Incentive profit-sharing rules joined with open-book accounting in SME networks

Toni Jarimo (Corresponding Author), Harri Kulmala

Research output: Contribution to journalArticleScientificpeer-review

4 Citations (Scopus)

Abstract

Profit-sharing rules applied together with open-book accounting are a synergetic combination that encourages SME networks to continuous innovation. This article studies profit-sharing rules that work as incentives for cost reduction in networks. We describe a case study of a steel-roof manufacturing and assembly network, where profit sharing became relevant shortly after open-book accounting was successfully implemented. Moreover, we present a dynamic game theoretic model for the study of the desired characteristics of profit-sharing rules in such networks. We find that, under quite general assumptions, profit-sharing rules need to satisfy certain conditions in order to encourage the network partners to announce their cost-reducing ideas immediately. A suitable and simple profit-sharing rule is the combination rule which rewards the innovator and the target of cost reduction.
Original languageEnglish
Pages (from-to)508-517
JournalProduction Planning and Control
Volume19
Issue number5
DOIs
Publication statusPublished - 2008
MoE publication typeA1 Journal article-refereed

Keywords

  • Continuous innovation
  • Game theory
  • Incentives
  • Open-book accounting
  • Profit sharing
  • Subcontractor network

Fingerprint Dive into the research topics of 'Incentive profit-sharing rules joined with open-book accounting in SME networks'. Together they form a unique fingerprint.

  • Cite this