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

Toni Jarimo (Corresponding Author), Harri Kulmala

Research output: Contribution to journalArticleScientificpeer-review

6 Citations (Scopus)


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
Issue number5
Publication statusPublished - 2008
MoE publication typeA1 Journal article-refereed


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


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