Inter-organizational cost management in SME networks

Inter-organizational cost management is a fairly new phenomenon that has been studied primarily in hierarchical networks of the car and electronics industry. As these networks are usually led by large multinational firms, inter-organizational cost management in networks comprising SMEs has gained far less attention to date. This paper contributes to reducing this deficit by analysing the development and implementation of cost management tools in two Finnish SME networks. The empirical data of the dual case study is discussed from the perspectives of agency, transaction cost, and contingency theories. In this respect, the results indicate that firm size, network infrastructure, and the variety of processes among the network members have an effect on the management accounting practices in networks. Moreover, the findings show that the cost management tools formed an integral part of a performance management development project that was supported by the main contractors of the networks. Although the SMEs did not concentrate on efficient cost management for their own, the utilization of management accounting approaches helped them to understand the evident links between their own activities, operative results, and network costs. This approach has opened a new way to the main contractors to increase the cost-awareness and to identify additional cost reduction opportunities among the SMEs.