Client perceived service and satisfaction in business to business professional tax consultant services

Table 4: Exploratory Factor Analysis 34Table 5: Extracted Factors 37Table 6: The Cronbach alpha coefficients of new components...38Table 7: Summary of regression results: Factors having

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

Nguyen Thi Ngoc Phuong

Client perceived service and satisfaction in business-to-business professional tax

Master thesis

Acknowledgement

I would like to express my gratitude to my supervisor, Dr Vo Thi Ngoc Thuy, for thepatient guidance, encouragement and advices she has provided throughout the time preparingthis thesis In addition, I would like to thank all the members of committee and professors atInternational School of Business and my colleagues for their great orientation, instructions andcomments for my further improvement of my thesis

Thanks to all participants in the research survey for their kind support and cooperation.Finally, I also would like to thank family and friends who always support and encourage me alot

Nguyen Thi Ngoc Phuong

March 2014

The results show that in the context of professional tax consultant services m Vietnam,clients tend to perceived performance and value in the same stage called perceived service.There are five factors which are empirically confirmed having positive effects to perceivedservice i.e technical skills, interpersonal skills, customer orientation, reputation and relationshipwith tax authorities In addition, perceived service is a key contributing factor to clientsatisfaction The results also indicate that the impacts of reputation and relationship with taxauthorities on perceived service are not different in terms of firm's international experience andnature of engaged services, respectively.

In addition, the research aims to provide managerial implications Based on the

finding, discussion and recommendations in the research, professional tax firms can have further actions to address client's need and more improve the level of customer satisfaction

ii

Master thesis

CONTENTS

Acknowledgement i

Abstract ii

Chapter 1: Introduction 1

1.1 Research background 1

1.2 Research problem 2

1.3 Research objectives 3

1.4 Scope ofthe research 3

1.5 Significance ofthe research 4

1.6 Structure of the thesis 5

Chapter 2: Literature review 6

2.1 Literature review 6

2.2 Qualitative analysis 16

2.3 Hypothesis 22

Chapter 3: Methodology 26

2.1 Methodology 26

2.2 Measurement 27

Chapter 4: Data Analysis 32

3.1 Purifying data 3 2 3.2 Measurement analysis 32

3.3 Hypothesis testing 38

3.4 Moderator testing 45

Chapter 5: Discussion and Conclusion 48

4.1 Results Discussion 48

4.2 Managerial implication 52

4.3 Conclusion 53

4.4 Limitation and Further research directions 53

lll

Table 4: Exploratory Factor Analysis 34

Table 5: Extracted Factors 37Table 6: The Cronbach alpha coefficients of new components 38Table 7: Summary of regression results: Factors having impacts on Perceived Service 41Table 8: Relationship among independent variables (Technical Skills, Interpersonal Skills,

Customer Orientation, Reputation, Relationship with Tax Authorities) and dependent variable(Perceived Service) 42Table 9: Summary of regression results: Factor having impact on Client Satisfaction 44Table 10: Relationship between independent variable (perceived service) and dependent

variable (client satisfaction) 44Table 11: Summary of Chow test results 46

lV

competitive advantage, service firms today are required to deliver superior client value (Flint,Woodruff and Gardial, 2002) Value has been linked to loyalty, increased profits, long termsurvival and competitive advantage (Khalifa 2004; Woofruff 1997; Hamel and Prahalad 1994;Day and Wensley 1988) However, the definition of value is often vague and the interpretationmight be very different between the client and the service provider due to different perspectives.This might be the reason why many scholars state that 'how" clients interpret value is moreimportant than 'how' service providers believe what value is supposed to be (Blois, 2004) Thisconcept is further complicated when studying professional services, which are more complexand intangible than regular services, meaning clients often have difficulty in confidentlyevaluating performance outcome (La, Patterson and Style, 2009) Understanding clients' view

of value which links to the comprehension of clients' perceived performance is a one of criticalsuccess factors for almost of the firm especially professional firms La, Patterson and Style(2009) find significant strong positive relationship from performance that completely mediatesthe relationship to satisfaction through value to satisfaction in professional business-to-businessservices

Professional tax services are professional services provided by professional tax firmswhose staff- tax consultants- are experts in tax law Together with the growth of economy andthe complex of many types of business and transactions, tax law become more complicated thanever, especially in emerging countries where there are frequent changes in tax regulations andpractices Professional tax services advise or consult clients based on

Master thesis

interpretation of the most updated tax law and experience on current practices which manyclients do not have inside their organizations Therefore, except the company with extremelysimple financial affairs, the others are about to seek to appoint a firm to provide tax services

1.2 Research problem

In line with the difficult economic environment as well as the growth in both qualityand quantity of many professional tax service firms in Vietnam, clients have more choices tosatisfy their needs The competition in this industry becomes fiercer Thus, almost these firmsmore focus on how client perceives the firm's service performance and value which is provedhaving connections to client satisfaction that in turn should be the ultimate goal of all firms(Morgan et al, 2005)

In recent years, substantial research has examined the client perceived performance,client perceived value (and its determinants) in business-to-business professional services.Research has also found empirical support for the relationship between client perceivedperformance and client satisfaction through value (La, Patterson and Style, 2009) In addition,previous research show the evidence indicating that client satisfaction in turn connects torepurchase, loyalty, and willingness to maintain a long-term relationship with the serviceprovider (Iacobucci et al., 1994; Athanassopoulos et al., 2001 ) Consequently, manyresearchers desire to examine the determinants of client perceived performance and to confirmthe relationship between client perceived performance and client satisfaction through value invarious professional services in particularly However, most of the research has focused onexamine antecedents of value and what value means as well as what impacts on clientsatisfaction in business-to-consumer professional services using Parasurama (1985 and 1988)and Gronroos (1984)measurement model and its dimensions Little research has been devoted

to examine client perceived value and client satisfaction in business-to-business professionalservices sector Currently, researchers have made some recent attempts to

2

Master thesis

investigate and develop alternative B2B specific scales in some specific industries such asengineering consultant, software, etc The most significant contribution to this era has been theconceptual model for client-perceived value and satisfaction in an international perspective indeveloping economies developed by La et al (2009)

1.3 Research objectives

Given the unique characteristics of the professional tax services which are provided on abasis of tax regulations and current practices, a study focus on examining client perceived valueand client satisfaction in professional tax services sector applying La et al.' s (2009) conceptualmodel would be useful for both practitioners and researchers Since the level of development oftax regulations and practices are different among countries, this study specifically focus onbusiness-to-business professional tax services in Vietnam

Further to the above discussion, this study aims to obtain following objectives:

1) To examine the antecedents of client perceived performance;

2) To test the effect of client perceived performance to client perceived value in professional tax services in Vietnam;

3) To test the effect of client perceived value to client satisfaction with professionaltax services in Vietnam; and

4) To explore factors/ situations (moderators) leading to the different influence of

these factors to client perceived service in the context of Vietnam

1.4 Scope of the research

Initially, the qualitative analysis will be conducted to confirm whether the factorshaving significant effect to client perceived performance and client perceived value as well asthe factors/ situations leading to the different influence of these factors to client perceivedperformance and value in La et al.'s (2009) conceptual model are applicable in professional taxservices in the context of Vietnam Through this process, the analysis is expected to

3

Master thesis

identify factors that reflect the unique characteristics of the professional tax service in Vietnam

Then, data for quantitative analysis are collected to confirm the identified factors andtheir moderators The sampling frame for this study was clients of tax consultant firms in HoChi Minh City where most of the largest tax consultant firms place their offices Their clientscan spread from Da Nang to Ca Mau and are engaged in various industries

•

1.5 Significance ofthe research

This thesis attempts to confirm the applicability of La et al.' s (2009) conceptualmodel are applicable in professional tax services in the context of Vietnam It is expected thatthis model will be further modified to reflect the reality of the professional tax services inVietnam through qualitative analysis to confirm/ disconfirm the applicability of the factors/relationship and/or introduce of new factors/ relationship relative to client perceivedperformance, value and satisfaction Then quantitative analysis is conducted to provide

empirical evidence to strengthen the results of qualitative analysis It endeavors to expand theconcept of value and satisfaction in business-to-business professional tax services in the context

of Vietnam This is the first research representative is in the context of Vietnam that is atheoretical contribution to the research on value and client satisfaction from an Asian behaviorperspective

In addition, the research aims to provide managerial implications This finding isexpected to help professional tax firms understand deeply about the factors having significanteffect to client perceived performance and value in a client's perspective such as technical skills,interpersonal skills, customer orientation, relationship with tax authority, and reputation Based

on this understanding and finding, professional tax firms can have further actions to addressclient's need and more improve the level of customer satisfaction In addition, exploring thefactor leads to different influence of factors having significant effect

4

Master thesis

to client perceived performance and value is extremely important for the firms in this sector toidentify their relative competition in comparison with others Further to that, the firms can set

up strategy in order to be more competent and successful

1.6 Structure of the thesis

This thesis comprises 5 chapters Chapter 1 is the introduction which gives an overview

of research background, problems, objectives, scope and significant ofthe research The nextsection is Chapter 2 which provides a review of the literature on client perceived performanceand its factors; client perceived value and satisfaction in service, qualitative study andhypotheses Then the thesis continues with Chapter 3 - the discussion about methodologyfollowed by empirical investigation and its results in Chapter 4 The thesis ends with Chapter 5

- discussion about the results, managerial implication and limitation

5

Master thesis

Chapter 2: Literature review

2.1 Literature review

2.1.1 Client perceived performance and its antecedents

Client perceived performance

According to Oliver (2006), Performance itself is the perceived amount of product or

service outcomes received, usually reported on an objective scale bounded by good and badlevels of performance (e.g courteous/ discourteous service) While quality is a judgment ofperformance excellence, these two concepts (i.e performance and quality) are frequentlyconfused with each other (Oliver, 2006)

Researchers argue that service quality is unlike product quality due to its characteristicsi.e inherent intangibility, inseparability of service provision and consumption, heterogeneityand perishability (Zeithaml, Parasuraman, and Berry, 1990) This nature combined with thecomplex technical nature of professional service (engineering, consulting, project management,etc.) make the service quality more difficult to be evaluated (La, Patterson and Style, 2009)

Many researches focus on examine the measurement of service quality and itsdimensions However, attitude toward the number of service quality dimensions are notidentical There is a consensus in the opinion that service quality should have three basicelements (Pollack, 2008, p.539): the quality of results, the quality of interaction and the quality

of service environment The quality results is the real result that client received

Through this real result, clients can assess actual benefits that are expected Clients oftenmeasure this result in a fairly objective way The quality of interactions refers to the assessment

of the overall interaction among client and service team members like the way of convertinginput into output Clients perceive this element through their own subjective judgments Thethird element is the quality of service environment that refers to service

6

Master thesis

firms' facilities and again, it is subject to clients' review Corresponding to this understanding,Ghobadian, et al., (1994, p 50-51) introduce the dimensions of service quality includingtechnical quality of the service (encountering actual result) and functional quality of interactionbetween service provider and client; and company's image as a result of the abovementioneddimensions as well as cost of service, communication activities, company allocation, internetsite accessibility, skill and behavior of team members This understanding focuses on evaluateservice quality through analyzing elements of service quality and its corresponding dimensionswhich are measured by clients through their perceived performance of service providers Inshort, this understanding assesses service quality through the client perceived performance ofservice providers in terms of real results, interaction and service environment

The European school of thought led by the work of Gronroos ( 1984) put forward thatclients perceive service quality from two viewpoints: the technical quality and the functionalquality of the service Technical quality has to deal with the 'what' element to answer thequestion whether the service meets clients' expectation while functional quality involves themanner in which the service is delivered Both technical quality and functional quality have to

do with client perceived performance of the service Thus, it can be said that client perceivedperformance is the initial point to adjust the quality of service and perceive service value

With the same opinion, Lovelock (1999 and 1995) named two components of eachservice package 'core services' and 'supplementary services' Ferguson, Paulin, Pigeassou andGauduchon (1999) refer core services as representation of the firm's basic competency in

a

creating value with and for clients (p.59) On the other hand, supplementary services arecombination of other service elements such as supporting and facilitating services

7

Moreover, professional services are purchased in order to get competence andresources they do not have inside the organization (Czemiawska and Smith, 20 I 0) It meansthat many clients do not have technical knowledge/ 'know-how' to confidently evaluate thequality of the service they purchase As a result, clients often evaluate professional servicequality and value through the performance of service firms that they perceived (La, Patterson

• and Style, 2009) Conceptual Model of Client perceived Value and Satisfaction of La,

• Patterson and Style (2009) suggest that there are two main components contributing to client

perceived performance i.e people-related factors (including interpersonal skills, technicalskills and customer orientation) and firm-related factors (comprising innovation andreputation) The relationship between a service provider's behavior (in terms of interpersonalskills, technical skills and customer orientation) as well as the firm's innovativeness andreputation and perceived performance have been tested in various studies in both consumerand professional settings (e.g., Day and Barksdale Jr., 1992; Paulin, Ferguson and Payand,2000; LeBlanc and Nguyen, 1996)

Technical skills

Technical skills is a one of factors that client seek to when evaluating a firm'sperformance (Ellis and Watterson 2001; Burke 1996) This factor refer to personnel'sknowledge and expertise, understanding of clients' business model and needs, and

competitor's service (Rentz, Shepherd, Tashchian, Dabholkar and Ladd 2002) as well as

8

Master thesis

industry background (Coviello, Ghauri and Martin, 1998) Further to the nature of taxprofessional services which are provided on the basis of the most updated tax regulations andcurrent practices, technical skills is considered the most important factor having significanteffect to to client perceived performance Technical skills can be assessed via real results of theservices, in this case it is equivalent to technical quality in Gronroos' (1988 and 1984) school ofthought and Lovelock's (1999 and 1995) core services

Interpersonal skills

Due to the intangibility and inseparability of service provision and consumption, everyservice engagement requires high level of interaction between service firm and client'spersonnel (Laing, Lewis, Foxall and Hogg, 2002), interpersonal skills is also one of key criteriausing to evaluate performance of a professional service firm Interpersonal skills factor isunderstand that the ability of service team member express him/herself verbally and non-verbally, and to build relationship with clients (Rentz et al., 2002) In the context of professionaltax service, interpersonal skills play a vital role in improvement of level of client perceivedperformance

Customer orientation

Recent empirical investigations indicate that customer orientation is an antecedent ofservice performance which eventually contributes to clients' overall service quality/performance evaluation (Brown, Mowen, Donovan and Licata, 2002; Brady and Cronin, 200 I;Harline, Maxham and McKee, 2000) Customer orientation emphasizes the ability of a

firm to attain customer information, analyze it to set priorities for improvement, and use thesepriorities to drive service and process change (Johnson, 1998; Johnson and Gustafsson, 2000)

By gaining a better understanding of customer needs and the use of this knowledge to designbetter services (Nilsson, Johnson and Gustafsson, 2001), a customer should have a direct impact

on client perceived value

9

The firm's general reputation as well as its reputation in a specific functional area are top

of choice criteria in business-to-business professional services (Dawes, Dowling and Patterson,1992) The concept of firm's reputation is defined as a set of economic and non-economicfactors credited by a firm based on its past actions (Weigelt and Camerer, 1998) Professionaltax services are mix of business and legal consultant services Based on that nature, togetherwith uncertainty during the selection process, clients rely on a firm's reputation through word-of-mouth or track record (Lin and Wei, 1999) In other words, reputation helps the firmapproach client more easily In the circumstances in which clients lack of expertise in evaluatingtechnical quality of professional services (most of the case), the firm's reputation can helpenhance the level of reliability of client in services they purchase and therefore have positiveinfluence on client perceived value

In the context of Vietnam, professional tax services are growing in both quality andquantity In addition, outsourcing is the practice which has been recently applied in manyVietnam companies especially in tax services Therefore, many clients do not possess their

10

Master thesis

own process to evaluate quality of professional tax services Consequently, clients tend toevaluate a firm's performance through resource-based view of the firm In line of the above, La,Patterson and Style's (2009) Conceptual Model of Client perceived Value and Satisfaction isconsidered as the most appropriate start-point model to examine client perceived value andclient satisfaction in tax professional services in Vietnam However, due to the difference in thecontext and the specific characteristics of professional tax service, this model will be furtherexamined and modified to ensure the appropriate applicability

2.1.2 Moderating factors on client perceived performance and its antecedents

Country of origin

The mentioned Conceptual Model, La, Patterson and Style (2009) additionally arguethat the link between a firm's resource and perceived performance is contingent upon theCountry of origin ("COO") effect Many studies confirm that COO has influenced therelationship between consumer ethnocentrism and heuristic evaluation of products in theconsumer marketing context Recent reviews and evidence shown by Peterson and Jolibert(1995) and Verlegh and Steenkamp (1999) and La, Patterson and Style (1997) indicate thatCOO plays an important role in pre-purchase attitude formation, customer perception ofperformance and quality; and purchase intention

There is also evident state that favorable country perceptions lead to favorableinferences about product attributes and subsequent favorable evaluation (Gurhan-Canli andMaheswam, 2000) In line with previous literature, La, Patterson and Style (2009) believe thatthe COO effect moderates clients' judgment on a firm's overall perceived performance

To illustrate, La, Patterson and Style (2009) give a example i.e when client perceivedCOO is unfavorable (negative), then the client will be surprised (i.e expectation exceeded)when the service provider demonstrates high technical skills (for instant) and concomitant highoverall performance in the core service Under the opposite condition, i.e favorable

11

Master thesis

(positive) client perceived COO; it is argued that the client already shapes the expectation at ahigh level of demonstrated technical skills Therefore, technical skills and overall performancewill not strongly influence each other, especially when overall performance is below what isexpected In short, under converse conditions i.e unfavorable (negative) COO, clients'perceptions of service provider's technical skills will have a stronger impact on overallperformance than the other conditions Similar arguments are applied for other factors i.e.interpersonal skills, customer orientation, innovation and reputation

Firm's international experience

Another moderator examined in La, Patterson and Style's (2009) Conceptual Model isfirm's international experience which moderates for the relationship between the firm'sreputation and perceived performance with the argument that from the client's viewpoint,international experience may increase the perception of reliability, capability and credibility La,Patterson and Style (2009) authors stated that a firm's overall performance perceived by itsinternational clients is likely to be different compared to its domestic clients For instance, adomestic client may perceived the performance of a domestic professional service firm throughits staff's technical skills as well as his/ her excellent interpretation skills given they (client andservice provider staff) are sharing the same beliefs, culture and language In contrast, with thesame criteria like that, it is not enough for a foreign professional service firm to win theengagement in a foreign country unless it can offer a differentiated service (performance) andsome "bonus" value This value-added differentiation, for example, might be the firm'sinternational reputation or the service personnel's demonstrated ability to interact with clientsfrom diverse cultures along with his experiences in dealing with a broad base of foreign clients.Kotabe, Murray and Javalgi (1998) considered this as one of the supplementary services thatinternational clients seek and a source of competitive advantage In other words, the presence ofthe firm's international experience will strengthen a cliet's

12

Master thesis

perception of the firm's reputation in relation to its performance Hence, it can be said thatinternational related factor such as firm's international experience (e.g., the number of foreignclients that it has dealt with, the amount of resources that it has allocated in overseas markets) tosome extent will play a primary part in international clients' eyes in assessing the value and/ orfirm's performance

2.1.3 Client perceived value

Oliver (2006) defines value as a judgment that compares the likely outcomes ofpurchasing to the input forgone As a result, value is a result of comparison between what to bereceived (e.g performance) to the acquisition costs (e.g financial, psychological, effort) Thisdefinition is other words of Heskett et al.'s (1994) that client perceived value results whenclients compare weighted "get" factor to "give" factor

Client perceived value is a notion that has lately been receiving attention from industrialmarketing researchers (Razavi, Safari, Shafie and Khoram, 2012; Boksberger and Melsen, 2011;Eggert and Ulaga, 2006; Fiol and Alcaniz, 2009; Sanchez et al, 2006; Teas and Agarwal, 2000).Roig et al, (2009) define it as a construct formed by two parts, one of benefits received(economic, social and relational) and the other of sacrifices made (price, time, effort, risk andconvenience) by the client Razavi, Safari, Shafie and Khoram (2012) note that generaldefinition of value is client's perception of the subjective worth of some activity or subjectconsidering all net benefits and costs of consumption

Trasorras, Weinstein and Abratt (2009, p 617) noted that "[ ] customer value iscreated when the perceptions of benefits received from the transaction exceed the costs ofownership" He also cites three sources of competitive advantage i.e operational excellence,product leadership and customer intimacy regarding this matter One of these strategicapproaches can be a company's main source of value creation

13

Master thesis

Client perceived value is also what customers want from the service (Razavi, Safari,Shafie and Khoram, 2012) In many case, quality of services and benefit it offers often becomeclient perceived value drivers (Bolton and Drew, 1991; Zeithaml, 1988) Based on economicvalue and consumer behavior theories, Jayanti and Ghosh (1996) formulated perceived value as

a direct consequence of perceived quality Many studies support this association (e.g.Andreassen and Lindestad, 1998, Chang and Wang, 2011; Edward and Sahadev, 2011) wherefound a positive relationship between perceived performance and value

Lapierre (1997) and Day (2002) suggest taking into account some contextual orsituation factors when studying the dynamics of value assessment Patterson's (2000) examinesthe client's product-norm experience as a moderating factor in the satisfaction paradigm Hisempirical findings demonstrate that the association of the professional service provider'sperformance and client satisfaction is dependent on whether clients are highly experienced withconsulting services Similarly, Andreassen and Lindestad ( 1998) argued that customer with lowdegree of service expertise are less capable in evaluating the quality attributes of complexservices confidently In other words, the strength of linkage between perceived performance andperceived value is contingent upon the degree of experience possessed by the client (La,Patterson and Style, 2009)

In the context of professional services (consultancy, engineering projects, legal advice,etc.) which are highly customized, technically complex and intrinsically difficult for clients(especially inexperienced ones) to evaluate the outcomes, La, Patterson and Style (2009) arguethat when a client has little or no experience, any performance attributes will directly contribute

to perceived value For that, he raises two reasons: one is that clients do not have competentexpertise in evaluating both perceived performance and value; another is

14

Satisfaction is a positive or negative feeling that results when comparing expectationsand performances related to a buying or to a consumption experience (Kotler and Keller, 2012;Lendrevie, Levy and Lindon, 2009) In service market, client satisfaction is often measured asthe difference between service expectations and the experiences Oliver (1980) looked atsatisfaction via disconfirmation of expectations According to him, client satisfaction can be afunction of the expectation (adaptation) level and perceptions of disconfirmation Bothexpectations and perceptions also have been found to influence customer satisfaction andsubjective disconfirmation under various circumstances (Churchill and Surprenant, 1982).

Satisfaction is perceived as "a key determinant of organization success" with a positiveinfluence over repeated sales and/or repurchases intensions and increase customer loyalty(Lewin, 2009) Similarly, Fomel et al (1996) consider that overall satisfaction is a fundamentalindicator of the firm's past, current, and future performance However, they found that servicefirms have significant lower client satisfaction scores than manufacturing firms Their study alsorevealed that satisfaction is more quality-driven than price-driven in

15

2.2 Qualitative analysis

As mentioned above, unlike other professional services, professional tax services areprovided on the basis of current tax regulations and practices In addition, in the context ofVietnamese economy, professional tax services are not newly introduced services but due tohigh cost and not complex financial transactions of many Vietnam companies, these serviceshave not been widely used Most clients of this sector are large corporations or foreign owncompanies whose transactions are complicated, involved overseas parties and they pay muchattention on how to have effective tax system In line of the above, to understand deeplyVietnamese professional tax market as well as confirm/ modify the factors having significanteffect to client perceived performance and satisfaction in this industry, a qualitative study bymeans of in-depth interview (face-to-face - 60% and through telephone - 40%) was conducted.The interviews were undertaken with three (3) senior managers of professional tax firms (two ofErnst & Young Co., Ltd and one ofNexia ACPA Auditing & Consulting Co Ltd) and two chiefaccountants as representative of clients Each interview took place in

16

Master thesis

around half an hour The information collected in such interviews was then interpreted usingsentence method - analyzing phrases in the answers to get the main points addressing thequestioned matters, draw conclusion and confirm with the interviewees

The results of the interviews confirmed four elements of technical skills, interpersonal

skills, customer orientation and reputation as factors having significant effect to client perceived

performance The association between the firm's innovation and perceived performance was not

confirm Again, this is due to the nature of professional tax services are based on tax regulationsand practices whose changes are out of control of professional tax firms In addition, theinnovation if exists would be the improvement in service process or solutions suggested toclients in a planning service engagement However, in context of Vietnam where the economictransactions are in the development stage, strategies for effective operation or effective taxsystem or solutions for issues are often followed the ones applied by developed countriespreviously Therefore, innovation is not considered as a factor having significant effect to clientperceived performance This is empirically proved by research of La, Patterson and Style(2009) Their explanation is that clients are lacking technical judgment of a professional service.Even if it is not the case, clients still cannot comprehend how innovation contribution to firm'sperformance Interview's results also confirmed the moderator role of the firm's internationalexperience in the relationship of reputation and perceived performance

In addition to that, the results of the in-depth interview introduced two factors having

significant effect to client perceived performance i.e service fee and relationship with tax

authorities The concept of service fee introduced here is not the same as what clients "give"

concept Service fee concept is understood as a benchmark through that client can estimate theservice quality among other competitors of the firm and can form their expectation of what theywould receive or their perceived performance This is support by the thought that

17

Master thesis

higher service fee often represents higher service quality and thus what client would perceivefrom the firm's performance would be higher This term was used and tested in consumerservices as reference price Expected service quality plays a key role in reference priceformation due to the price to quality relationship demonstrated by many authors (Ziethaml,1988) Due to the intangible nature of services, consumers use price as a cue that signals servicequality or perceived performance This is especially important in the case of 'pure' serviceswhere there are few physical signals for consumers to evaluate potential service quality.(Dickinson, J.B and Dickinson, C D., 2012)

Another added factor having significant effect to is relationship with tax authorities.

Although professional tax services are based on both tax regulations and practices, given taxregulations in Vietnam do not develop together with the rapid growth of the economictransactions in quantity and complexness, most ofthe complicated cases, the current practicesare applied In the lack of tax regulations in some special cases, sometime tax authorities havetheir own interpretation of regulations and based on that, they examine the issue of a specificcompany In addition, majority of clients of professional tax services are companies havingdifficult tax issue that there is no clear guidance in regulation In that case, a good relationshipwith tax authorities will contribute outstanding value to the service firm This relationship helpsthe firm easily interact with the tax authorities or tax officers who are in charge of its client andvia that the firm can obtain the treatments/ practice of those people/ authorities Acknowledgethis relationship, clients tend to appreciate the work of professional tax firm and thus theyperceive performance of the firm at a higher level

However, the association between relationship with the tax authority and perceivedperformance depends on the nature of engaged services Professional tax services in nature can

be divided into two types: compliance services and advisory services Compliance services are

services provided in order to assist clients in complying with tax regulations

18

Master thesis

(required by regulations) For example, company is required to file the corporate income taxdeclaration annually within 90 days from the end of tax year Advisory services are servicesprovided for management purposes in order to plan for the company's future operations Forexample, board of management plan to open a new business line During this stage, how tocomply with tax regulations is also a matter need to consider In line with that, the companyseeks to appoint a professional firm to assist in providing advice on what regulations to complywith and what they can do to save tax, improve operation and according risks Assisting theclient in audit defense e.g explain to the tax authorities or draft official letter to answer the taxauthorities' challenges is another example of professional tax advisory service According tothat, compliance services do not require much interaction with tax authorities In contrast,clients more focus on relationship of the firm with relevant tax authorities when they have taxissue and need advices from tax experts Therefore, practical experiences of intervieweesindicate that the association between relationship with tax authorities and perceivedperformance is stronger in advisory services than in compliance services

Regarding effects of COO as a moderator in the relationship of technical skills,interpersonal skills, customer orientation, innovation and reputation and perceived performance,these effects are not confirmed in the context of Vietnam professional tax services Togetherwith the localization strategies of many professional tax firms, number of foreign tax consultants

in Vietnam reduces significantly in recent years This does not impact much on the servicequality as well as performance of professional tax firms in Vietnam Given the foreign taxconsultants have advanced knowledge in the field of tax and legal, they may not understanddeeply the tax practices in Vietnam In addition, language is the largest barrier for foreign taxconsultants in interaction with tax authorities Although they have a support team to help them

in this matter, clients do not feel comfortable to work with them when they are challenged by taxauthorities and need assistance in response/ defense to tax

19

of these departments In addition, there may be the first time a firm provide tax services to acompany but not is the first time the chief accountant or any relevant people as representative ofclients interact with service firm Therefore, at least, there is a basis based

on that client can assess the performance and value of the service they receive Consequently, inthe practice of professional tax services in Vietnam, client buying experience is not a moderator

in examining the relationship between perceived performance and client perceived value

Table 1: Summary of qualitative analysis' results

In La et al 's

Results of (2009)

conceptual

analysis model

Factors having significant effect to client perceived performance

20

Moderators in the relationship

Firm's international experience as a moderator

8

performance

Nature of professional tax services as a

moderator in the association between

9

relationship with tax authorities and perceived

performance

Effects of COO as a moderator in the

10

relationship of client perceived performance

Client buying experience as a moderator in the

ll

and client perceived value

The results of quahtattve analysts are Illustrated m the below figure:

21

Master thesis

Figure 1: Summary of qualitative analysis' results

Technical skills ···

( (people/ s~i~~services) ,)Interpersonal

Customer

Clientperceived

satisfactionvalue

As mentioned in the literature review, in the lack of technical knowledge/ 'know how'

to confidently evaluate the quality of purchased services, clients often assess service quality andvalue through the performance of service firm that they perceived (La, Patterson and Style,

2009) Also according to this research and various studies in both consumer and professionalsettings (e.g., Day and Barksdale Jr., 1992; Paulin, Ferguson and Payand, 2000;

qualitative analysis only confirmed the impacts of interpersonal skills, technical skills,customer orientation and reputation on client perceived performance but innovation.Therefore, in the context of business-to-business professional tax services, it ishypothesized:

• H 1: Technical skills have significant effect to client perceived performance;

• H2: Interpersonal skills have significant effect to client perceived performance;

• H3: Customer orientation has significant effect to client perceived performance;

• H4: Reputation has significant effect to client perceived performance;

In addition, the results ofthe qualitative analysis introduced two factors having significant effect to client perceived value i.e service fee and relationship with tax authority Service fee mentioned here was considered as a signal of service quality in consumer services For the purpose of this thesis, this term is further test to check whether it can be applied in professional services, especially professional tax services in the context of

Vietnam Regarding the relationship with tax authority, given this factor reflects the unique nature of professional tax services in Vietnam as stated by the industrial experts as mentioned in the qualitative analysis, this thesis attempt to empirically prove for this statement Thus, it is hypothesized:

• H5: Service fee has significant effect to client perceived performance;

• H6: Relationship with tax authority has significant effect to client perceived performance;

In addition to the perceived performance, Razavi, Safari, Shafie and Khoram,(2012) state that client perceived value is also what customers want from the service.Based on economic value and consumer behavior theories, perceived value is a directconsequence of

23

Master thesis

perceived quality (J ayanti and Ghosh, 1996) Many studies support this association (e.g.Andreassen and Lindestad, 1998, Chang and Wang, 2011; Edward and Sahadev, 2011) wherefound a positive relationship between perceived performance and value Further, McDougalland Levesque's (2000) empirical study of four different types of services has indicated thatperceived value is a critical contributing factor to client satisfaction which also exceeded thecontribution of service quality in explaining satisfaction Therefore, the following hypothesesare proposed:

• H7: A firm's perceived performance has significant effect to client perceived value

• H8: Client perceived service have significant effect to client satisfaction

As described above, in terms of nature, professional tax services comprise two types ofservices i.e compliance services and advisory services Compliance services assist clients incompliance with tax regulations while advisory services are provided to address clients' taxissues in a tax audit or build effective tax plans for future operations As a consequence, based

on practical experience, experts in this field (i.e interviewees) state that the association betweenrelationship with tax authorities and perceived performance is stronger in advisory services thancompliance services Therefore, it is hypothesized that:

• H9: The relationship between relationship with tax authority and perceived performancewill be stronger in advisory services than in compliance services (nature

of engaged services);

La, Patterson and Style (2009) argue that from the client's viewpoint, internationalexperience may increase the perception of reliability, capability and credibility which in turnare criteria based on which clients assess the reputation of a service firm Thus, firm'sinternational experience is considered as a moderator in relationship between firm's reputationand client perceived performance and hypothesized as follows:

24

Master thesis

• HlO: The relationship between reputation and perceived performance will be stronger under

high (rather than low) level of firm's international experience

Figure 2: Proposed Conceptual Model of Client Perceived Value and Satisfaction

in Business-to-Business Professional Tax Services in Vietnam

Technical skills

experienceInterpersonal

Nature ofengaged services

25

The adopted questionnaire from previous research (will be discussed in detail in themeasurement section) was developed and pre-tested (in an interview approach) with variousacademic and industrial experts to detecting ambiguous questions, check for face and contentvalidity of the measurement scales, and certify the wording of the items The small samplefor pre-test is similar to that carried out by File, Cermak and Prince's (1994) study with thepurposes of detecting ambiguous questions, checking for face and content validity of themeasurement scales, and certifying the wording of the items After this step, 5 point scale wasmore preferable and comfortable for the participants given 7 point scale made them a little bitconfused when answering the questions Therefore, the questionnaire was adopted using 5 pointscale for all constructs.

The final questionnaire was then formatted in the online-survey form and sent to

clients of professional tax firms in Ho Chi Minh City Face to face interview was also

conducted whenever possible to fulfill the survey questionnaire There were 227

questionnaires sent out and 132 were obtained in which 120 questionnaire were considered as usable The others were eliminated due to several reasons such as lots of unanswered questions,insufficient information, etc

The sample size of 120 is considered appropriate pursuant to Stevens ( 1996) whorecommend that for social science research, about 15 subjects per predictor are needed for a reliable equation The research model of this thesis totally has 8 predictors Thus, 120

observations are acceptable

26

As mentioned above, variables of service fee and relationship with taxauthorities and moderator of nature of engagement were introduced in thequalitative analysis through in-depth interview with industrial experts and clients ofprofessional tax firms Also on this interview, participants believed that thesevariables could be measured through certain indicators Given the uniquecharacteristics of the professional tax services in Vietnam and the lack of theoriescovering these variables in the same context, suggested indicators in the in-depthinterview were adopted.

Regarding value concept, it has been studied in consumer services.However, it is challenging to measure perceived value in a B2B service setting (La,

Patterson and Style, 2009) Thus, multiple items measuring client perceived valuewere taken from various studies

27

Measuring items of firm's international experience were adopted from La, Patterson andStyle's (2009) study which in tum were taken from the initial measures of Cavusgil and Zou's(1994) of'intemational competence' and amended wordings accordingly.

The items and scales applying to measure all the constructs used in this thesis aresummarized in the below table More details about the original scales are disclosed in Appendix1

Table 2: Summary of indicators of the constructs used in the research model

•Ability to express him/herself non-verbally

•General speaking! communication skills Interpersonal • Awareness and understand of the non-verbal communication of

• Ability to control and regulate non-verbal display of emotion

(Below are additional items suggested by the expert panel and drawn from

other studies)

• Knowledge of our operation Technical skills

•Knowledge of our needs/ issues

• Competence of the service provider team

Customer • Tried to help us achieve our goals

28

Master thesis

orientation •Offered the service that is best suited to our problem

(Below are additional items suggested by the expert panel and drawn from

other studies)

• Was willing to disagree with us in order to help us make a better decision

• Pro-active in contact us to discuss about our issues/ problems

(Below are additional items suggested by the expert panel and drawn from

other studies)

Reputation

• Expertise in this specific area

• Competitive competence of service provider team (Scale: 1 = Not well regarded; 5 =

Well regarded)

(Below are additional items suggested by the expert panel)

Service fee

• The service fee was used as a benchmark for the service quality (Scale: 1 = Strongly

• Good relationship with tax authorities

• Abilities to discuss/ negotiate with relevant tax authorities

Relationship with

regarding our issues tax authorities

• With information/ advice from the service provider team, we are

not surprised at the practice of relevant tax authorities

(Below are additional items suggested the expert panel other studies)

i'

• Produced reports and presentations of the highest standard

• Went "the extra mile" when necessary to ensure you were satisfied at the end of the assignment

• Firm X has delivered what your Company want and expected

• Considering the fee paid and what firm X delivered, overall your Client perceived Company received good value for money

value • Overall, firm X provided better value compared to other firms

offering similar service

• Your Company is very satisfied with our decision to commission firm X

Client • If your Company had to do it all over again, your Company satisfaction would choose the same firm

• Firm X has met or exceeded your Company's expectations

• Firm X's international experience in this type of project is substantial

• Firm X had allocated a sizable number of full time employees on Firm's the ground to work on the project

international • Firm X had a significant number of clients in international experience

•

markets Firm X' s experience in dealing with international clients is considerable

30