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Productivity Change, Technical Progress, and Relative Efficiency Change in the Public Accounting Industry

Anderson Graduate School of Management, University of California at Riverside, Riverside, California 92521
Anderson Graduate School of Management, University of California at Riverside, Riverside, California 92521
School of Management, The University of Texas at Dallas, Richardson, Texas 75083-0688
rajiv.banker{at}ucr.edu
hsihui.chang{at}ucr.edu
nataraj{at}utdallas.edu

We present evidence on components of productivity change in the public accounting industry toward the end of the 20th century. Using revenue and human resource data from 64 of the 100 largest public accounting firms in the United States for the 1995–1999 period, we analyze productivity change, technical progress, and relative efficiency change over time. The average public accounting firm experienced a productivity growth of 9.5% between 1995 and 1999. We find support for the hypothesis that technical progress rather than an improvement in relative efficiency was the reason for this productivity growth. Firms that were early movers into management advisory services (MAS) and those that emphasized growth in MAS over growth in the traditional audit and tax services enjoyed significantly higher productivity growth than their peers. These firms also contributed significantly more to the industry's technical progress.

Key Words: public accounting; productivity change; technical progress; relative efficiency; management advisory services; auditing; taxation services
History: Received: August 15, 1999;