Beyond the Dyadic Relationship: A case study on a role of open book accounting in an industrial network

Abstract: Introduction: Studies on inter-organizational relationships have increased rapidly, but most studies have focused on the dyadic relationship. Back in the 1970s the industrial network approach was developed and researchers started to emphasize that companies are interwoven in networks of relationships and suggested that interdependencies are created between companies when they are mutually dependent on one another to reach long-term benefits. An issue has been how to manage interdependencies and researchers have recently emphasized that the role of Open-Book Accounting (OBA) in this management within an industrial network should be observed. Researchers have in turn emphasized that there are two purposes of OBA, trust-building and cost management, which should be studied together. Research Objective: The aim of this thesis is to extend the knowledge on the role of OBA in managing interdependencies within an industrial network. By studying the purposes of OBA together and not separately, we aim to explain how trust-building and cost-management support each other in the management of interdependencies. Research Questions: RQ1: How is an industrial network and its interdependencies created? RQ2: How can OBA be used to manage interdependencies, when trust-building support cost-management? RQ3: How can OBA be used to manage interdependencies, when cost-management support trust-building? Research Design: When writing this thesis, we conducted a case study as the methodology is suitable to apply when the objective is to investigate a single phenomenon (OBA) in its natural setting. Eight semi-structured interviews were conducted with five companies in the studied industrial network. Analysis and Discussion: Before the industrial network was created, there was opportunistic behavior among the actors and the dyads were transactional in character. When a relationship to a new logistics partner was established the opportunistic behavior was mitigated and interdependencies were thus created. The established trust from the industrial network creation made it possible to use OBA and information has been shared in the industrial network to support a mutual understanding and make the supply chain more efficient. The increased efficiency has improved the cost-management, which has built more trust. Thus, a management over interdependencies has been established when OBA has been used to support trust-building and cost-management. Conclusion: We have broadened the scope of OBA's role in the management of interdependencies by examining how trust-building and cost-management can support each other. Unlike previous research, our study of the industrial network indicates that a firm can use OBA, not only to manage interdependencies with suppliers in the manufacturing processes, but also to indirectly support the management of interdependencies with their customers. We stress that more research is needed on the roles of OBA in industrial networks and suggest researchers to not only study the role of OBA in managing interdependencies, but also the role of OBA in creating interdependencies.