall, 2007; Gooderham et al, 2004). For example, Devi and Samujh (2010) argue "Understanding business needs provides opportunities for firms in the financial management services sector to identify more accurately the services needed by smaller businesses in general, and thus meet these needs more efficiently" (Devi and Samujh, 2010, p. 7).
In the competitive situation, SME owner / managers should learn how exploit external resources to help their companies to become more productive and competitive (Worrall, 2007). Give to earlier discussion, one possible way to reduce competitive pressure and gain sufficient competence and resource is to employ qualified persons (Gooderham et al, 2004). However, given the insufficient number of qualified professional accountants, we expect SMEs will turn to external accountants for advice and support services (Berry et al. 2006; Devi and Samujh, 2010). Because advice and support services comprise a range of competencies and knowledge that are much significant for the firm survival and gaining competitive advantage (Gooderham et al, 2004). For instance, Gooderham et al. (2004) argue that when a smaller company faces with vulnerable competition, they refer to an external accountant as source of support and advice to acquire competitive advantage. Consequently, our third hypothesis based on the earlier discussion is as follows:
Hypothesis 3: The firms that face more intense competition will utilize more external accountants' advisory services.
1.3.4. Complexity of Marketing Decisions
In consistent to RBV, smaller companies need to acquire advice and support services to broaden their market for achieving competitive advantage (Marriott et al 2008). Further, Johnson et al. (2007) argue the need of company owner/manager to acquire external advisory services and support is dependent on the nature of the market within which the company operating. For example, while a company is operating in local market, they might be able to drive the business based on its internal resource and need only a limited external support (Johnson et al., 2007). In addition, while SME owner/managers may be proficient in the product (services) markets within which they work, they may not be proficient in accounting, operational and financial management issues, or may lack other important skills and expertise (Devi and Samujh, 2010; Collis and Jarvis, 2002; Marriott and Marriott, 2000). Although market issues are not legalized by statute, as accounting issues, Pineda et al. (1998) reported that SME owner/managers also see market issues as accounting issues. Thus, SME owner/managers may treat this area of expertise in the same way as they come up to accounting issues or financial management issues; they may engage advice and information when they make marketing decisions on product quality, product lines and pricing (Pineda et al., 1998; IFAC, 2010).
Mcgee and Sawyerr (2003) explain complex marketing decisions is defined as a great deal of uncertainty, the company owner/manager should obtain external source to diminish this uncertainty. Given to earlier argument, we can expect that the SME managers are facing with more complexes of marketing decisions; they would seek advice and support (Dyer and Ross, 2008). Consequently, they may refer to external accountants for financial management advice and perhaps wider assistance (Berry et al. 2006). Evidence suggests that SME owner/managers seek specialized advice and support services in areas that they need (Sian and Roberts, 2009). For example, Sian and Roberts (2009) reported that SME owner/managers use external accountants on the subject of variety of business advisory services beyond traditional services. Dyer and Ross (2008) found that complexity of marketing decisions is significantly associated with business advice. Therefore, we hypothesize an association between the use of advisory services and complexity of marketing decisions as follows:
Hypothesis 4: The more the complexity of the marketing decisions facing the SMEs, the higher the use of external accountants' advisory services.
1.3.5. SME Performance
Bennett and Robson (1999) provide evidence from the SMEs that utilize the advisory services of an external accountant is associated with employment growth. Bennett and Robson (1999) categorized three growth categories: (i) declining/stable, (ii) medium growth, and (iii) fast growth. They found that the advisory services of an external accountant are associated with SME growth. Additionally, Robson and Bennet (2000) examined the relationship between business advice provided by an external accountant and SME performance. However, they did not find a positive relationship between business advice and SME performance. They categorized performance in three groups (1) change in number [of staff] employed by client, (2) percentage change in firm turnover and (3) change in profitability per employee. Therefore, we can speculate that this may due to the context of the developed economy where the SME entrepreneurs could be sufficiently literate on financial and management issues. For instance, in emerging economy, most SMEs face difficulty to draw and maintain skilled employee (UNIDO, 2003; Ismail, 2002). This is as a result of less expertise and insufficient of knowledgeable accounting support to carry out accounting tasks (Jayabalan et al., 2009; UNIDO, 2003; Ismail, 2002).Thus, SMEs in the emerging economy need utilize external accountants relative to more developed economy to get benefit from their services (Devi and Samujh, 2010; Jayabalan et al., 2009).
Berry et al. (2006) examined the effect of four types of accountants' advisory services (business advice, emergency advice, financial management support and statutory advice) on SME performance (growth). They report that "the degree of use of a range of external advice was positively related to the growth rate of SMEs" (p33). Similarly, Dyer and Ross (2008) examined the use of business advice by the small business owner and its impact on business success. Measure of business success in their study was perceptual, based on satisfaction with financial measures (Amount of profits, Profit as percentage of sales, Profit as percentage of investment, Growth in sales and Growth in profits). Dyer and Ross (2008) found business advice positively impact on business success. It is accepted that most of SMEs in lesser emerging economy such as Iran are facing with inadequate resources (Zanjani et al., 2008; UNIDO, 2003). Consequently, in the merging economy context where there is more need to expertise and hence use of external accountants' services should enhance performance. Hence, we hypothesize the firm performance is associated with direct use of external accountants' advisory services as follows:
Hypothesis 5: A firm performance improves directly to the extent to which the external accountants' advisory services are utilized.
Accountants' advisory services
Complexity of market decisions
Figure 1: research model
2. Research Methodology
2.1. Data Collection
According to the definition of SMEs in the context of Iran by UNIDO (2003), we limited our survey population to companies in terms of number of employees in the range of less than 250 employees, while excluding micro-firms with fewer than 10 employees. Thus, the populations of this paper comprise Iranian manufacturing SMEs because manufacturing SMEs are highly significant in view of producing both manufacturing value added and exports in the context of Iran (UNIDO, 2003). We designed and developed a questionnaire survey based on prior research (see Dyer and Ross, 2008; Ismail and King, 2007; Sarapaivanich and Kotey, 2006; Rivard et al, 2006; Carey et al., 2006; Doran, 2006; Gooderham et al., 2004). A pilot test conducted with 50 SME owner/managers, and then a sample of 1750 SMEs was selected randomly, using a stratified random sampling approach and the survey questionnaire was sent to each SME owner/manager by post mail. We selected the owner/managers of SMEs because they would have to gain external advisory services to manage their businesses. We received 770 questionnaires. However, we finally had only 658 usable answers, representing an effectual response rate of 38 percent. The response rate is very high in contrast to previous study of SME context by Everaert et al., (2007), found a low response rate (10 percent).
Based on the suggestion by Armstrong and Overton (1977), we compared early and late respondents (non-response bias test), but we didn't find any significant differences between early and late respondents in terms of the number of employees and as well dependent and independent variables, thereby this result is in line with prior resaerch done by Everaert et al. (2008).
2.2. Variable Measurement
We measured each variable based on prior studies. Then, the constructions of the scales and the details of the variable measurement are presented in Table 1. Finally, we found adequately high Cronbach's alpha for all variables (above 70%).
2.2.1. Dependent and Independent Variables
In this study, we measured Performance similar to the measure was used by Sarapaivanich and Kotey ( 2006), first asking respondents to indicate the level of the importance attached to the seven performance goals (see Table 1) on a 7-point Likert type ranging from 1-not at all important to 7-very important. Then, respondents were asked to indicate their satisfaction with the seven performance goals over the previous two financial years on a 7-point Likert type ranging from 1-strongly dissatisfied to 7-very satisfied.
Based on IACPA (2003) and interviews with selected Iranian professional accountants and SME owner/mangers, we drew five types of Advisory Services (see Table 1) are applicable in Iranian SMEs are similar to that derived from Doran (2006). Consequently, we utilized the measurement developed by Gooderham et al. (2004), asking respondents to indicate to what extent they use external accountant as advisor relating to each item using a 7-point Likert type, where 1 - not at all to 7 - very large degree.
We measured Knowledge of SME owner/manager with nine items derived from Ismail and King (2007), asking respondents to indicate the level of their knowledge of the accounting techniques and IT applications, using a 7-point Likert type from 1 = no knowledge to 7 = extensive knowledge.
Technical Competence was measured with six items that developed by Carey et al. (2006), asking respondents to specify the degree to which the firm perceives its external accountant as a technical competent source of accounting and advisory services, using 7-point Likert scale where 1-lowest score and 7 - highest score.
Competitive Intensity is measured with five items based on Rivard et al. (2006) and Lamminmaki (2008). Hence, respondents were asked to record the intensity of their firm competition relating to each item on a 7-point Likert scale from 1- very weak competition to 7- very fierce competition.
We measured Complexity of Market Decisions with four items in line with Dyer and Ross (2008), asking respondents to identify the factors that affect the success of their business on a 7-point Likert scale, 1 = not at all significant, 7 = extremely significant.
2.2.2. Control Variables
RBV indicated that the use of external support and professional services interacts with the size and age of the firm (Bennett and Robson, 2003). Empirical studies indicate that utilization of business services and advice by SMEs is positively related to firm size and firm age (Dyer and Ross, 2008; Robson and Bennett, 2000; Bennett and Robson, 1999). As a result, we chose these variables in our study as control variables. Therefore, we measured Firm Size in consistent with the measure that used by Audet and St-Jean (2007), asking respondents to indicate the number of employees working in the business. In addition, we measured Firm Age similar to the approach utilized by Doran (2006); asking respondents to identify in what year their business was first registered.
3.1 Descriptive Statistics
Table 2 explains demographic profile. Our sample included 78 percent male and 22 percent female. Most of the respondents were quite well educated, and the overall level of managerial experience was high with nearly three-fourth of respondents having over five years of experience.
Descriptive statistics are shown in Table 3. Descriptive statistics describe means and standard deviation (S.D) and correlations among the independent, dependent and control variables. It is remarkable that all independent variables significantly correlated with the dependent. In consistent with Lamminmaki (2008), no correlations more than 70% were obtained between independent variables, so the correlation between independent and dependent variables was such that multicollinearity is not a concern.
3.2. Hypotheses Testing
3.2.1. Testing for direct effects: advisory services
Table 4 shows regression coefficients and standard error (S.E) for each of the predictor and control variables. The multiple linear regression analysis in Model 1of Table 4 shows a significant positive coefficient for owner/manager knowledge (Knowledge), suggesting that the use of advisory services provided by an external accountant is positively related to the owner/manager knowledge, thereby confirming Hypothesis 1 (p<0.01). It also indicates that the use of advisory services also is significantly positively associated with the technical competence (Competence) of the external accountant, which provides support for Hypothesis 2 (p<0.01). In addition, the Hypothesis 3 receiving support which posits a positive relationship between competitive intensity (Competition) and use of advisory services (p < 0.01). Support is also provided for Hypothesis 4 (p < 0.01) which posits the more the complexity of the marketing decisions facing the firm, the more the use the external accountants' advisory services. On the other words, the complexity of marketing decisions is significantly positively associated with the use of the advisory services provided by external accountants ( MktDecision).
3.2.2. Testing for control variables effects: advisory services
We suggested that firm size and firm age may affect the use of external accountants' advisory services. In Model 2 of table 4, a multiple linear regression analysis was also conducted with owner/manager knowledge, technical competence, competitive intensity and complexity of market decisions as the independent variables and the use of advisory services as dependent variable, controlling for the effects of the size and age of the firm. The results suggested that all independent variables (owner/manager knowledge, technical competence, competitive intensity and complexity of market decisions) have a positive significant impact on the use of advisory services (p<0.01 respectively). Therefore, Hypotheses 1, 2, 3 and 4 are also supported. It noted that the use of advisory services is not associated with firm size and firm age.
3.2.3. Regression analysis: performance
We noted the extent to which a firm uses external accountants' advisory services might have an improvement on its performance. Therefore, for achieving this objective, a linear regression analysis was undertaken to test the association between the utilization of advisory services as the independent variable and performance as the dependent variable in Model 3 of Table 4. Support is also provided for Hypothesis 5 (p < 0.01) which posits a firm performance improves directly to the extent to which the external accountants' advisory services are utilized. In addition, we also controlled for the impact of age and size of the firm in Model 4 of Table 4, and found that the use of advisory services statistically positively associated with firm performance (p<0.01), and negatively associated with firm size(p<0.05), but it was unrelated to firm age.
4. Discussion and Implications
In this paper, we have examined the factors that influence a firm's propensity to use external accountants' advisory services and whether SME obtain those services improve its performance. Drawing on the resource-based view (RBV), a series of hypotheses were generated and tested on data concerning the utilization of advisory services by SMEs in the context of Iran.
As hypothesized earlier, owner/manager knowledge has significant positive impact on the use of external accountants' advisory services. In the other words, firms with owner/managers having high levels of knowledge in accounting will use external accountantsâ€² advisory services more than those firms that with owner/managers having low levels of knowledge. Therefore, our finding corroborates prior studies conducted by Audet and St-Jean (2007), indicated when the SME owners know more about the external service providers, they will utilize higher their services, and Ismail and King (2007), found the use of accounting information system was associated with SME owner/manager knowledge of accounting techniques.
We also found a positive association between the utilization of advisory services and technical competence of an external accountant. This finding is consistent with the results of the previous research undertaken by Gooderham et al. (2004), suggested accountant's competence has a significant positive impact in using external accountant as business advisor, and by Carey et al., 2006), indicated the technical competence of an external accountant positively was associated with outsourcing of internal auditing services.
More importantly, our results also revealed that the SME operating in a competitive environment turns to external accountant for support and advice. On the other words, the use of advisory services provided by an external accountant is positively associated with competitive intensity. This result is consistent with preceding research conducted by Chenhall (2003) which showed that the competition intensity positively associated with the use of formal controls, but this result is counterpart with prior study done in Norway by Gooderham et al. (2004), indicated that business advice of external accountant was not related to the degree of competition. The reasons can be stated that: firstly, prior research was undertaken in a more developed country, whereas present study was conducted in lesser developing country such as Iran. Secondly, the sample of this study included small and medium sized- enterprises whereas prior research (Gooderham et al., 2004) focused on micro and small enterprises (20 employees). Finally, we examined five types of advisory services provided by external accountant, whereas prior study tested only business advice of an external accountant.
This study also examined the association between complexity of marketing decisions and the use of external accountants' advisory services, and found the more the complexity of the marketing decisions facing the firm, the more the utilization the external accountants' advisory services. On the other words, the usage of the external accountants' advisory services is positively related to the complexity of marketing decisions. This finding indicates that owner/managers are willing to use external accountant when the firm has many different products, market segments, and customers. Our finding is in line with prior research done by Dyer and Ross in 2008, demonstrated that the more complex the marketing decision, the more the small business owner/manager is probable to seek business advice.
We also introduced the size and age of the firm as control variables in our regression equation. Accordingly, the relationship between the use of advisory services and four independent variables (owner/manager knowledge, technical competence of the external accountant, competitive intensity and complexity of market decisions) was remained positively significant, but the use of advisory services was not associated with the size and age of the firm. This finding is similar to a few prior studies undertaken by Gooderham et al. (2004); found that the sourcing of business advice from external accountants was not associated with firm size, and Mohan-Neill (1995), indicated that younger and smaller firms use less market information when they make decisions.
More importantly, this study examined the relationship between the use of advisory services and SME performance, and found that a firm performance improves directly to the extent to which the firm engages an external accountant as advisor. On the other words, the use of advisory services is positively associated with SME performance. Our finding is consistent with prior studies that indicated the usage of advisory services from an external accountant had a significant positive influence on firm performance (Bennett and Robson, 1999; Berry et al., 2006; Dyer and Ross, 2008). Furthermore, the link between the utilization of advisory services and performance remained significant after including control variables in our regression equation.
The results of this research have implications for both research and practice. In terms of research, the first implication is that the relationship between advisory services and SME performance was inconclusive in previous studies, so this work complements Berry et al. (2006) 'study of advisory services. In addition, our research reveals the association between the use of advisory services and four independent variable (knowledge of owner/manager, technical competence, market decisions and competitive intensity), and makes a contribution to the literature on emerging economies. Besides, this study analysed the effect of external accountants' services and SME performance from the RBV, this provides some empirical findings not shown in previous studies. From a practical view, this work is the first to analyse the external accountants' services in the Iranian context of an emerging economy and it also explicitly discusses the services currently provided by accountants to SME sector and examines the role that accountants play in Iranian context. In addition, from earlier discussion in the literature review section that most emerging economies face resource constraints and taking the case of Iranian manufacturing SMEs the evidence supports the RBV that in cases of resource constrain, external accountantsâ€² services do enhance performance. This implies the accounting profession should explore avenues to enhance the services offered by professional accountants.
5. Limitations and Suggestions for Future Research
Generalizability of this research is limited because all of the enterprises in the sample were manufacturing, generalizing the findings of this research to service sector is not advisable. In addition, we examined only Iranian SMEs, so our findings may not be generalized to SMEs in other countries. However, the results of this study may require to be interpreted in light of a few constraints. First, this research focused on quantitative method using questionnaire survey, thus future research should employ qualitative approach in order to investigate the effect of advisory services on SME performance. Finally, this research utilized subjective measures of SME performance, but it may be useful to examine objective measures of performance (i.e. percentage of profits) within a specific industry for future study.
This study examined the factors impact decision to engage external accountants' advisory services and its effect on SME performance by using a sample of manufacturing firms in Iranian SME context. Our findings indicate that owner/manager knowledge, technical competence, competitive intensity and complexity of marketing decisions are critical factors affect a firm's decision to engage external accountants' services in Iranian SME context. More importantly, our results suggest the use of the external accountants' advisory services was significantly positively associated with SME performance. Although we didn't conduct the mediation effects of the use of advisory services on the relationship between four independent variables and performance, more intensive examinations provide a promising avenue for future research.