The importance of strategic alliance is difficult to underestimate. The number of such organizations increased significantly in the past years. According to Dyer, Kale and Singh (2001), "estimates are that top 500 global businesses have an average of 60 major strategic alliances" (as cited by Adobor, 2002, p.71). The information flows in such alliances are extremely complicated; therefore, it is necessary to look on basic principles of building up accounting information system of strategic alliance and its participants in order to find how it can help achieve goals of alliance.
It is necessary to find answers on next research questions:
How should be defined strategic alliances and its accounting and information system? What are the main classifications of SAs?
What are the main parts of accounting information system of SA?
What are the main characteristics of AIS with respect to different types of SA?
In the first of this paper, it is necessary to define used term of "strategic alliance", its main objectives and principles of formation. Also, classifications of SA should be presented because it will help to understand functions should accounting information system execute in respect to SA. The next step is to understand the structure and main functions of AIS; its profile and quality of its functioning. In third part, main distinctions of AIS and its structure for different kinds of SA are presented; some specific reports and registration forms are described.
Consequently, it is possible to formulate thesis statement in the next way:
"The AIS of SA should be designed based on the goals of SA; it should create financial reports in order to support the decrease of costs or achievement of synergetic effect"
Literature review
Sebahatin Demirkan (2007) in his dissertation presents several definitions of strategic alliances. For instance, he mentions that, according to Digman (1999), a strategic alliance is an agreement where two or more firms pool resources to form a new, mutually beneficial business arrangement to accomplish preset objectives. Then, Demirkan shows classification of strategic alliances on joint ventures (where separate company is established) and contractual alliances (where only sharing of resources and assets exists). Also, the author maintains that informational flows for these two types differs to a great extent.
Henry Adobor (2002) reveals the influence on establishment of accounting and information system in alliances. He maintains that the effectiveness of alliance's AIS is based on trust and communication among partners. Moreover, in his opinion, communicational infrastructure, organizational propensity to trust, the dominant internal mindset and the dominant structural type of organization significantly influence on the behavior of partner in alliance. Murali Sambasivan (2011) takes the case of more specified alliance, exactly, supply chain alliance, and supposes that mutual interdependence of partners leads to creation of relationship capital (based on commitment, trust and communication). Nevertheless, it is necessary to notice that authors apply these finding to all kinds of alliances; whereas, revealed patterns might vary significantly.
Jaloni Pansiri (2005) supports the idea of significance of nonmaterial matters on strategic alliance. According to him, choice of strategic partners and potential alliance structure and scope are based on the individual perceptions of CEO of partners. However, the author does not mention the importance of more formal perception of business - company's mission.
Siamak Nejadhosseini Soudani (2012) connects design of the strategic alliance's AIS and factual performance of partners and alliance. He maintains that there is positive connection between organizational performance and degree of elaboration of alliance's AIS. He supports his ideas with statistical analysis of questionnaires.
Wai Fong Chua (2010) accentuates her attention on accounting controls as a necessary part of AIS. During her investigation, she finds that investments and effectiveness of internal controls are not strongly correlated. What matters much more is symmetry of design of AIS; it is crucial that all partners should be in the same conditions.
The essences of strategic alliances
Strategic alliances are "voluntarily initiated cooperative agreements between firms, which involve exchanging, sharing and developing resources" (in Gulati (1995), as cited by Demirkan, 2009, p. 7).
The role of business synergy in strategic alliances
The main point of creating business forms of collaboration is to achieve so-called synergy effect - when co-work of two powers gives more than just sum of two powers. In general, this rule usually presents in the next equation: "2+2=5".
The application of synergy effect on human sciences is researched in the framework of synergetics; in economic sciences, this term was introduced, in outline, by Ansoff in his book "Corporate Synergy".
According to Ansoff (1965), there are three main kinds of business synergy - collusive, operational, and financial. Ansoff (1965) define synergy as follows - "synergy refers to the idea that firms must seek product-market posture with a combined performance that is greater than the sum of its parts" (as cited by Potocan and Kuralt, 2007, p. 200)
Future researches explained the use of synergy concept to formation of alliances and showed that "horizontal mergers are aimed at collusive synergy (market power); related or vertical mergers seeks operational synergy (production of administrative effectiveness), and unrelated mergers hope to gain financial synergies (by reducing the cost of capital)" (Potocan and Kuralt, 2007, p. 200).
Moreover, the authors of this research suggest the division on two parts of benefits from the integration - rationalization effect that leads entities to their optimum effect and synergetic effect that shows difference between effects of integrated system and optimum effects of separate entities.
The theory of transaction costs in respect to strategic alliance
It is necessary to look on this question in the boarders of institutional theory, which main point is existence of transaction costs. These costs are connected to the flows of information among contractors, the uncertainty of contractor's behavior and market's changes, the protection of company's information and technologies. The creator of this theory was Ronald Coase, who wrote his famous work "The Nature of Firm" in 1937 and developed these ideas in essay "The Problem of Social Costs" in 1960.
According to thought of R. Coase in "The Nature of Firm", creation of a firm was the most important form of adaptation to the existence of transaction costs. The market price mechanism is replaced by administrative mechanism within the borders of an organization (worker completes his task not because of supply-demand equilibrium but because he was told to do so). Administrative mechanism reduces transaction costs.
Rationalization effect can be connected to the concept of transaction costs. Coase theorem, created by G. Stigler (1966), based on Coase's researches, sounds as follows - "as long as private property rights are well defined under zero transaction cost, exchange will eliminate divergence and lead to efficient use of resources or highest valued use of resources" (p. 119) . By other words, with these prerequisites, optimum effect of business system will be achieved.
Therefore, it is possible to examine strategic alliance as further development of a firm in terms of decreasing transaction costs. Let us consider the next situation - there are manufacturer and its dealers, all separate entities. They have several options - to make bargains on the occasion, with the use of price mechanism (invisible hand of market) or to conclude a strategic treaty where terms of future bargains are stated. In the first case, amount of transaction costs would be great because it is necessary to look for important information each time bargain is made. In the second case, once the terms of partnership are stated (alliance is formed), there is no need for future search of information. Therefore, alliances decrease transaction costs.
Therefore, it can be maintained that one of the main objectives of creating a strategic alliance is decrease of transaction costs.
The concept of company's core competencies
The each partner of strategic alliance has its core competency. This term can be defined as "special abilities of company to create additional value based on harmonization of complex flows of information, materials and assets and human activities" (Chernoguzov, 2011, p. 112). By other words, it is the reason why company is able to create profit. The core competency is the base for the rest of business - all additional operations are created to support the development its core competency. The core competencies are laid in the base of creating organization strategies. Therefore, detection and development of core competencies may be used as tool for organizing interfirm relationships in strategic alliances. Maximum synergy effect, in this case, may be achieved due to coherence of core competencies of partners.
Methodology of creating strategic alliances based on the coherence of partners' core competencies can be divided on two different steps. First one is conceptual and analytical when partners, especially, initiator of creating the strategic alliance, have to analyze the structure of interrelations and connections within its own flows of information, materials and assets to detect and concretize the core competency that can be developed further in strategic alliances. Second step is the creation of conception of strategic alliance where the core competencies of partners are put into hierarchy and strict structure. Only then, strategic alliance can function effectively.
Therefore, while interaction of core competencies of partners in some form of strategic alliance, synergy effects are created.
Contractual alliances and joint ventures
There are various forms of implementing strategic alliance. However, according to Demirkan (2007), it is possible to distinguish only two major groups - contractual alliances and joint companies. In the first group, there is no mutual management over shared materials and assets. In the second group, vice versa, there is joint management over assets.
The contractual alliances are based on the certain contracts where all kinds of collaboration and coordination are specified. Therefore, it is more reliable and certain kind of alliance because risks and transaction costs are minimized. However, the interaction of core competencies of partners does not work at full strength because contracts are not flexible. According to Potocan and Kuralt (2007), "this innovation [synergetic functioning] requires more openness and cooperation from BS [business system] members" (p.200). To increase the effectiveness of contractual alliance it is necessary to review contracts' terms in order to improve interaction and to reflect the changes on the market. System of constant reviewing will allow adding some flexibility to alliance.
The joint ventures are much more risky and difficult in management. Because there are at least two groups of interest, some management conflicts are anticipated in joint companies. Because assets are shared into a much greater degree than in contractual alliances, losses might be more painful for partners. However, core competencies interact stronger because there are no boarders for operations of joint ventures. To eliminate negative aspects of joint companies it is necessary to design management system and decision-making process as thoroughly as possible.
Therefore, it is possible to present this classification graphically in the next way:
Figure 1. Classification of strategic alliances
On this figure, the area A is considered to be "ideal situation" when synergy effect is maximized and transaction costs are minimized, that is alliance works at full strength. Area B is not desirable but still can be used as tool for getting additional competitive competencies; however, this area
Accounting information system
In the modern economics, the complex system of interactions among counteragents is necessary in order to produce goods and services. For managing these interactions, it is necessary to build up effective system of gathering and analyzing of relevant information. In economic sciences, this system is called financial information system. However, it is necessary to notice that there is no unite approach toward the definition of this term.
It is crucial to give definitions for information system and financial system. According to Bidgoli (2011), management information system is "organized integration of hardware, software, technologies, data, processes, and human elements designed to produce timely, integrated, relevant, accrual and useful information for a decision-making process" (p. 4).
Structure of AIS
Although there is no single well-established definition of financial information system, many researchers point out operations of gathering, registration, analysis and control of relevant information in the boarders of AIS. Every of these subsystems have its own purposes, inputs and outputs.
A lot of studies represent registration subsystem as fundamental for AIS. Accountancy makes the registration of occurred processes in the organization and creates generalized figures and summaries. The main purpose of accountancy is the creation of information modeling of organization's functioning, that is, with the use of registration of processes and events, accountancy creates information images (modes) of material and financial flows within an organization. By other words, every entry in accounting books presents and symbolizes the actual flow or movement of materials, goods, services, or funds.
It is necessary to notice that accountancy subsystem corresponds with environment in very limited way. Formation of organization's accountancy is based on the law system; however, once it is settled, in the process of functioning, the influence of environment of organization accountancy is limited and rare (for instance, it can happen in case of significant changes in Accounting Principles of country). Management accounting is based on internal needs of organization.
The result of registration subsystem - information model of organization - is used as basis for other subsystem, analytical. This subsystem makes the qualitative and quantitative estimation of those changes that took place in organization in the course of accounting period. Analysis is made on the basis of comparison of plan and fact figures, revelation of deviations and explanation of its reasons. Sometimes, in order to provide users with adequate estimation, it is necessary to use external information (political, social, market factors and etc.). Here, close interaction of analytical subsystem with external information takes place; relevant information about rivals, general market situation, and government regulations is accumulated. The result of analytical subsystem is optimal (sufficient) information provision for decision-making process and correction of plan figures on the next accounting period.
The subsystem of audit and control creates guarantee of execution of management decisions and bring information model closer to reality. It checks the model on the frauds, significant errors, "bottle necks" and etc. Some organizations have to take external audit (it depends on forum law system), some organizations take these action on the voluntary basis. The subsystem of audit and control needs constant correction according to volumes and complexity of organization's operations and external situation on the market. Thereby, this subsystem checks correspondence between internal needs of organization and its information model and also provides with ways of improving other subsystems.
Registration subsystemIn order to present AIS more clearly, it is useful to use 3-dimensional model, proposed by Popova L.V. (2003), the professor and doctor of economic sciences:
Figure 2. 3-dimensional profile of AIS
In this 3-dimensional coordinate system, z-axis shows the quality of registration subsystem, x-axis shows the quality of the subsystem of audit and control, y-axis - the quality of analytical subsystem. It is necessary to notice that the z-axis is divided into mandatory, compulsory accounting that is required by the government and initiative, management accounting that is made on basis on internal needs.
Quality of AIS
It is necessary to provide with additional explanation to term of "quality of subsystem". The main result of functioning of any subsystem is information in some kind; therefore, it is fair to connect the quality of subsystem with the quality of information it provides. According to Chenhall and Morris (1986), there are 4 main characteristics of information - scope, timeliness, integration and aggregation.
Scope means the level of use of internal and external information, probability character of information (its orientation on the future). Timeliness is based on the frequency and speed of creation of models and reports. Integration is implied as creation of information about internal interaction among organization's various departments, coordination of segments within an organization. Aggregation is referred to the use of analytical and management models based on the information that is aggregated by the functional criterions (f.e., sales, production and etc.).
Accordingly, the grey surface on the Figure 2 represents the AIS profile for organization. This model can be compared with the human ability to see - the higher man stands (the better quality of registration subsystem), the bigger area he can observe (correspondingly, the quality of other subsystems). However, his ability to see is limited by nature, that is, he is not able to observe long distances while being on the ground (it is impossible to provide qualitative analysis and audit with low-quality accounting).
Accounting information system of companies within strategic alliance
The accounting information system of companies that enter to strategic alliance should be based on the overall strategic goal for this alliance. Different profiles of AIS refer to different types of SA.
Features of AIS in contractual alliances
Contractual alliances require building in the report form in registration and analytical subsystem that shows the decrease in transaction costs. For the first time, this report compares costs before entering to alliance and after in order to find out material difference. After some time of functioning within alliance, report should compare actual results with alternatives. The main goal of this improvement of registration and analytical subsystem is consideration of profitability participation in alliance. Once this collaboration makes more costs than it would happen without alliance, it is necessary to change integration form or even to eliminate it.
It is necessary to notice that this report is complicated financial instrument and should be based on several registration forms of internal and external nature. For instance, let us consider supply chain management and strategic alliance between manufacturer and supplier. The collaboration of these market actors is well described by W.F. Chua (2007). It is contractual type of alliance because there is no sharing and exchange of assets between partners. The main goal is to decrease transaction costs - before entering to alliance, supplier and manufacturer have to complete whole negotiation process based on market prices. Making alliance creates mechanism for automatic identification of main terms of collaboration.
First time, when this alliance is in process of building up, it is crucial for supplier to compare costs without and with partnership (costs of higher level - creating and managing alliance plus potential loss of profit; and costs of lower level - negotiation process with manufacturer and other market actors). Obviously, if this comparison shows profit for supplier, he makes all necessary efforts to conclude alliance. The same method works for manufacturer.
But once alliance is set up, original comparison should be changed - it is necessary to compare actual costs and alternative ways of functioning, for instance, collaboration with other manufacturers. Of course, it is impossible to review all possibilities and alternatives; therefore, this new kind of comparison should happen periodically and should touch the most potential alternatives.
The audit and control subsystem, in case of contractual type of alliance, does not undergo serious changes.
Therefore, contractual alliance creates changes in registration system, especially at initial stages, creates a serious continual burden on analytical subsystem and does not significantly touches the audit and control subsystem.
Features of AIS in "joint ventures" alliances
Joint ventures are separate entities with its own accounting information system that has connections to its mother organizations. Therefore, it is possible to suggest that this type of integration leads to high costs of setting up AIS. As it was revealed before, the main objective of joint ventures is close collaboration of core competencies of partners. Therefore, it is necessary to understand what economic figures and indicators reflect the development of core competency. For instance, if business considers its core competence as ability to create unique product, indicators would be sales, customers' satisfaction, market share, and etc.
It is necessary to build in these indicators into registration subsystem in order to create sufficient reports in analytical subsystem. Again, it would effective to create mechanisms of comparison of actual results with alternative ways.
Special attention should be paid for audit and control system. Many GAAPs (Generally Accepted Accounting Principles) demand disclosure of all material transaction among joint ventures and its mother companies in order to prevent frauds and illegal actions, such as transfer pricing. For instance, SOX (Sarbanes-Oxley Act, United States Federal Law) demands creation of internal audit policy for corporation in order to provide financial reports with additional confidence. Therefore, in case of joint ventures, audit and control subsystem should be changed in significant way as for joint venture by itself and for mother companies.
Consequently, it is possible to maintain that joint ventures cause significant and material changes in AIS of partner. The creation of new separate entity leads to formation of new AIS and material correction in registration, analytical and audit-control subsystems of AIS.
Conclusion
Strategic alliances are important part of modern economics worldwide. In order to maintain effective operations for these economic bodies, it is necessary to provide adequate flow of information among partners. This task is fulfilled by accounting information system of actors. AIS should be based on main and strategic goals of partners and whole alliance.
The main purposes of strategic alliances are minimization of transaction costs for partners and achieving and maximization of synergetic effect. The collaboration within alliance should be based on the concept of core competencies of business. There are two main types of strategic alliance based on relationship to sharing and exchange of assets - contractual alliances and joint ventures.
It is necessary to notice that AIS is very complex and complicated term that includes various parts and elements with its own peculiarities of functioning, inputs and outputs. Nevertheless, it is possible to mark out three main subsystems - registration, analytical, audit and control. The combination of these parts creates certain profile of AIS.
In respect to contractual alliances, registration and analytical subsystems should be changed in significant way in order to provide necessary information for making decision about profitability of alliance. Joint ventures demand much more efforts for setting accounting information system, especially on initial stages. However, significant synergetic effect of that kind of collaboration may overlap costs for setting AIS.
Therefore, AIS is complex part of enterprise that subordinates to strategic business goals and support the decrease of costs and achievement of synergetic effect.
