Towards Inter-organizational Working Capital Management

Working capital is an investment which is tied up into the inventories and accounts receivable and which is released with accounts payable. Due to the current business landscape with tightened financial conditions and finance markets, organizations emphasize efficient working capital management. With efficient working capital management, a company can reduce the need of finance, free up cash, increase profitability, improve liquidity, increase the efficiency of operations, and decrease (financing) costs. From the perspective of an individual company, efficient working capital management means decreasing inventory levels by shortening the cycle time of inventories, decreasing accounts receivable by shortening the trade credit terms and effective collection procedures, and increasing the level of accounts payable by paying the suppliers later. From an inter-organizational perspective, however, working capital should not be sub-optimized by a single company but holistic view to working capital management through the supply chain should be adopted to create value and improve performance together. The purpose of this research is to take academic research as well as practical management towards inter-organizational working capital management. The thesis discusses the benefits as well as mechanisms of working capital management in the inter-organizational context and has two main objectives: (1) to examine the effect of inter-organizational working capital management on performance in the value chain context and (2) to develop models of working capital management for internal as well as inter-organizational value chains. The results of the archival research conducted in the value chain of the pulp and paper industry and the value chain of the automotive industry indicate that companies can increase relative profitability by managing working capital comprehensively by taking into account all three components, and holistically though the value chain. Companies in the value chain benefit from different strategies in working capital management depending on the position of the company in the value chain. This can be taken into account in inter-organizational working capital management. The effects of inter-organizational working capital management actions on the financing costs of working capital were studied via simulations. Simulations also show that the value chain and individual companies benefit from an inter-organizational view to working capital management. Inter-organizational working capital management actions include for example: shortening the cycle time of inventories, reducing product costs, shifting inventories, shortening payment terms, and considering the cost of capital. The thesis also provides solutions for the practical requirements for tools to control working capital. The design science part of the research introduces the adjusted cash conversion cycle (ACCC) model for internal value chains, as well as models for working capital management in the inter-organizational value chain context: the working capital management model (WCMM) and the financial cycle time model (FCTM) designed in corporation and product levels respectively. This research contributes to literature on working capital management and interorganizational accounting. The research gives a holistic, inter-organizational view to the management of working capital. It advances the knowledge in working capital management on operational level, increases knowledge in the recently risen theme of supply chainoriented, collaborative working capital management, combines management accounting research with supply chain management research, and contributes to the demand of practical inter-organizational accounting methods. In addition, the research has strong practical focus as new managerial methods are introduced.

GIS analysis of change in an agricultural landscape in Central Finland

Selostus: Keskisuomalaisen maatalousmaiseman muutosten GIS-analyysi

Soils in a young landscape on the coast of southern Finland

Selostus: Nuoria maita Viikin pelloilla

Soils in an agricultural landscape of Jokioinen, south-western Finland

Selostus: Jokioisten seudun maannokset

Contrasting tree-ring data with fire record in a pine-dominated landscape in the Komi Republic (Eastern European Russia) : recovering a common climate signal

Abstract

Supporting knowledge creation and sharing in the early phases of the strategic innovation process

The driving forces of technology and globalization continuously transform the business landscape in a way which undermines the existing strategies and innovations of organizations. The challenge for organizations is to establish such conditions where they are able to create new knowledge for innovative business ideas in interaction between other organizations and individuals. Innovation processes continuously need new external stimulations and seek new ideas, new information and knowledge locating more and more outside traditional organizational boundaries. In several studies, the early phases of the innovation process have been considered as the most critical ones. During these phases, the innovation process can emerge or conclude. External knowledge acquirement and utilization are noticed to be important at this stage of the innovation process giving information about the development of future markets and needs for new innovative businessideas. To make it possible, new methods and approaches to manage proactive knowledge creation and sharing activities are needed. In this study, knowledge creation and sharing in the early phases of the innovation process has been studied, and the understanding of knowledge management in the innovation process in an open and collaborative context advanced. Furthermore, the innovation management methods in this study are combined in a novel way to establish an open innovation process and tested in real-life cases. For these purposes two complementary and sequentially applied group work methods - the heuristic scenario method and the idea generation process - are examined by focusing the research on the support of the open knowledge creation and sharing process. The research objective of this thesis concerns two doctrines: the innovation management including the knowledge management, and the futures research concerning the scenario paradigm. This thesis also applies the group decision support system (GDSS) in the idea generation process to utilize the converged knowledge during the scenario process.

Modeling and measuring organizational renewal capability

Globalization and new information technologies mean that organizations have to face world-wide competition in rapidly transforming, unpredictable environments, and thus the ability to constantly generate novel and improved products, services and processes has become quintessential for organizational success. Performance in turbulent environments is, above all, influenced by the organization's capability for renewal. Renewal capability consists of the ability of the organization to replicate, adapt, develop and change its assets, capabilities and strategies. An organization with a high renewal capability can sustain its current success factors while at the same time building new strengths for the future. This capability does not only mean that the organization is able to respond to today's challenges and to keep up with the changes in its environment, but also that it can actas a forerunner by creating innovations, both at the tactical and strategic levels of operation and thereby change the rules of the market. However, even though it is widely agreed that the dynamic capability for continuous learning, development and renewal is a major source of competitive advantage, there is no widely shared view on how organizational renewal capability should be defined, and the field is characterized by a plethora of concepts and definitions. Furthermore,there is a lack of methods for systematically assessing organizational renewal capability. The dissertation aims to bridge these gaps in the existing research by constructing an integrative theoretical framework for organizational renewal capability and by presenting a method for modeling and measuring this capability. The viability of the measurement tool is demonstrated in several contexts, andthe framework is also applied to assess renewal in inter-organizational networks. In this dissertation, organizational renewal capability is examined by drawing on three complimentary theoretical perspectives: knowledge management, strategic management and intellectual capital. The knowledge management perspective considers knowledge as inherently social and activity-based, and focuses on the organizational processes associated with its application and development. Within this framework, organizational renewal capability is understood as the capacity for flexible knowledge integration and creation. The strategic management perspective, on the other hand, approaches knowledge in organizations from the standpoint of its implications for the creation of competitive advantage. In this approach, organizational renewal is framed as the dynamic capability of firms. The intellectual capital perspective is focused on exploring how intangible assets can be measured, reported and communicated. From this vantage point, renewal capability is comprehended as the dynamic dimension of intellectual capital, which consists of the capability to maintain, modify and create knowledge assets. Each of the perspectives significantly contributes to the understanding of organizationalrenewal capability, and the integrative approach presented in this dissertationcontributes to the individual perspectives as well as to the understanding of organizational renewal capability as a whole.

Measuring organizational capabilities in the engineering and consulting industry

Tämän työn tarkoituksena oli tutkia kuinka organisaation kyvykkyyksiä voidaan mitata engineering- ja konsultointialalla käyttämällä ns. kyvykkyysauditointimenetelmää. Päämotiivit aineettoman omaisuuden mittaamiseksi tunnistettiin kirjallisuuskatsauksen pohjalta. Erilaisten menetelmien etuja ja haittoja tutkittiin, jotta kyvykkyysauditoinnin suorittamiseen liittyvät haasteet ja vaatimukset tulisivat tunnistetuiksi. Kyvykkyysauditoinnin rakentaminen vaati teollisuudenalan erityispiirteiden tunnistamista. Niiksi havaittiin tietointensiivisyys ja projektikeskeisyys. Auditoinnin implementaatioprosessi koostui neljästä osasta, joista kolmen ensimmäisen suorittamiseen case-yritys antoi merkittävän panoksensa. Kriittisten menestystekijöiden selvittämisen jälkeen voitiin niihin vaikuttavat organisaation kyvykkyydet tunnistaa ja arviointi suorittaa. Arvioinnit kerättiin sisäisiltä ja ulkoisilta arvioijilta, ja ne muodostivat pohjan analyysille, joka selvitti yrityksen kehittämistarpeita. Kyvykkyysauditoinnin hyödyiksi laskettiin kasvanut tietämys yrityksen vahvuuksista ja heikkouksista sekä mahdollisuus tarkkailla säännöllisesti sen kokonaissuorituskykyä ja parantaa sitä.