INNOVATION, LEARNING AND DEVELOPMENT EXPENSES IN THE DIGITAL ECONOMY. A STUDY OF THE BIG FOUR ACCOUNTING FIRMS

The key element of the digital economy is the digital technology that has pervaded the financial services and tax advisory sector. In order to sustain digital technologies in this sector, there is a clear need for innovation. Innovations are the factor responsible for economic growth, which in turn requires research, development and training to drive innovation. This study examines the impact of innovation expenses, employee training expenses and research and development expenses on the annual revenues of the Big Four entities, which are representative for the financial services and tax advisory sectors. Therefore, this study focuses on the dynamic analysis of the aggregate global revenue and innovation, learning and development expenses and the efficiency rate of the mentioned expenses for the Big Four entities. The results of the study reflect the insignificant influence of the absolute change of innovation expenses on aggregate global revenues, while the absolute change in development and training expenses leads to the same change of aggregate global revenues. However, the growth rate of these expenses exceeds the growth rate of aggregate global revenues. This condition is explained by the phenomenon of technological transformation in the financial services and tax consultancy sector, which does not generate immediate results on financial performance, but prepares the stage for future financial results.