Future buying intentions for complex transactional legal services


Academic Paper, 2016
29 Pages, Grade: 9

Excerpt

Inhalt

Introduction

Conceptual model and hypothesis development
Services marketing and professional services
Legal services and credence attributes
Future buying intentions
Perceived value of services
Commitment

Research methodology

Analysis and results
Assessment of the measurement model
Assessment of the structural model
Competing model

Discussion
Perceived value of services -> Future buying intentions
Affective commitment -> Future buying intentions
Calculative commitment -> Future buying intentions
Calculative commitment -> affective commitment – model II/model III

Theoretical contributions

Managerial contributions

Research limitations

Appendix A

References

Abstract

Purpose – The purpose of this study is to understand factors influencing future buying intentions for complex transactional legal work at large law firms in Germany. In doing so, I integrate three marketing concepts: perceived value of services and affective and calculative commitment and examine their relationships and impact on future buying intentions.

Design/methodology/approach – A conceptual model was developed based on the findings of an extensive literature review and on the outcome of semi-structured interviews led with industry experts; the model was tested, using partial least squares (PLS), on 125 responses obtained through a questionnaire that was addressed to senior management within the legal, procurement and/or M&A department at the top 100 corporations and financial institutions in Germany.

Findings – The findings suggest that neither perceived value of services nor calculative commitment directly impact future buying intentions in this context. Rather affective commitment serves as a mediating variable for both constructs. Perceived value of services was conceptualized as a higher-order formative construct consisting of 5 dimensions and the proposed multi-dimensional conceptualization was confirmed.

Originality/value – The study enriches the limited literature on professional services with credence attributes and adds to the debate surrounding the conceptualization and operationalization of the constructs employed in this context in form of an empirical investigation.

Keywords Professional services, future buying intentions, services marketing

Paper type Research paper

I would like to thank Dr. Philippa Ward for her helpful comments on a draft of this article.

Introduction

The future of large law firms is a topic that has intrigued scholars and practitioners alike particularly over the last decade due to a changing economic and global competitive landscape, technological advancements and changing client demands. While numerous articles have outlined trends and uncertainties likely to impact large law firms in the future opinions remain split on the changes likely to occur over the next 10 years. Common consensus exists on the notion that large law firms are increasingly under pressure to change, change to be more efficient, change to better manage knowledge, change to be more innovative and change to better demonstrate service value. It appears that organizations have become more discerning in purchasing legal services and the choice of legal providers.

This study is novel in the professional services domain as it empirically identifies and investigates factors that influence future buying intentions for complex transactional legal services at large law firms in the German context. Transactional legal work refers to business transactions that take place predominately outside of court and involves the drafting of contracts and compliance with law across various practice areas.

This study seeks to develop a conceptual model based on primary research gathered through semi-structured interviews and by means of a questionnaire to offer managerial recommendations in strategic decision-making and to extend the body of literature for an important but neglected area, i.e. professional services.

The concept of future buying intentions has its roots in the marketing literature and a range of approaches have been employed to determine antecedents and their impact on buying intentions in a variety of contexts (e.g. Zeithaml et al, 1996), where service quality, satisfaction and more recently perceived value appear to be the most commonly studied antecedents.

In this study three concepts in understanding future buying intentions for complex transactional legal work at large law firms in Germany are integrated, namely perceived value of services and affective and calculative commitment. The choice to investigate these concepts is twofold: 1) perceived value of services and commitment in connection with future buying intentions have not been empirically examined in the legal context to date; instead more attention was paid to satisfaction and quality of services within the professional services domain in general, and 2) the value of large law firms’ transactional legal services and the commitment of organizations to such services has raised a number of contradicting debates by recent press and scholary work (e.g. Susskind, 2010; Economist, May, 2011).

Conceptual model and hypothesis development

An extensive literature review spanning four academic disciplines, i.e. economics, legal studies, marketing and sociology, revealed that only few empirical studies focus on buying intentions for transactional legal services. Typically, scholars from the four academic disciplines considered examine particular aspects of the legal industry. For instance, while legal scholars frequently discuss and analyze the law and ethical aspects of lawyering, economists often focus on the growth of law firms and emphasize the asymmetry of information between customers and service providers. Marketing scholars typically seek to understand particular constructs such as client-attorney relationships or service quality to identify choice criteria in determining the essence of particular constructs from a consumer’s and/or corporate client’s perspective. Sociologists on the other hand often study the legal profession as a whole. Drawing predominately on the services marketing literature, an evaluation of the key conceptual elements investigated in this study was provided, referring to other disciplines only if prior work does not appear to exist.

Services marketing and professional services

While there seems to be a large body of knowledge on product purchasing and related purchasing process, much less academic literature can be found about services and their selection criteria from a corporate customer’s perspective. Several authors agree that the selection criteria and the decision-making process for goods are essentially different from those of services (e.g. Edget & Parkinson, 1993; Jackson et al, 1995; Axelsson and Wynstra, 2002). Services marketing, which has found its place in marketing textbooks since the 1990s (e.g. Grove et al, 2003), usually emphasizes four distinct characteristics that distinguish services from goods. The four characteristics that have commonly been cited are intangibility, heterogeneity (not standardized), inseparability (difficult to separate production from consumption) and perishability (difficult or impossible to store). It is this distinction that has helped shape the services marketing literature, led to differing selection criteria and to the development of distinctive marketing strategies for services and goods marketers.

Transactional legal services are classified as professional services, professions that are highly specialized and require a significant amount of training (e.g. Rosenbaum et al, 2006). This sets professional services apart from other services and as a result of that, selection criteria for professional services may not be commensurate with those of other services. This has also been noted by researchers in other disciplines. For instance, contributing to the literature of engineering economics, Kugyte and Sliburyte (2005) differentiate between professional services, service shops and generic services and note that service provider selection criteria depend on the type of services researched. As opposed to generic services, professional services for example require advice and trust from the buyers’ perspective due to insufficient information available and due to a higher level of perceived risk (e.g. Kugyte and Sliburyte, 2005). As a result, evaluating alternatives is much more complex and consequences in forming inappropriate decisions could be serious and expensive for a corporate client (e.g. Kugyte and Sliburyte, 2005).

Legal services and credence attributes

According to Darby and Karni (1973) most goods and services possess attributes that can be analyzed in terms of three categories, namely, search, experience and credence. While most goods process search attributes, that is, attributes that can be observed and determined prior to purchasing a good by searching information, credence and experience attributes dominate in many services (e.g. Zeithaml, 1981). Experience attributes are those attributes that can be difficult to determine prior to the purchase but are relatively easy to determine or verify after purchase and consumption (Andersen and Philipsen, 1998). Often cited examples include auto insurance or cruises where the buyer consumes the product or service and finds out whether the product or service lived up to the buyer’s expectation. Credence qualities on the other hand are qualities that are difficult to ascertain even after the good or service has been purchased and consumed and therefore often require trusted advisors (e.g. Andersen and Philipsen, 1998; Dulleck et al, 2011).

Legal services can be complex, may involve numerous legal practice areas and are mostly classified as credence goods. The categorization of transactional legal work was a topic discussed both with industry experts and lawyers throughout this research study. While a clear differentiation between what constitutes a complex and “straightforward” transaction appears to be drawn in practice today, only very few academic studies discriminate between different types of legal services to date. In the past, legal services were commonly grouped as credence services, yet throughout this study it became clear that not all legal services should be categorized as credence services as very different underlying factors influencing purchasing decisions (and other conceptual elements) may be at play. It is for this reason and the implications this differentiation may have for theory and practice that I chose to focus on complex transactional legal work, the type of work large law firms are commonly engaged for.

Complex transactional legal work, depending on the scope of the work, commonly requires the interplay of multiple practice areas such as corporate, finance, employment and tax in multiple jurisdictions and may involve a high level of risk and uncertainty in terms of the coordination of the work for instance. As a result, lawyers not only provide a certain service but also determine and establish the scope of the work based on their judgment, though clients may have extensive experience and insight into the legal advice required (Cabrillo and Fitzpatrick, 2008). Consequently, according to Cabrillo and Fitzpatrick (2008), this also excludes clients from truly determining the true value added from the services consumed. This implies that the quality of the services provided can only be judged based on clients’ beliefs (Hadfield, 2000) and that corporate clients form relationships with a number of law firms predominantly as a way to control opportunistic behavior and manage legal spending in terms of future buying intentions (e.g. Beardslee et al, 2010).

The following section provides further explanation and evaluation of the constructs investigated in this study, namely future buying intentions, perceived value of services and affective and calculative commitment, drawing predominately on the services marketing literature and referring to other disciplines only if prior work does not appear to exist.

Future buying intentions

Future buying intentions in this study’s context refers to the repeat purchasing of complex transactional legal work at large law firms. In services marketing, several authors find that future buying intentions have not been empirically examined across a large number of services (Mitra et al, 1999), particularly not professional services. From a buyer’s perspective, a review of the services marketing literature showed that adhering to the services offered by a firm engaged in the past may be a method to reduce risk or uncertainty that a company would otherwise face with a new services provider (e.g. Mitra et al, 1999). Palihawadana and Barnes (2004) propose that clients who appreciate the value of the services pay less attention to alternative providers, are willing to stay with a particular law firm and may even be willing to pay a premium. While future buying intentions have been modelled and investigated in a number of ways, the most commonly studied antecedents appear to be service quality and satisfaction and more recently perceived value of services. Within the legal context, the only study that has investigated client loyalty and the key reasons for staying with a law firm is that of Palihawadana and Barnes (2004). The authors identified service quality as the key reason to return to a particular law firm. Young and Denize (1994) however contend that even if service quality is not satisfactory, there may be reasons to repurchase at a particular firm for motives other than service quality, namely the lack of alternative service providers, the uncertainty linked to change or the investments made into a particular firm (as cited in Palihawadana and Barnes, 2004). Focusing on consultancy services, Sonne (1999) finds that customers purchase services from one particular institute based on arguments such as “we know the consultant of the institute, we know their background, and they have performed services for us in the past” (p. 104) and that this indicates that customers purchase services from the institute “based not only on an assessment of the institute’s technical competence, but also out of a need to reduce uncertainty and risk” (p. 104).

In this study I propose a positive relationship between both the perceived value of services and future buying intentions and affective and calculative commitment and future buying intentions, leading to the following hypotheses:

H1: There is a positive relationship between the perceived value of services and future buying intentions.

H2: There is a positive relationship between affective commitment and future buying intentions.

H3: There is a positive relationship between calculative commitment and future buying intentions.

The related elements will be discussed below:

Perceived value of services

In their literature review, Boksberger and Melsen (2011) note that there is much controversy relating to the definition and measurement of perceived value. On the one hand, perceived value has been extensively discussed in the marketing literature for more than a decade, on the other hand, there seems no consensus on how perceived value should be conceptualized and operationalized. Consensus however exists on the importance of perceived value in running a successful business and building and sustaining competitive advantage (e.g. Molinari et al, 2008). Several authors regard value as a complex and dynamic construct that is not merely limited to functional aspects of benefits and sacrifice, as has been traditionally suggested (e.g. Sanchez-Fernandez and Iniesta-Bonillo, 2007). More recent literature appears to account for this complexity, taking more often a multi-dimensional approach in conceptualizing perceived value (e.g. Kumar and Grisaffe, 2004). A review of the services marketing literature showed that only very few studies have investigated perceived value in the professional services setting. In terms of conceptualization, the most commonly investigated constructs in connection with the perceived value of services are service quality (e.g. Patterson and Spreng, 1997; Lapierre et al, 1999; Kumar and Grisaffe, 2004; Whittaker et al, 2007), service satisfaction (e.g. Patterson and Spreng, 1997; Lapierre et al, 1999; Lam et al, 2004; Whittaker et al, 2007), price (e.g. Kumar and Grisaffe, 2004; Whittakker et al, 2007) and intention and loyalty (e.g. Lam et al, 2004; Kumar and Grisaffe, 2004; Whittakker et al, 2007). While a number of these studies have investigated the moderated effect of value through satisfaction on intention, to my knowledge, only two studies have researched the direct impact of value on intention and as several authors have pointed out direct comparison between those studies is therefore not appropriate (e.g. Cronin et al, 2000; Whittaker et al, 2007).

In conceptualizing perceived value, two studies concerned with financial and consulting services (Kumar and Grisaffe, 2004; Whittaker et al, 2007 respectively) offered a foundation for partial adaptation. Kumar and Grisaffe (2004) examine the effect of extrinsic attributes (industry leadership, perceived quality, customer focus, perceived price and innovativeness) on customer value while Whittaker et al (2007), based on the theory of consumption values of Sheth et al (1991), conceptualize value as a second order formative construct consisting of six dimensions (functional, epistemic, emotional, price/quality, social and image values) in understanding buying intention. In this study, perceived value was conceptualized as a second-order construct adopting four of the dimensions investigated by the authors, namely service quality, epistemic value (referred to as “innovation” in Kumar and Grisaffe (2004)), price and reputation (referred to as “image” in Whittaker et al (2007)) and adding the domain specific dimension perceived risk. For context specific and feasibility reasons, i.e. constraints on the data that could possibly be collected within one study, only four of these dimensions, the constructs that were thought to be most relevant in the legal context, were adopted.

Quality of the service: Several authors have found that the quality of the service delivered is not merely related to the perceived outcome of the offering (e.g. Morgan, 1991; Palihawadana and Barnes, 2004) but that it consists of many encounters between a service provider and a corporate client throughout an engagement and is therefore an overall evaluation based on a client’s judgement. Sonne (1999) for instance finds that this particularly pertains to professional services as “each service delivery consists of many encounters and interactions between the service provider and the customer rather than one moment of truth” (p. 98). Drawing on the framework of Sonne (1999), this study focused on two elements of service quality, i.e., interactive, also referred to as soft quality, and non-interactive elements, also referred to as hard quality. Soft quality refers to the interactive elements between a service provider and a corporate client and includes aspects such as communication, personal chemistry or reliability. Hard quality on the other hand refers to non-interactive elements such as technical skills/competence or resource capacity. While Sonne (1999) finds that competence and technical reliability are the most important determinants for evaluating service quality in professional services, the author notes that service quality is also affected by the treatment of the customer and personal interaction during the process. In this study, service quality is conceptualized as a second order construct that comprises of hard and soft quality.

Epistemic value: Epistemic value, or innovation, refers to the extent to which a service provider and its offerings are perceived as creative. It accounts for benefits obtained from the offering’s ability to provide novelty, arouse curiosity or provide value added services that improve a client’s knowledge base (e.g. Kumar and Grisaffe, 2004; Whittaker et al, 2007). Whittaker et al (2007) note that “The inclusion of this dimension is based on the fact that many professional services (e.g. consultancy, training etc.) are specifically designed to improve the skill and knowledge base of the client organization” (p.374). Following this, innovation is not merely perceived to add value in an unmeasurable manner but contributes to the bottom line of the corporate clients’ business and is viewed to form an important and integral part of perceived value.

Price: Kumar and Grisaffe (2004) find that traditionally price and quality have been considered as the key determinants of value across a number of sectors. Price in the context of this study refers to the legal fees arising in a particular transaction. The relationship between price and value has been well documented in the marketing literature and tested in a variety of contexts. In the legal services setting the importance of legal fees can be ambiguous depending on the nature of the work for instance. Most transactional legal work is increasingly regarded as standardized legal work (e.g. Susskind, 2010) with the exception of complex transactions such as hostile take overs and in agreement with a number of studies price was expected to significantly impact the perceived value of services.

Brand/reputation: A provider’s overall brand/reputation is generally regarded as an important determinant of the perceived value of a provider’s offering and within the professional services context the reputation of a firm is considered to serve as a risk reducing mechanism (e.g. Whittaker et al, 2007). Though Palihawadana and Barnes (2004) find that the reputation of law firms was considered among the least important loyalty attributes and explain that reputation may play a critical role when selecting a law firm for the first time but perhaps much less so in the decision to repurchase at a particular law firm, it was a significant component in future intentions. In line with other professional services studies, reputation was anticipated to be an important component of perceived value in future buying intentions.

Perceived risk: Several authors note that buying intentions for professional services are characterized by high levels of uncertainty and risk (e.g. Sonne, 1999) and should therefore form part of a model that investigates perceived value. There are several types or measures of risk that have been investigated depending on the research environment. The most relevant research germane to this study is that undertaken by Mitra et al (1999) who investigate perceived risk in search, experience and credence services. In the marketing literature perceived risk has commonly been operationalized by 5 constructs, i.e. financial, performance, physical, social and psychological risk. Pertaining to credence services, Mitra et al (1999) find that consumers encounter a high degree of financial, social and psychological risk in purchasing those types of services. In this study, perceived risk was conceptualized as a second order construct comprising of financial, performance and social risk that seemed appropriate in the legal context. Financial risk refers to the risk of losing money as a consequence of service delivery failure or loss of some degree that crystallizes either during a transaction or only months after a transaction is closed (e.g. Featherman and Pavlou, 2003). Performance risk is the risk associated with the inability to perform legal services on time and as required to deliver the desired results (e.g. Featherman and Pavlou, 2003). Social risk on the other hand refers to the change in the potential social status of a decision-maker due to incorrect decisions taken (e.g. Featherman and Pavlou, 2003).

Commitment

In most business-to-business exchanges, repurchasing decisions are commonly the outcome of the regular and broad efforts made by a provider to build long-term relationships (e.g. Gounaris, 2005). In doing so the notion of cultivating commitment towards a provider as facilitator has received substantial attention in the marketing literature particularly since Morgan and Hunt’s study on trust-commitment theory (Jones et al, 2010).The prevailing understanding is that committed clients provide firms with greater profits, may recommend the firm and spread positive world-of-mouth, and may even pay a premium (e.g. Hilton and Migdal, 2005). There are several types of commitment and the most frequently investigated types that Gounaris (2005) describes as “relatively stable attitudes and beliefs about the relationship” (p. 127) are affective and calculative commitment (e.g. Cater et al, 2011). Affective commitment refers to the client’s emotional attachment, identification, common values, similarity and involvement with an organization (Jones et al, 2010). Calculative commitment on the other hand is of rational nature and refers to the perceived need to commit to an organization due to the perceived paucity of alternative firms in the market or significant anticipated switching costs (e.g. Jones et al, 2010). Within the legal context in Australia, Frow (2007) finds that affective commitment is an important component of overall commitment, yet, contrary to other studies, points out that calculative commitment was only seldom mentioned. In this study, I anticipated that both affective and calculative commitment may well be significant in the German context.

Perceived value as antecedent of affective and calculative commitment in the professional services context:

To date, only very few authors appear to have investigated the relationship between commitment and perceived value. Beyond the services marketing literature, Sanchez-Garcia et al (2007) investigate whether the perceived value of a ceramic product purchase positively influences the consumer’s affective and cognitive commitment to an establishment. While the authors find that perceived value consisting of social value, emotional value and functional value positively influence affective commitment, no significant relationship could be established for cognitive commitment (Sanchez-Garcia et al, 2007). In line with the authors, I suggest a positive impact of perceived value on affective commitment, i.e. where clients maintain a high perception of the value of the services delivered including the interpersonal interaction throughout a transaction that has taken place in the past, the more likely clients are to be affectively committed to large law firms. Though no study appears to have investigated the relationship between perceived value and calculative commitment, several researchers examined the relationship between trust and calculative commitment and found an inverse relationship (Ruyter et al (2001) as cited in Gounaris, 2005). The authors find that as a company’s trust in a provider or partner increases, the reason to continue the interaction or cooperation based on calculative commitment declines. In agreement with these findings, I suggest a negative relationship between perceived value and calculative commitment, that is, the higher the perceived value of the services the less calculatively committed clients are to large law firms.

H4: Appreciation of the services positively influences affective commitment.

H5: Appreciation of the services negatively influences calculative commitment.

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Figure 1: Conceptual research model

Research methodology

There were two stages to this research, an exploratory and explanatory stage, stage 1 and stage 2 respectively. The aim of stage 1 was to further explore and circumstantiate the findings of the literature review through the means of semi-structured interviews. The aim of stage 2 was to test a conceptual model that was designed based on the outcome of the literature review and the findings of the semi-structured interviews. Furthermore, dozens of unstructured discussions were led at conferences and seminars throughout stage 1 and stage 2.

The sample group for stage 1 consisted of legal experts at a large law firm (7 experts), legal experts at consultancies (2 experts), directories and universities (3 experts) and senior management in the legal, procurement and/or M&A department at the top 100 corporations and financial institutions in Germany (3 experts). The sample group for stage 2 was defined as senior management within the legal, procurement and/or M&A department at the top 100 corporations and financial institutions in Germany. 1087 business managers were invited to participate twice throughout January 2015 and this resulted in 125 fully completed questionnaires. For the design of the questionnaire the guidelines outlined by Churchill and Iacobucci (2004) were followed. Likert-type scales anchored by a five point scale ranging from “strongly disagree” (1) to “strongly agree” (5) and “not at all important” (1) to “extremely important” (5) were employed. At the pilot stage, 15 colleagues and industry experts, my 2 supervisors and 5 doctoral candidates at university were asked to complete the questionnaire. The questionnaire was revised and pilot tested several times before the final version in German and English emerged in January 2015. The questionnaire was divided into 5 sections, A-D and followed a logical order where each measurement item was placed in a section that represented a construct of the model tested commencing with “perceived value”, followed by “commitment” and finally “future buying intentions”. Measurement items for each construct were established following the suggestions of Engelland et al (2001) to ensure the appropriate employment of scales in the context of this study and resulted in 51 indicators.

For the purpose of analysis a number of analytical techniques were applied. The qualitative data collected through the semi-structured interviews was processed following an inductive three phase approach described by Elo and Kyngäs (2008). The quantitative data collected during stage 2 was analyzed using Partial Least Squares (PLS), a component-based structural equation modeling (SEM) technique, to test the proposed hypotheses and to examine the outer/measurement model. One of the key advantages of PLS is that it allows researchers to model abstract constructs (unobserved variables) comprising of multiple indicators (observed variables) that are either a dimension or reflection of that construct (Lowry and Gaskin, 2014). PLS is well suited for theory building, allows for both reflective and formative variables in a model and is less strict on sample size than covariance-based SEM techniques.

In examining the outer/measurement model and inner/structural model, a two-stage approach as proposed by Henseler et al (2009) and Hair et al (2011) that encompasses (1) the assessment of the outer model based on a set of measures/criteria followed by (2) the assessment of the inner model was followed.

Analysis and results

Assessment of the measurement model

The assessment of the measurement model involves the application of several techniques/tests, distinguishing between reflective and formative latent constructs. In this research, all formative constructs are higher-order variables consisting of reflective latent variables that were addressed under the assessment of the inner model. The assessment of the reflective measurement model involved determining measurement reliability and validity according to certain criteria, namely indicator and internal consistency reliability and convergent and discriminant validity.

Reliability concerns the degree of stability and consistency of the indicators while validity determines whether a construct measures what it is intended to measure (e.g. Henseler et al, 2009).

Indicator reliability is the process whereby the relevance of an indicator assigned to a particular latent variable is determined. Thereby the absolute standardized outer component loadings should be higher than 0.7.While loading values below 0.7 are acceptable in case of exploratory research (e.g. Hulland, 1999), it is recommended to eliminate those indicators with loadings below 0.4, if overall internal consistency can be improved. In this study, in interpreting the values, indicators with loadings below 0.6 were discarded following a sequential approach that resulted in higher values of the remaining indicators. Internal consistency reliability or composite reliability determines the internal consistency of a given block of indicators and in this study, the measure developed by Fornell and Larcker (1981) (as cited in Whittaker et al 2007), with the commonly proposed benchmark of 0.6 was employed. In contrast to Cronbach’s alpha, an internal consistency measure often quoted in academic studies, this measure does not assume that all indicators are equally weighted (or equally reliable); the measure developed by Fornell and Larcker (1981) overcomes this by utilizing the indicator to construct loadings without any prior assumptions and is therefore often considered more accurate (e.g. Hair et al, 2011). The results after a three-stage ‘purification’ process are summarized in table 1 in appendix A. Overall, out of 51 indicators tested, 10 indicators were removed as they did not meet the adopted benchmarks.

For the assessment of validity, two validity criteria were examined, namely convergent validity and discriminant validity (e.g. Henseler et al, 2009). Convergent validity (AVE) represents the shared variance in a latent variable and a value of at least 0.5 indicates that a latent variable explains on average more than a half of the variance of its indicators (e.g. Henseler et al, 2009) and is therefore commonly adopted as benchmark. Discriminant validity implies that an indicator should correlate poorly with other indicators in the model that should be different (e.g. Henseler et al, 2009). In this study, two criterions, namely the Fornell-Larcker criterion and cross-loadings were examined. While the Fornell-Larcker criterion assumes that a latent variable shares more variance with its respective indicator than with any other latent variable, cross-loadings, the loadings of each indicator on its respective latent variable, is considered to be more liberal in that the loading of each indicator is expected to be greater than all of its cross-loadings (Henseler et al, 2009). Table 2 and table 3 in appendix A summarize the AVE values and cross-loadings and show that all constructs exceed the cut-off value of 0.50 proposed by Fornell and Larcker and that none of the indicators load higher with any other latent variable than the one it is intended to measure. Consequently, the examination of the information presented in both tables confirms discriminant validity.

Assessment of the structural model

Before proceeding to assess the structural model, the proposed higher structures of perceived value of services, quality of the service and perceived risk were examined. PLS is well suited to investigate models at a higher level of abstraction and two approaches are commonly proposed, namely the two-stage approach and the repeated indicator approach. In this study, the approach of repeated indicators where a higher-order construct is directly measured by the indicators of all lower-order constructs was followed (Chin, 2010). The proposed structures of the three multi-dimensional formative constructs were all confirmed with t-values of the regression coefficients of above 2.7. Generally speaking, regression coefficients with t-values above 1.96, i.e. a level of significance above 0.025 (one-sided test) are considered significant (e.g. Nitzel, 2010).

In assessing the structural model, several criteria, relying on nonparametric procedures such as bootstrapping and jackknifing, were examined. To determine the statistical significance of the loadings and pathways, the PLS bootstrapping procedure was employed. Estimates were based on 1,000 samples that resulted in n-1 degrees of freedom (where n is the number of samples) one-tail critical t-values of 1.645, 2.326 and 3.09 for 0.05, 0.01, and 0.001 levels of significance respectively. Of the initial 5 pathways only 2 were supported, namely affective commitment->future buying intentions (H2) and perceived value of services->affective commitment (H4). At first glance, this seems to be reflected in the weak R^2 values ranging from 0.0097 for calculative commitment to 0.147 for affective commitment to 0.248 for future buying intentions, implying that the model does not possess sufficient predictive power as it stands. However, it has been argued that low R^2 values can have predictive power if one consciously decides to focus on a very limited number of constructs only, as is the case in this study, in sectors where generally low R^2 values are prevailing (e.g. Nitzl, 2010). Overall, the three constructs perceived value of services, affective commitment and calculative commitment explained 25% of the variance of future buying intentions (R^2 = 0.248), with affective commitment explaining most of the variance of future buying intentions (f^2 = 0.23) and calculative commitment the least (f^2 = 0.007), indicating a large and weak effect respectively, according to the benchmark commonly adopted. Perceived value of services explained 15% of the variance of affective commitment while only less than 1% of calculative commitment. The Q^2 values (future buying intentions: 0.114; affective commitment: 0.058; calculative commitment: 0.004) of the three endogenous variables were all above 0 indicating that the model has predictive relevance.

Competing model

Alternatively, to the original model, I hypothesized relationships between calculative commitment and affective commitment, perceived value of services and affective commitment, affective commitment and future buying intentions and the indirect effect of perceived value of services through affective commitment on future buying intentions. The results show that perceived value of services and calculative commitment are significant determinants of affective commitment. Furthermore the impact of affective commitment on future buying intentions was supported. The significance of the mediation effect was tested employing the Sobel test, a test that is considered very conservative and commonly recommended for medium to large sample sizes (e.g. Sobel, 1990). All three pathways were significant at a significance level of 0.1% (one-sided test; and 0.05% two-sided). Compared to the original research model, the R^2 and Q^2 values for affective commitment have risen from 0.147 to 0.265 and while the R^2 value for future buying intentions has slightly fallen from 0.248 to 0.236 indicating that perceived value of services and calculative commitment explained only a very small percentage of the variance of future buying intentions directly. The lion share of varience is explained by affective commitment and only indirectly through perceived value of services. The results of the Sobel test however indicated that the association between perceived value and future buying intentions were significantly mediated by affective commitment (significance levels of less than 0.05%) and therefore shows that perceived value plays a significant indirect role in future buying intentions.

The increased R^2 value of 0.265, for affective commitment, indicates that calculative commitment contributes almost as much to the variance of affective commitment as perceived value of services does. This is further confirmed by the positive (and higher) Q^2 values indicating that the model has predictive relevance.

Discussion

This study empirically investigated the impact of perceived value, affective and calculative commitment on future buying intentions. The original research model tested 5 hypotheses and the results indicated that only two were confirmed, namely affective commitment on future buying intentions and perceived value of services on affective commitment. This resulted in the adjustment of the research model and produced several alternative models.

The following table summarizes the results of the original model compared to those of the alternative models considered and discusses each hypothesis below.

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* Level of significance of 0.05 only, ** level of significance of 0.01

Table 1: Results orginal and competing models

Perceived value of services -> Future buying intentions

Perceived value of services was conceptualized as a higher-order formative construct comprising quality of service, epistemic value, price, brand/reputation/credibility and perceived risk partially adopted from two studies concerned with financial and consulting services (i.e. Kumar and Grisaffe, 2004; Whittaker et al, 2007 respectively). The findings supported the conceptualization of perceived value of services and offers support on how perceived value of services should be treated in the professional services domain. This accords with the findings of Whittaker et al (2007) who conceptualized value as a higher-order construct consisting of functional value, epistemic value, emotional value, social value, image and price/quality and partly with Kumar and Grisaffe (2004) who hypothesized industry leadership, innovativeness, perceived quality and perceived price to influence customer value and found moderate to strong support for these relationships. This study therefore adds to the ongoing debate regarding the conceptualization and operationalization of value in the services domain and provides support for a multi-dimensional conceptualization in the legal context.

In terms of the hypothesized pathway (H1), contrary to the study of Kumar and Grisaffe, (2004) and Whittaker et al (2007), yet in agreement with the studies of Patterson and Spreng (1997) and Lapierre et al (1999) in the services literature, the findings reveal that there is little support for H1 in the research and all alternative models investigated in this study. This could be because perceived value has, as several studies in services marketing also suggest, an indirect effect on buying intentions through affective commitment or other constructs such as satisfaction (e.g. Cronin et al, 2000). “Perceived value of services” as a whole and as conceptualized in this study may be taken for granted by large organizations in complex transactional legal work and ultimately not suffice for future buying intentions. As several authors and interview participants have noted, clients have become more sophisticated and with that higher standards and different perceptions of large law firms and ‘service value’ may prevail. Furthermore, more decision-makers, e.g. including employees from very different departments such as the legal, procurement, compliance and M&A department, may be involved in the process of engaging large law firms and as a result of that, a broader definition of ‘value’ and ‘value contribution’ by large law firms and other professional services providers in complex transactions may exist.

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Details

Title
Future buying intentions for complex transactional legal services
College
University of Gloucestershire
Grade
9
Author
Year
2016
Pages
29
Catalog Number
V384526
ISBN (eBook)
9783668594562
ISBN (Book)
9783668594579
File size
651 KB
Language
English
Tags
future
Quote paper
Dr. Katja Friedrich (Author), 2016, Future buying intentions for complex transactional legal services, Munich, GRIN Verlag, https://www.grin.com/document/384526

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