Interfirm Organizations: A New Perspective for Cost Management
24 Pages Posted: 12 Sep 2007
Date Written: April 24, 2001
Interfirm organisations are receiving increasing attention in the management literature owing to their superior performance in terms of fast growth, increased flexibility and efficiency. Effective design of these organisations depends on the choice of which activities to perform internally and which to outsource, and also on how to manage relationships within the network. Building on the emerging field of strategic cost management studies, this paper presents a general framework that supports the rationale underpinning the cost structure and effectiveness of interfirm organisations. Specifically, it focuses on three important cost drivers relating to: a) how transactions with partners are settled; b) how technological interfaces with partners are managed; c) how activities are distributed among partners. The model is then applied to an Italian firm operating in the electronics industry. This work is to be considered as a work-in-progress, but nevertheless it provides two major contributions. At a theoretical level, while the traditional transactional approach focuses on the nature and on the object of the relationships, this paper extends its attention on the technological structure and managerial process that make transactions with the external environment possible. At a methodological level, our aim is to operationalise the data collection process in order to analyse the effects on the firm's cost structure of different ways of interacting with the actors of the value chain.
Keywords: Cost Management, Strategic Cost Management, Network, Activity Cost, Transaction Cost
JEL Classification: M40, D23, L14
Suggested Citation: Suggested Citation