Open book accounting and resource interdependencies : The case of capital equipment sales

Abstract: Over the past few decades, firms have arguably become more dependent on each other. On average, purchased products and services account for more than 50 % of the total cost of large firms. In addition, they have become more complex, requiring closer co-operations between buyers and suppliers.This development has also been reflected in the growing literature on Open Book Accounting (OBA). It deals with the systematic exchange of confidential financial and nonfinancial information that legally independent business partners undertake with the aim to manage their interdependencies. Prior research has observed large differences in OBA depending on whether the exchanged product is standardised or designed by the buyer, the supplier or both parties together. At the same time, limited attention has been paid to how OBA might be used in capital equipment sales. Capital equipment is characterised by its need for support with spare parts and services over its extended life cycles. High opportunity costs might also arise whenever it cannot be used due to scheduled services or unexpected breakdowns.The thesis analyses consequently how OBA is designed and used in the embedded buyer-supplier relationship between a manufacturer of capital equipment and one of its major customers. With its detailed observations, the study contributes also to an improved general understanding of the interconnection between inter-organisational and intra-organisational designs and uses of OBA information. Moreover, it challenges current views of OBA as primarily increasing visibility. In contrast, it illustrates how increases and decreases of visibility are simultaneously and continuously negotiated between actors in industrial networks.