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A new perspective to inter-firm competition Published: Sunday, November 27, 2011 8:00 am By: Ramón L. Rivera, President & CEO

         The competitive perspective has dominated for a long time several fields of management research: from strategic management, organizational economics to marketing management. It shares a unified theoretical framework which can be briefly described as follows: 1) The creation of economic value occurs within the firm whereas inter-firm interactions influence the distribution of that value. 2) Since competitive success and value appropriation by one firm means the defeat and the loss of value of the other firms involved in the game, interfirm interdependence is based on a zero-sum game. 3) In a business world in which any interdependence qualifies a zero-sum game, the interest functions of firms involved in the game are in unrecoverable contrast.

         An alternative perspective, partly spread out as a reaction to the competitive approach, emphasizes the development of collaborative advantage. The theoretical framework underlying the cooperative perspective is summarized as Follows: 1) The sources of economic value creation and the roots of firms’ superior performances are located within the structure of firms’ interdependence; 2) Firms’ interdependence is based on a positive-sum game. It that the more successful a partner is, the larger are the benefits for the other partner and vice versa. 3) In a business world which emphasizes a strong mutual dependence among firms and the economic value of cooperation, it follows a picture of business interdependence based on strongly convergent firms interest-functions.

         Strategic management field is currently facing a number of new and unexpected challenges which find their roots in the restless dynamics of environmental change and firms’ strategic action and thinking. As a result, organizations need to adapt and integrate existing theoretical lenses and conceptual categories or develop entirely new ones. Zero Sum approaches to strategy are no longer suitable in the 21st century. In this sense, we encourage the study and application of coopetition as a different approach to strategy.

         In management literature the hybrid behavior comprising competition and cooperation has been named coopetition (Brandenburger & Nalebuff, 1996; Lado, Boyd &Hanlon, 1997; Gnyawali & Madhavan, 2001). Whereas both competitive and cooperative perspectives focus on entirely diverging and converging interest structures, since it takes into account firm interdependence on the base of partially congruent interest structures, coopetition represents an integrative theoretical bridge which stretches to join the two contrasting mentioned perspectives.

         The coopetitive perspective stems from the acknowledgment that, within interfirm

interdependence, both processes of value creation and value sharing take place, giving rise to a partially convergent interest (and goal) structure where both competitive and cooperative issues are simultaneously present and strictly interconnected. They give rise to a new kind of strategic interdependence among firms that we term coopetitive system of value creation.

         The coopetitive perspective stresses that the supreme interests of a partner are not necessarily aligned with the supreme interest of the other partner(s). This partial or incomplete interest congruence requires to explicitly take into consideration the fairness problem within the cooperative game structure which has been instead, implicitly or explicitly, taken for granted in the cooperative perspective. In other words, the coopetitive perspective pays attention to the positive-but-variable game structure. This structural variability enlightens the presence of uncertainty due to the competitive pressures of firms’ interdependence, provided that it is not known ex ante to what extent each partner would benefit from cooperation compared to the other(s). 

         Now, what are the benefits in terms of knowledge and economic value outspreading from these kinds of relationships? At the macro level, while knowledge value is added by intense communication and information flows and inter-industry new knowledge creation and transfer, which in turn allow to join more knowledge stock, economic value is achieved through reduced aggressive and suboptimal rent-seeking and profit and fund sharing arrangements. At the meso level, whereas knowledge value is attained through intra-industry new knowledge creation and transfer, deep communication and information flows and product co-design and co-development, economic benefit is accomplished through increased R&D investment and workforce training investment, joint R&D and production, faster agreement on standards and

reduced time-to-market for products.

         Finally, at the micro or firm level, while knowledge stock added value is bestowed by extended communication and information flows and intra-firm new knowledge creation and transfer, higher incentive and commitment to work, and knowledge creation by the workforce, economic benefit is granted by a quicker and more effective transition from R&D to production and an increased productivity by the overall commitment of the workforce.

         Far from being a compact monolith, coopetition strategy is a multidimensional and multifaceted concept which assumes a number of different forms and multiple levels of analysis and for which it is all but easy to grasp its structure, processes and evolving patterns. As previously understood, coopetition encompasses both economic and social issues related to interfirm interdependence. Blurring boundaries in the firms’ value chain(s) and relationships among coopetitive players developing a coopetitive system of value creation.

Copyright 2011 QBS, Inc.
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