Management Accounting for the Extended Enterprise : Performance Management for Strategic Alliances and Networked Partners

Firm boundaries no longer define the relevant entity for performance management for many firms. Competitive forces, deregulated economies and technological advances have reduced the costs of transacting with external parties and diminished the value of vertical integration. At the same time, the potential returns to collaboration have increased, as firms with unique capabilities join forces to more rapidly develop and deliver innovative products and services. Collaboration may take the form of arrangements that align the interests of participating parties through formal profit-sharing rules (e.g., franchises, licensing arrangements, and joint ventures). Alternatively, they may take a more amorphous form, using few mechanisms from contract law to structure their interactions or allocate the gains from trade (e.g., strategic alliances, strategic partnerships, consortia, extended enterprises, and strategic supply chains). Although the research and teaching in some management disciplines reflect the trend toward collaboration as a mode of organizing economic activity, the field of accounting has generally been unresponsive to these changes. We posit that new management accounting practices are fulfilling old demands for performance measurement and management control in new ways to facilitate this capability. At the same time, they are also fulfilling new demands for promoting learning and rich communication in a coordinated network of partner firms. In developing our case, we review theory and evidence from the corporate strategy literature, the organizational literature, and to a lesser degree, the operations management and management accounting literatures. We also conduct a thorough search of the practitioner literature to identify contemporary accounts of partner relationships. Our objective is to suggest a new research agenda for the extended enterprise that is linked to what has traditionally been termed management accounting research, but which challenges these boundaries using literatures that have begun to explore the contours of the new organizational landscape