Advice giving: A theory of advice formulation

Samantha Lee

What motivates advisors in the formulation of their advice? People seek advice so as to improve the quality of their decisions. But is the advice provided of a consistent quality in all circumstances and if not, what are the factors that may influence advice quality? These are the questions that formed the impetus for, and drove the direction of, this thesis.

We suggest that advice formulation is a selective process and the quality of advice given to a decision maker, far from being consistent, is shaped by a number of factors such as the personal characteristics of the advisors, extent of information and/or knowledge asymmetry between advisors and their clients, the complexity of the advisory task, the future/history of the advisory relationship and the presence of incentives. This theoretical model of the determinants of advice quality is not meant to be an exhaustive list of the factors that may influence advice giving and advice quality. The limited research literature on advice giving means that the work done in this thesis is very much of an exploratory nature and the theoretical model presented in this thesis represents the first, initial list of potential determinants of advice quality. It is expected that future empirical work may lead to a modification or expansion of this model.

A research model that empirically examined three of these possible factors - personal characteristics, knowledge asymmetry and task complexity - is presented. The personal characteristic construct utilized for the research model is: social value orientation. Three experiments, representing the first, initial empirical investigations of the research

model, were conducted. Results of these experiments indicated that advice quality was not influenced by advisors' social value orientations, with prosocials and proselfs exhibiting similar patterns of behavior; advisors were influenced by knowledge asymmetry, providing more optimal advice in asymmetric knowledge contexts than in symmetric knowledge contexts; and task complexity affected advice quality, with advisors providing more optimal advice as task complexity increased.

Supervisor/s

Professor Marcus O'Connor

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