Interdependence and accounting information exchanges in inter-firm relationships

Hoffjan and Kruse (2006) maintained that a consistent definition of open book accounting has not yet emerged. They observed that in the literature, different terms are used in connection with the concept, e.g., open book costing and open book transparency. Open book accounting (OBA) is defined by the two authors as the systematic disclosure of cost information between legally independent business partners beyond corporate borders (Hoffjan and Kruse 2006: 40). Such information, being regularly disclosed, is standardized (Kulmala 2002). They also say that OBA refers to the use of information that is located in the sphere of influence of another company within the value chain and is usually confidential. Hoffjan and Kruse (2006), referring to McIvor (2001: 236), specified that open book costing is unilateral OBA, where only the suppliers disclose information. It is the customer who requires the supplier to share the component cost information as part of the process of improvement and cost reduction. Cost transparency, instead (Lamming 1993), refers to the two-way sharing of cost information between suppliers and customers. Both partners are then aware of the relevant dimensions of the reciprocal cost structures and are able to implement common cost improvement initiatives.

Though we acknowledge that other management accounting contributions (Keating 1997; Bushman et al. 1995; Lambert 2001; Abernethy and Vagnoni 2004; Bouwens and van Lent 2007) have examined the issue of interdependence, they have not been explicitly taken into consideration here, because their research questions and the related definition of interdependence are substantially different from ours. More specifically, these authors investigate how the dependence on other business units’ actions impacts on the performance of the business unit under study, and vice versa.

Fashion firms sell products that change quickly, in response to the shifting tastes and preferences of customers. This causes demand variation in styles and colours of garments. In addition, new fashion products are launched at least twice a year. Such specifics generate particular challenges to both the fashion firm and its suppliers. On the one hand, the time to design, manufacture, and distribute fashion products needs to be minimized, thus calling for tight collaboration between all the firms involved at various stages of the supply chain. On the other hand, once a product has been marketed, there is the potential to achieve volume and colour flexibility as a result not only of the ability of the manufacturers to change production rates, but also of the capacity of the suppliers to dye the garments as late as possible in response to demand for particular colours (Holland and Lockett 1997).

As agreed with the respondents, the results will be presented in an anonymous form.

All respondent firms produce and sell finished garments. They have outsourced one or more manufacturing activities to firms with whom they have established collaborative relationships and/or they distribute their products through external trade partners.

For a description of the enabling conditions of the OBA, refer to Section II.

On the issue of restricted access in inter-organizational studies, see: Dekker (2003) and Coad and Cullen (2006).

This form is called putting-out. To this end, see Mariotti and Cainarca (1986) and Grandori and Soda (1995).