Coopetition Strategy

Theory, experiments and cases

Giovanni B. Dagnino, Elena Rocco

• Publisher: Taylor & Francis
• Year: 2009
• Print ISBN: 9780415438988
• eBook ISBN: 9781135219604
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This innovative book portrays the state-of-the-art of coopetition strategy regarded as a compelling mindset to exploit entirely the potential of actors' interdependencies (firms, governments, suppliers, customers, scientists and partners) in today's global scenarios. It provides the rudiments for navigating an exploration journey into a virtually new and emergent management subfield.

This volume presents three key distinctive features:

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• it is the first attempt that delves systematically and rigorously into coopetition strategy and coopetitive behaviour;

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• it clearly elucidates the contribution of coopetition to the advancement of strategic management and managerial practice;

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• it is the outcome of the collective brains of several scholars, with diverse geographical roots and backgrounds, who cultivate original research on co-opetition strategy from a variety of perspectives (economic, managerial, political) and multiple methods (theory building, game-theoretical, experimental and inductive case-based inquiries).

Looking into this volume, the reader will realize that, while the topic is at the beginning of its lifecycle, coopetition strategy has touched an important crossroads which solicits a more comprehensive and systematic assessment. If mindfully formulated and implemented, this hybrid strategic option is able to increase returns and generate value for shareholders, entrepreneurs, managers and coopetitors.

1 Introduction – coopetition strategy

A “path recognition” investigation approach

Giovanni Battista Dagnino and Elena Rocco

The label “coopetition strategy” is to some still nonsense or baloney. To some others it is instead an expression that increasingly appears illuminating and revealing. Coopetition is about interaction and actor interface, while strategy broadly regards planning and selecting a course of action. For this reason, in our understanding, the two terms are perfectly hitched.

It is nonetheless true that the word coopetition still carries with it some intricacy and has not achieved the status of a universally known trademark. The intricacy regards especially the positive acceptance of the term in standard managerial language that inescapably requires the acquisition of legitimacy. As Thomas Jefferson (1820) pointed out almost two centuries ago: “When an individual uses a new word, if ill formed, it is rejected in society; if well formed, adopted, and after due time, laid up in the depository of dictionaries.” Accordingly, the Jeffersonian process of sound neologization requires a word to acquire legitimacy, and this process is generally made via “path recognition”. Likewise social animal and human interaction, by “path recognition”, we mean that a word can be easily acknowledged by its community of reference by way of the recognition of its meaning. Actually, when an MBA student, a business executive or a consultant reads or hears a specific word, let’s say the word “competition”, he/she immediately and automatically credits to it a connotation that is the result of a pathway that the word’s use has traced across time and space (and in standard textbooks or handbooks). In order to do so, the recognizer is to be equipped ex ante for the recognition of the word’s significance and its significance path.

In the case of coopetition, the process of path recognition is seemingly at its inception. Consequently, this book intends to pioneer the attempt to convert a “liquid” word into a ordinary tangible and accepted word. In a nutshell, this book aims to draw an illustration of what we term a coopetition strategy investigation path.

Purpose of this book

The purpose of this book is threefold. First, we aim to sketch the evolution of the notion of “coopetition” and to exemplify the state of the art of the literature on coopetition a dozen years after Brandenburger and Nalebuff’s seminal piece. The primary goal of the book is hence to show that various fields in management studies have taken profit from the notion of coopetition (e.g. strategic management, organizational studies and experimental economics). Second, we aim to move away from the mere recognition of the oversimplified conventional conception to offer a deeper understanding of the nature of coopetition strategy. Whereas a number of authors (Brandenburger and Nalebuff 1996; Lado et al. 1997; Gnyawali and Madhavan 2001) have emphasized the swelling importance of coopetition for today’s interfirm dynamics, academic investigation on the issue of coopetition has only recently started to go beyond nominating or evoking it (Dagnino 2007; Padula and Dagnino 2007; Walley 2007; Chapter 2, this volume). A good part of the existing studies on coopetition strategy are generally neither systematic nor methodical, and – if we exclude Brandenburger and Nalebuff’s (1996) foundational book – nor managerial in essence or purpose. With the intention of playing a role to accomplish this important end, the contributions to this volume disengage from the sheer analysis of competition and cooperation in the attempt to examine the properties of coopetition strategy, as well as the premises and the consequences of coopetitive behaviours. Third, by taking into account a number of intriguing cases of coopetition in action at the country, industry and firm levels as well as various experimental evidence, the book clarifies the contribution and potential of coopetition strategy to the advancement of strategic management and managerial practice. Since the book is the outcome of the collective effort of several international scholars, its chapters are driven by a series of methodologically diverse and mixed approaches: conceptual, experimental and case-based. In our understanding, since it comprises a variety of approaches applied to coopetition strategy, this characteristic is a self-reinforcing feature of the book. We will address the three points above as follows.

We primarily take into account the current status of the term coopetition. If we try a simple Google search for the word “coopetition”, we are immediately presented with more than 92,000 entries, while a Google search for “coopetition strategy” counts for about 83,000 entries (1 October 2008). The fact that, when googling the word, so many entries on the issue of coopetition and coopetition strategy come along is nothing else than a clear sign of the current effervescence of and escalating attention to this theme. This means that there is “out there” a business community, both in academia and in the executive world, that is potentially interested and comparatively attentive to the development of coopetition. Notwithstanding that, for its original features the Google observation, while certainly appealing, cannot certify either the existence of a unified body of studies on coopetition strategy, or a wide concrete implementation of coopetition strategy in practice. Rather, Google’s startling vast response overlooks what has commonly heretofore occurred to the word coopetition; i.e. the scattered use of the term in both business academia and practice. This state of affairs bears a series of drawbacks as coopetition has been mostly used in isolation vis-à-vis other management concepts, thereby implying:

1. terminological fragmentation;
2. lack of knowledge accumulation; and eventually
3. missed advancement opportunities, since the lack of interaction and exchange implies that advancements made in one field do not convey to other fields.

In this book, by leveraging systematic efforts towards the conceptualization and characterization of coopetition strategy, we try to break the above-mentioned negative loop so as to offer the reader a hint of the current evolution of the coopetition strategy concept.

The book’s audience

The book targets both academics and practitioners. On the one hand, we expect that researchers, scholars and graduate students of management, business strategy and organization issues will show interest in a book that pioneers the systematization of coopetition strategy a dozen years after Brandenburger and Nalebuff’s seminal piece. On the other hand, practitioners, executives and consultants will detect in the book a handful of intriguing conceptual tools, practical examples and experimental evidence, which trigger innovative ways of thinking and building coopetitive strategies. Accordingly, since it provides in-depth instances, hints, principles and techniques in the coopetition beacon, it might help a fair number of individuals to recognize and assess the necessity to take into account the coopetitive option in today’s business world. In addition, for its ground-breaking and original flavour, the book is tailored to be a basic complement to newly developed graduate and undergraduate courses on coopetition strategy, where attendants look forward to learning why and how it may be important to mindfully coopete, instead of merely picking up one of the two alternatives of competing or cooperating. The book can also be helpful supplement to conventional basic courses on competition or cooperation strategy that aim to establish coopetition as a relevant sub-domain of strategy teaching.

Why this book is required

In short, despite its diffusion in practice and the recent flourish in research, the study of coopetition is still at the inception of its lifecycle. The growing interest and importance of coopetition in management studies has guided us to believe that we have reached a turning point, which solicits a more comprehensive and systematic understanding of this relevant strategic option. Since there are no published books dedicated to this theme, if we exclude Brandenburger and Nalebuff’s piece heretofore overworked and Luo’s specific application of coopetition to international business (2004), this book appears well timed and somewhat expected. The key distinguishing feature of the volume is actually that it is the first book that explores systematically and rigorously the potential of coopetition strategy and coopetitive behaviour. A second distinctive feature is that the book is the product of the collected efforts of a number of international management scholars, with diverse geographical roots and backgrounds, who cultivate original research on coopetition from a variety of methods; i.e. theoretical, experimental and case-based. Despite its composed nature, the book shows a high degree of consistency since all the authors – driven by common interests and aims – are conducting research with the same basic inspirations and have already experienced intense dialogue among them.

In addition, the book appears at the dawn of the third millennium in a historical period that is profoundly shaken and terribly shaped by a series of technology-driven and financially-guided dramatic changes. There is virtually no arena in which uncertainty is higher and the need to coordinate investment decisions greater than in the development and commercialization of new technologies. The simultaneous foreshortening of product lifecycles and the escalation of development and commercialization costs have increased the threshold of technological, managerial and financial resources required for new technology’s marketplace success. Further, in the century of increased globalization, the appropriation of the benefits outspreading from investment in new technology is intrinsically arduous due to the blurring of natural barriers to imitation (e.g. distance and language) and the relative easiness of the processes of idea borrowing and idea stealing, which the current law provision (patents, copyrights, trademarks and so on) are able to prevent only to a limited extent. The current economic and financial crisis feeds the necessity of coopetition strategies. It requires rival firms to cooperate to locate shared solutions. When there is less availability of credit and funding in the system, the choice to coopete become more convenient as, by coopeting, it becomes possible to reap rents from conjoint efforts. In other words, while under environmental munificence it is easier to engage in a competitive race and to accept the cost of losing, in a scarce resource regime everybody needs the support of somebody else and may thereby benefit from cooperation. An interesting example is current public financing for cultural investments of municipalities and provincial bodies in Italy. Time has ended when financing was given with no regards for the public budget: coopetition strategy among municipalities and provinces is therefore much needed among bodies that have heretofore acted in absolute autonomy from one another.

Coopetition is a crucial issue in the realm of high-tech and service industries, such as the financial services industry. In an intrinsically globalizing context, where technological, financial and competitive cycles are inherently unstable and temporary, it is particularly important for firms to cooperate: we live an age where global consumers have become increasingly sophisticated in demanding, at the same time, new technologies, new financial instruments, superior quality and innovative design (Luo 2007). Besides, the increasing pressure for integrating the global value chain stemming, for instance, from a need for enhanced productivity and efficiency increasingly leads firms to cooperate. Nonetheless, interfirm cooperation is induced as well by institutional hazard pressure: it may be difficult for individual actors and single firms to overcome institutional hazard (e.g. regulatory, technological and environmental) by doing it all in isolation, without pulling together other actors and firms in a networked fashion. The result is the emergence of a coopetition regime between actors, firms and institutions. On the financial side, private equity, venture capital and hedge funds have lately increased their span and breadth. As a consequence, in the financial services industry the compelling necessity of cooperating while competing is anything but odd; actually actors’ coopetition has become the rule more than the exception. Yet, what is exceedingly important in coopetition strategy is the fact that, if mindfully formulated and implemented, it increases company returns and generates economic (and social) value for managers, shareholders and complementors.

Finally, it would be misleading to circumscribe the effectiveness of coopetition strategy to high-tech and financial services industries. Coopetition strategy is a crucial issue for traditional industries as well. The Goldcorp case illustrated in the introduction of the celebrated book Wikinomics (Tapscott and Williams 2006) offers a vivid example of how a mindfully conceived coopetitive strategy can revitalize apparently sluggish firm circumstances. In the 1990s Goldcorp Inc., a small Toronto-based gold-mining firm, was facing one of the most threatening perspectives as “the gold market was contracting, and most analysts assumed that the company fifty-year old mine in Red Lake, Ontario, was dying” (p. 7). After some years spent attempting to solve the problem in the conventional way, investing over $10 million for further exploration in the mine, Goldcorp CEO Rob McEwen was left with absolutely nothing in hand. One day, during an MIT conference for young presidents, McEwen had an epiphany while listening to the remarkable story of how Linus Torvalds and his young colleagues had assembled the computer operating system Linux by leveraging the open-source strategy. McEwen realized that a similar strategy might work for Goldcorp. This would imply challenging one of the fundamental assumptions of the mining industry, i.e. never give away proprietary data. The challenge was risky, but the magnitude of the benefits could be quite large. Despite the wide scepticisms, in March 2000 the “Goldcorp Challenge” was launched on the Internet. All of the company’s geological data back to 1948 were revealed on the company’s website. A total of $575,000 in prize money would have been awarded to participants with the best method and estimates. The adventure ended up exceptionally well: over 80 per cent of the new targets yielded substantial quantities of gold. McEwen estimates the collaborative process shaved two to three years off the usual exploration time. Goldcorp enjoyed the benefits of the revolutionary open source approach to exploration.

The Goldcorp illustration is an extraordinary message to scholars interested in innovative strategic thinking. The renaissance of Goldcorp is based on the CEO’s ability to see things differently and to switch the rules of the game from a purely competitive to a collaborative approach. McEwen undertook the substantial risk of abandoning the traditional competitive approach of the mining industry because he realized that the creation of extra value (and the survival of the firm itself) resided in innovative business strategy. Sharing rather than protecting the most valuable resources in the mining industry (i.e. the intellectual property of geological data) exposed the company to the risk of being a sucker as in a prisoner’s dilemma game (Axelrod 1984). McEwen literally exposed the company to the risk of a hostile-takeover bid. But the risks of continuing to do things the old way were even greater. “Mining is one of humanity’s oldest industrial pursuits”, McEwen said, “This is old old economy … If we could find gold faster, we could really improve the value of the company.” McEwen’s strategy transformed Goldcorp from an underdog to a winning frontrunner: the company’s value increased from $100 million to $9 billion in a few years. Changing the rules of the old old economy’s industry game harnessed the collective genius of a very heterogeneous group of contestants (PhD students, mining consultants, mathematicians, military officers and others took part in the “Goldcorp Challenge”), and made it possible to inject new high-quality knowledge through innovative thinking and diversity of methodologies.

Did McEwen think in term of coopetitive strategy? Does the “Goldcorp Challenge” truly represent a case of coopetition? It doubtlessly fits the open-source strategy definition. We do believe that it also represents a captivating case of coopetition strategy for two reasons. The first and more obvious motive is that anyone, including the executives employed in competing firms, could take part in the contest leveraging Goldcorp expertise in the mining sector to secure the challenge. In that c...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of illustrations
• Notes on contributors
• Foreword
• Preface
• Acknowledgements
• 1 Introduction – coopetition strategy: a “path recognition” investigation approach
• PART I Coopetition strategy: conceptual development
• PART II Coopetition strategy: case-based inquiry
• PART III Coopetition strategy: experimental evidence