Open Book Accounting Research Articles

World War 2 governmental cost-plus procurement: An Australian case study

The much-maligned cost-plus contract used in the procurement of defence assets has received little attention in the accounting history literature focused on accounting and the military in times of war. An extensive archive of a World War 2 contract between the Australian government and the UK De Havilland Aircraft Company for the supply of Tiger Moth airframes provides an opportunity to investigate important features of this contract, including cost recording and disclosure, monitoring of cost data by government inspectors, resolution of uncontracted events and evidence of government action to mitigate risks associated with this form of contracting. We also broaden the extant literature on open-book accounting on the premise that government access to the contractor's costing system constitutes a strong subset of this phenomenon. Finally, the batch-costing techniques utilised show strong evidence of ‘learning’ in respect of direct labour costs, consistent with this feature of cost behaviour in aircraft assembly.

Trust, distrust, and open‐book accounting in three client‐vendor relationships

AbstractExtant management accounting research has conceptualized the interplay between trust, distrust, and open‐book accounting (OBA) as a relationship‐level phenomenon, largely ignoring that inter‐organizational relationships are often complex entities that comprise multiple arenas of exchange where (dis)trust and OBA can interact in different—and potentially contradictory—ways. To address this theoretical oversight, we draw on relational exchange theory to propose that (dis)trust largely forms within OBA domains where different forms of data are exchanged for different purposes. Trust and distrust may thereby coexist within a relationship. We also propose that (dis)trust spills over to influence the conditions for OBA in other domains. Consequently, trust and distrust not only take shape in cumulative processes within OBA domains but also diffuse between domains in a relationship. Empirical observations from a longitudinal case study of a retail buyer's attempts to introduce OBA in three vendor relationships lead us to suggest that competence‐trust spillover is determined largely by domain similarity, while goodwill‐trust spillover relies to a greater extent on staff mobility between OBA domains. Overall, the negative effects of distrust spillover on the implementation of OBA appear greater than the positive effects of trust spillover. Our study shows that, by analyzing the domain‐specific nature of trust and distrust, future research can increase our understanding of the relationship between data characteristics and (dis)trust, as well as explain how trust and distrust interact to determine conditions for data exchange between organizations.

Vertical Contract Disclosure in Three‐Tier Industries*

Consider a three‐tier industry with a monopolist supplying a manufacturer which sells its product to final consumers through two retailers. Contracts are linear and secret. Hence, upon receiving an out‐of‐equilibrium offer, each retailer must form a belief about the identity of the deviating upstream firm. This beliefs' specification problem wipes out if an Open Book Accounting (OBA) policy is implemented, whereby the input price is disclosed to retailers. Under Cournot (Bertrand) competition, OBA increases industry profits and consumer surplus if retailers believe that any out‐of‐equilibrium offer is more likely to reflect a deviation by the upstream supplier (by the manufacturer).

The interplay between financial rules, trust and power in strategic partnerships in the construction industry

PurposeTo explore how and why the social structures of strategic partnerships are shaped by actors and how these interrelate with a team's interpersonal relationships over time. Grasping the complexity of this interplay is essential if we want to comprehend what actually goes on in these partnerships and understand why actors often disengage from them.Design/methodology/approachIn three cases, 14 in-depth interviews were held with knowledgeable actors about important events and activities that influenced the relationships between partners. Interview data were triangulated with journals kept by the lead author, who participated as an engaged scholar in the three cases. Because this study took an interdisciplinary approach, new insights could evolve from the multi-level analysis.FindingsTrust has a moderating effect on the relation between open-book accounting and the degree of control a dominant party wants to exercise. When the level of control is raised, this can signal distrust to the other partners, which can harm the relationship. When partners feel more dependent on each other's capabilities to reach their long-term goals, the parties seem to be less likely to put the blame on one of the partners in the case of undesirable events.Practical implicationsManagers should be aware of their power position and acknowledge the effects of power on their relationships. If long-term and close collaboration does not emerge in their partnership, it may be due to how they use their power position.Originality/valueThanks to the interdisciplinary approach, this is the first study that shows the significance of trust and power in maintaining strategic partnerships in the construction industry, and how trust can affect the financial rules of actors.

Control Beyond Ownership: Open-Book Accounting in Unbalanced Supply Chain Networks

Open-book accounting is a practice to disclose the full cost structure of suppliers to customers to achieve cost efficiency in supply chains. However, the dominant market power of customers could interfere with this goal in practice. Using unique data on the suppliers of large Korean business groups, we find that open-book accounting is associated with profit rate regulation by customers. Suppliers’ price growth is capped despite the increase in supplied goods. Profit rates of suppliers significantly co-move in times of low average profitability. Using an exogenous regulatory reform that outlawed coercive open-book accounting, we find the tendencies significantly reversed post-reform.

Open-book accounting no relacionamento entre comprador e fornecedor no setor agroindustrial

Objetivou-se identificar como o OBA (Open-Book Accounting) é praticado no relacionamento entre uma empresa agroindustrial e um de seus fornecedores diretos, na perspectiva da ECT (Economia dos Custos de Transação). Trata-se de estudo de caso único e díade. Empregaram-se entrevistas semiestruturadas, análise documental e observação direta para coleta dos dados e análise de conteúdo para análise. Verificou-se que o OBA é aplicado bilateralmente, com detalhamento amplo de informações pelo fornecedor, e estreito e eventual pela compradora. Sua aplicação não foi imposta e emergiu pela confiança e benefícios mútuos estabelecidos, ampliação de negócios conjuntos e contrato exclusivo de fornecimento. No caso específico da empresa compradora, o propósito principal do OBA é apoiar o TCO (Total Cost of Ownership), empregado para seleção e (re)negociação com fornecedores. Conclui-se que o compartilhamento consensual de informações, prevendo benefícios mútuos, aumenta a disposição ao OBA e as chances de identificação de oportunidades de redução de custos.

Vertical Contract Disclosure in Three-Tier Industries

Consider a three-tier industry with a monopolist supplying an essential input to a manufacturer, which in turn sells its product to final consumers through two differentiated retailers. Throughout the supply chain, contracts are linear and secret. In this setting, upon receiving an out-of-equilibrium offer by the manufacturer, a retailer has to form a belief about the identity of the deviating upstream firm. This beliefs' specification problem wipes out if an Open Book Accounting (OBA) policy is implemented (i.e., if the input price is disclosed to the retailers). I show that the welfare effects of OBA crucially depend on the retailers' beliefs: when retailers compete a la Cournot, OBA increases total industry profit and consumer surplus if and only if retailers believe that any out-of-equilibrium offer is more likely to reflect a deviation by the upstream supplier rather than by the manufacturer, whereas the opposite result emerges under Bertrand competition.

Implementation of inter-organisational mediums: synthesising framework as a design exemplar

The field of management research has an utilisation problem. A considerable avenue in which the translation from theory to practice has been only partial is the management control of inter-organisational relationships. In this particular stream of management (accounting) research, open-book accounting (OBA) is a key concept. Based on the OBA literature, our ambition is to develop an implementation framework for inter-organisational mediums (IFFIM). The first part of the framework, IFFIM_1: the relational view is concerned with the multidimensional nature of inter-organisational relationships by illustrating relational complexities through the OBA dimensions. The second part of the framework, IFFIM_2: the process view is an outlook to the stepwise implementation process, where the factors that influence OBA implementation have been integrated to the phases of the so-called enterprise system experience cycle. Unlike most contemporary research, our work is based on the idea of 'design science', the aim of which is to develop general knowledge to support the design of solutions to field problems. IFFIM is a design exemplar to practitioners, i.e., a guideline to follow in the design of interventions.

The effect of product complexity and communication quality on IOCM and OBA in buyer– supplier relationships

Purpose This paper aims to investigate the effect of product complexity and communication quality on inter-organizational cost management (IOCM) and open book accounting (OBA) practices in buyer–supplier relationships in Malaysian manufacturing firms. Design/methodology/approach A questionnaire survey was administrated to CFOs or accounting managers of Malaysian suppliers. Exploratory factor analysis and Structural Equation Modeling procedures were applied to test convergent and discriminant validity of the measurement model and examine the relationships among the latent constructs in the structural model. Findings The results suggest that IOCM and OBA scales show acceptable reliability and validity. The findings also report that both product complexity and communication quality have a positive effect on IOCM and OBA in buyer–supplier relationships. However, the results suggest that IOCM does not influence OBA practice. Research limitations/implications Although IOCM and OBA constructs exhibited satisfactory reliability and validity, future research is required to refine and further validate these constructs. The data were only collected from the supplier’s perspective. Thus, future research is invited to benefit from matched data from both suppliers and buyers to generate additional insights on IOCM and OBA. Practical implications This study may assist suppliers and buyers in relationships by suggesting that complex products require the adoption of IOCM and OBA practices to reduce information asymmetries and manage costs. Furthermore, emphasizing quality of communication may enhance the implementation of these practices. Originality/value Theoretically, this study contributes to the academic stream of management accounting and cost management as it enhances an understanding of contributions introduced in prior literature on IOCM and OBA. It uses a complementary approach of transaction cost theory (TCT) and social exchange theory (SET) to explain the research model. Methodologically, the study validated scales for measuring IOCM and OBA in a new environment.

Measuring Inter-organizational Cost Management and Open Book Accounting

ABSTRACT This paper reports the findings of a study aimed at developing valid measurement for inter-organizational cost management (IOCM) and open book accounting (OBA) constructs. The conceptualization of these measures were based on the prior literature in the context of supplier firms of Malaysian manufacturing sector. Using Structural Equation Modelling (SEM), measurement models of the constructs were tested and the scales were validated. The results indicated a satisfying model with acceptable reliability and validity. The findings of this study provide instruments that could be utilized as tools to assess the adoption of IOCM and OBA practices in buyer-supplier relationships. This paper extends the understanding on the concepts of IOCM and OBA practices through the introduction of a comprehensive scale covering wide dimensions of IOCM and OBA. Keywords: Inter-organizational cost management; open book accounting; new scales; buyer-supplier relationships. ABSTRAK Makalah ini melaporkan hasil kajian yang bertujuan membangunkan pengukuran yang sah untuk Pengurusan kos antara organisasi (IOCM) dan Perakaunan ‘open-book’ (OBA). Konsep bagi ukuran berkenaan adalah berdasarkan kajian lepas dalam konteks firma pembekal sektor perkilangan di Malaysia. Model pengukuran konstruk telah diuji dan skala telah disahkan menggunakan Pemodelan Persamaan Berstruktur (SEM). Hasil kajian menunjukkan model yang dibangunkan adalah memuaskan dengan tahap kebolehpercayaan dan kesahan yang boleh diterima. Dapatan kajian ini menyediakan instrumen yang boleh digunakan sebagai alat untuk menilai penggunaan amalan IOCM dan OBA dalam hubungan pembeli-pembekal. Kajian ini memperpanjangkan kefahaman tentang konsep IOCM dan OBA melalui skala komprehensif yang diperkenalkan yang meliputi dimensi IOCM dan OBA yang luas. Kata kunci: Pengurusan kos antara organisasi; perakaunan ‘open-book’; ukuran baru; hubungan pembeli-pembekal.

Measuring Inter-organizational Cost Management and Open Book Accounting

Measuring Inter-organizational Cost Management and Open Book Accounting

Open-book accounting and trust: influence on buyer-supplier relationship

PurposeThis paper aims to discuss the role of open-book accounting (OBA) and trust on buyer–supplier relationship satisfaction. The objective of this paper is to analyze how OBA and trust influence satisfaction on the relationship between suppliers and buyers in the Brazilian automotive sector’s supply chain.Design/methodology/approachThe research has been developed based on a qualitative strategy, characterized as explanatory. Data gathering has been conducted through document analysis and semi-structured interview, and content analysis has been used for discourse analysis.FindingsResults show that OBA is unilateral, imposed by the auto manufacturer, representing a selective information process, as suppliers try to protect their information value as far as possible. Trust is partial and cooperation is not spontaneous, both driven by the search for benefits. OBA may yield a positive or a negative outcome with regard to the social and the economic overall satisfaction of suppliers, depending on how the information is used by auto manufacturer.Originality/valueThe main contribution of this article is to provide an understanding of the difficulties of applying the OBA in companies and of the factors that may influence its operation and performance, impacting on satisfaction and continuity of relationships. The paper also contributes with the proposal of a clearer and more objective definition of OBA. Being the intention that new research in this area can be developed from a delimited, clear and objective definition of OBA, allowing better understanding on the subject and comparison among research studies.

To Disclose or Not to Disclose? An Investigation of the Antecedents and Effects of Open Book Accounting

Open book accounting (OBA) is the regular disclosure of management accounting information beyond corporate borders. Prior contributions have mainly concentrated on identifying its antecedents in individual or small numbers of organizations with exploratory cases. My paper responds to the call to investigate OBA on a wider empirical basis and focuses simultaneously on the explanatory variables of OBA and its influence on both financial and non-financial performance. I thus also explore the mediating role of OBA in linking key antecedents and performance within a unified theoretical framework. I empirically test my model using survey data from a sample of European companies, which are then analyzed through structural equation modeling. My findings indicate that the extent of OBA use is explained by a firm’s willingness to work together with its counterparts in the long run, that is, a relational factor, and the presence of sophisticated cost accounting systems, that is, a technical prerequisite. My evidence also suggests a positive association between OBA and firm performance. Additionally, I find that OBA is a partial mediator that explains how a firm’s long-term commitment to its external partners and the sophistication of its cost accounting system may become associated with performance.

Dynamic and static pricing in open-book accounting

PurposeThe purpose of this paper is to understand differences between open-book accounting (OBA) using static prices and OBA using dynamic prices. The authors identify how these differences influence various aspects of customer–supplier relationships.Design/methodology/approachThis paper is based on a case study involving a builders’ merchant and a wood manufacturer in the UK. The builders’ merchant under discussion has recently outsourced part of its production to the aforementioned wood manufacturer by using OBA with dynamic prices. For this case study, the authors have conducted interviews with multiple people from both parties in the agreement. Additional illustrative cases are provided through a study of other qualitative papers on OBA.FindingsThe authors find evidence supporting that, when dynamic prices are used in OBA, risk (unpredictability) is shifted from the supplier to the customer. Also, the customer frequently focuses on the supplier’s costs, both parties often aim for a long-term relationship and the customer becomes more dependent on the supplier, causing high interdependence. Furthermore, empirical evidence suggests that the customer finds price less important, and the reallocation of activities between the customer and supplier is easier in OBA setups in which dynamic prices are used.Originality/valueThis paper provides the first study of how differences between dynamic and static prices in OBA influence the customer–supplier relationship. This paper adds to the developing literature on OBA, in particular, as well as to literature on pricing, in general.

Work Floor Experiences of Supply Chain Partnering in the Dutch Housing Sector

Work Floor Experiences of Supply Chain Partnering in the Dutch Housing Sector

Inter-Organizational Cost Management and Open Book Accounting: A Review

This paper aims to review the recent literature on inter-organizational cost management (IOCM) and open book accounting (OBA) practices, and their relationship with cost reduction. Based on the method used, a comprehensive review of relevant literature on this topic between 1992 and 2016, was sourced, collected, and summarized. Subsequently, two major findings were drawn. First, studies in the US, UK, and Japan dominated research on the area of IOCM and OBA, but, in recent years, more European and other countries are becoming involved. Second, the reviewed studies show that IOCM and OBA improve inter-organizational relationships, particularly, when the partners develop relational safeguards to prevent opportunism. However, the conclusions from the conceptual and case studies on the role of IOCM and OBA to reduce costs in the supplier-buyer relationships were contradictory. This paper furthers the understanding of the contributions introduced in prior studies on IOCM and OBA, and helps to identify some future research directions. Keywords: Inter-Organizational Cost Management, Open Book Accounting JEL Classification: M41, M49

Modes of governance for municipal energy efficiency services – The case of LED street lighting in Germany

Energy efficiency retrofits are often impeded by high perceived investment risks, long payback periods and a lack of skills. At the municipal level these issues are particularly pronounced as procuring, implementing, and managing retrofits can exceed existing municipal governance capacities. The diffusion of municipal LED street lighting as a replacement for conventional lighting serves as an example. This paper argues that technological (e.g. complexity and maturity), economic (e.g. selling services vs. products and financing costs), institutional (e.g. property situation and contracts) and competency barriers to retrofitting (e.g. lack of measurement capacity and qualified facilitators) translate into transaction costs. We develop a taxonomy of appropriate modes of municipal retrofitting governance based on transaction costs economics. The findings indicate that more market-based solutions, energy performance contracts in particular, can facilitate the procurement of innovative energy efficiency retrofitting solutions and associated investments among municipalities if neutral tenders, open-book accounting, municipal ownership and intermediary organisations allow municipalities to choose appropriate governance structures for particular technologies and retrofits.

Contract-Boundary-Spanning Governance Mechanisms: Conceptualizing Fragmented and Globalized Production as Collectively Governed Entities

Conceptualizing how private actors can and should control their supply chains is a tricky question with both economic and legal dimensions. The topic is of extreme importance in today’s global economy. On the one hand, this importance is highlighted by events such as the catastrophic and deadly collapse of the Rana Plaza factory building in Bangladesh and the economic fiasco of the Olkiluoto 3 nuclear power plant construction project in Finland, both arguably caused by the lack of effective supply chain governance. On the other hand, the potential benefits of successful supply chain governance, shown by examples such as open book accounting in automotive manufacturing, provide another perspective on the importance of focusing on supply chain governance. In this paper, I provide a framework for conceptualizing supply chain governance from a legal perspective. First, I combine the governance analytics of global value chain theory with research into compliance mechanisms and practical examples of contract boundary spanning governance mechanisms. This provides a preliminary typology that helps distinguish between adequate and inadequate governance mechanisms. Second, in contractually organized supply chains, governance mechanisms necessarily transgress contract boundaries and thus privity. This leads me to refer to them as contract-boundary-spanning governance mechanisms. To help conceptualize the requirements for attributing legal normative effects to such mechanisms, I propose using Teubner’s factual framework for evaluating liability in contract networks. Combined together, the typology and the framework provide a tool for evaluating and discussing the appropriateness of liability in different factual situations. This tool is not limited to any specific jurisdiction or doctrine and is thus trans-substantive. It enables further comparison of the legal doctrines available in different jurisdictions and transnationally for their potential in establishing liability in different configurations of supply chain governance.

Employee Voice through Open-Book Accounting: The Benefits of Informational Transparency

This paper explores the concept of open-book accounting. It illustrates the benefits of open-book reporting policies in terms of their potential ability to correct informational asymmetries, and it sets out some ideas for a future research agenda centred around the concept. The discussion is grounded in large part in the experiences of employee-owned businesses (EOBs) because such organisations are at the forefront of informational transparency innovations in social accounting. But the broader principle of sharing organisational information with employees and training them to process financial and strategic information is applicable to any organisation. It is argued that open-book accounting, especially in the context of EOBs, provides an exciting alternative to mainstream accounting and financial controls and a welcome addition to the social accounting literature.

The role of open book accounting in a supplier network: Creating and managing interdependencies across company boundaries

Open book accounting (OBA) is an accounting method that has been put forward as a tool for managing interdependencies across company boundaries. This paper investigates the role of OBA in creating and managing interdependences in supplier relationships. In particular, consideration is given to how OBA deals with the embedded relationships in which interdependencies are both potentially aligning and conflicting with interdependencies in other relationships. An in-depth case study on the role of OBA within the retail industry in Sweden has been conducted. The study shows that the company used the OBA to create and manage interdependencies in different inter-organizational situations. The company used it in managing the interdependencies with the first tier supplier and down in the supply chain influencing second and third tier suppliers. However, OBA plays a key role in creating and managing the embedded supplier relationships. OBA was used to influence indirect relationships and their technical and organizational interfaces. It was also decisive in new resource combination and in the identification of new interfaces. Furthermore, OBA was used when actors defined the network boundaries and find new temporary solutions.