Competitive Advantage Analysis Of International "Big 4" Accounting Firms Based On Resource-based Theory

Since the implementation of Reform and Opening-up policy,Certified Public Accountant(hereinafter referred as CPA),as a trade,develops at a tremendous speed. Related data show that in China,up to the end of 2008,the number of licensed CPAs has mounted to 83,000,non-licensed members over 70,000.There are over 7,200 CPA firms.The total business income for the whole trade in 2007 touched 27.6 billion yuan (RMB);hereinto,23 firms,7 more than the year before,had an average income of 0.1 billion yuan or more,which achieved an increase of 13%.However,compared with the "Big Four" international CPA firms(Price Waterhouse Coopers,Ernst & Young, Deloitte & Touche and KPMG Peat Marwick),the domestic CPA firms are at a disadvantage.How does the gap come into being under identical conditions? On the basis of such kind of situation,the thesis analyzes the competitive edge of the "Big Four" CPA firms in detail.The competitive edge of enterprises has long been the concern of industrial quarters and theory circle.In previous studies,the root of competitive edge was discussed in two aspects:external determinism and internal determinism.External determinism emphasizes that competitive edge of enterprises depends on some external variables.The representative notions to external determinism includes "Market Structure--Market Conduct--Market Performance" pattern proposed by E.S.Masson and J.S.Bain,Harvard University,U.S.A,and Competition Strategy Theory by Michael E.Porter.However,"external determinism" fails to give a proper explanation to such a question:Now that the competitive edge is determined by enterprises' external factors(such as market structure and market opportunities),how comes the gap in competitive edge under identical conditions? Therefore,the focus of research on the root of competitive edge has turned to enterprise-internal,this is,what we call,"internal determinism".The theory declares that enterprises' internal factors are decisive for the acquisition of competitive edge.The accumulation of internal resources and capacity is the key for achieving excess profit and competitive edge.The representative notion to internal determinism is Resource-Based Theory.The thesis analyzes competitions between CPA firms in terms of the Resource-Based Theory.It covers the following issues:According to Resource-Based Theory,what main resources do CPA firms own? What competitive edge do "Big Four" CPA firms have in terms of resources and how to promote the competitive edge of domestic CPA firms?Apart from the Introduction and the Conclusion,the main body of the thesis is made up of four parts as discussed below.The first part covers Literature Review and some comments on previous studies. The research findings on CPA firms' competitiveness both in foreign countries and at home are listed and discussed in this part,and the approach for this thesis is introduced as well.The nature of competitiveness is the advantage an enterprise displays in survival and development.CPA firms,in the category of enterprise,care about competitiveness,which has long been in the scope of scholars' research.From the previous research findings on CPA firms' competitiveness,we can see that there is relatively more regulatory research,but less empirical research.Most research treat the CPA firms as a whole,hence lacks pertinence.Almost all research at home are conducted in accordance with Michael E.Porter's Competition Strategy Theory, though a few are conducted by Resource-Based Theory,they are neither thorough,nor systematic.This thesis takes Resource-Based Theory as the angle,applies public data, and analyzes the competitive edge of the "Big Four" CPA firms in detail,thus ending up with constructive suggestions for domestic CPA firms to promote their competitiveness.The second part goes deep into Resource-Based Theory,including its origin and fundamental idea,then discusses CPA firms' advantage in resources by this theory.The fundamental idea of Resource-Based Theory is:An enterprise is the joiner of all inputs, which,unlike those described in Neo Classical Theory Model,are completely homogeneous and flexible.All inputs or resources employed by the enterprise are,in some extent,greatly different,and not so flexible.We name this kind of difference as "heterogeneity" of resources and the failure to flow freely as "non-complete flexibility".Due to the two features of enterprises' resources above,different enterprises may have great difference over a long period.For enterprises long holding special resources have easier access to excess profit.From this point of view,special resources are decisive for enterprises' performance.That's to say,the pursuit of excess profit will finally convert to identification of the special and scarce resources.The special resources inside the enterprise are the core and key.As for CPA firms,their superior resources are,respectively,human resources,name-brand resources and organizing ability resources.The third part discusses the competitive edge of the "Big Four" CPA firms.On the basis of Resource-Based Theory,this part studies the competitive edge of the "Big Four" CPA firms by means of public data from Association of Certified Public Accountants' database,CSMAR database Analyses show that compared with domestic CPA firms,the "Big Four" international CPA firms display evident advantage in human resources,name-brand resources and organizing ability resources all.The fourth part lists some measures that can be taken for domestic CPA firms to promote competitiveness.By referring to the experience of the "Big Four" CPA firms, this part makes specific proposals in terms of human resources,name-brand resources and organizing ability resources.The author believes that in order to improve the competitiveness of domestic CPA firms,we should strengthen the importance of human resources to CPA firms' development;improve the firms' inner environment, increase CPAs treatment and reinforce human resource management;enhance auditing quality,integrate superior resources in auditing market;exert scale superiority and synergistic effect after CPA firms' integration and pay attention to cultural construction. The thesis extends the scope where Resource-Based Theory is employed and enriches the approach to study in CPA firms' competitiveness.It can be a reference for domestic CPA firms to cultivate and promote competitiveness.