Relationships of Cooperation and Competition between Competitors

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Relationships of Cooperation and Competition between Competitors

Abstract

In this article, we are elaborating the various relationships that exist among competitors both on an activity and resource level as well as on an individual level. The firms will have different roles in different activities and interactions. Competitive and cooperative activities can in some cases be in conflict with each other. If a firm should choose to either cooperate or compete, or if it should try to combine competition and cooperation, has therefore become a strategically important issue. In the article, discuss the importance of cooperate or compete of different firms.

Introduction

Cooperation between competing firms has become an important subject for research. The purpose is to get a better understanding of coopetition, the occurrence of simultaneous competitive and cooperative behavior between firms and how the formation of coopetitive ties have an influence on the market value of firms. By this, an implication can be made about the effects of coopetition on the attractiveness of a market.

Coopetition is a relatively new subject in strategy research and it needs its own developed body of research. In the early 80’s, the research has started by focusing on long-term cooperative relationships between buyers and sellers in a vertical setting. It has been argued that the common goal for involved buyers and sellers have been to create new capabilities by combining their resources and activities. In order for long-term relationships, the involved actors have moved from exchanges to the creation of bonds by making adaptations and investments.

Relationship of cooperation is different from the relationship of competition. Cooperative relationships are accumulated a mutual interest to support each other and interact without restraints. Relationships between cooperating firms are usually visible to outsiders. Such that some small and medium sized firms mostly lack of resources and need subsequently to cooperate with others, but at the same time they have to challenge their opponents, in order to survive. These relationships are constructed on a distribution of activities and resources among characters inserted in the same business network.

On the other hand, competitive firms are forced to interact with each other. Competing relationships are conflicting, as the benefits for the involved characters usually cannot fulfilled simultaneously. Competitors frequently try to avoid direct interaction whereas buyers and sellers try to maintain the interaction. Competitive relationships are more casual and invisible in that informational and social exchanges are more common than regular economic exchange.

In the early 90’s, initial research was conducted on the relationships between competitors in horizontal settings. There are different types of relationships that exist between competitors, but there are needs to develop the framework to make the possible grasp on the complexity of a firms multiple relationships with their competitors.

The aim of this paper is to elaborate on the content of relationships between competitors, by accounting for the different layers of a business network, which are related to each other in an atmosphere of competition and cooperation. There are three different layers of importance when analyzing business network which is;

These different layers was established by Håkansson and Snehota in 1995. The actors or the individuals that are involved in the activities are also important for the relationships that develop among competitors.

The reason for firm to participate in coopetition is that the firm desire to cooperate with competitors when they want to take advantage of opportunities in their markets that require greater resources than the firm owns to achieve the opportunity individually. Examples are responding to a market demand for a new type of product which a firm can fulfil by expanding its current range of products and entering foreign market. There may be two problems which might be;

Lack of production facilities in individual firms to expand on their own.
Lack of knowledge about a country they want to enter with their products.

In this situation, it is more convenient to cooperate with a competitors that is similar in resources and has common interest in the market opportunity. So competitors cooperate with each other to complement the necessary resources to achieve the market opportunity.

Factors influencing the formation of coopetition

The effects of coopetition on the value of firms is discussed to get a better understanding of the conditions that might influence the formation of coopetition. The reason is that the formation of coopetition ties is found to be affected by various contextual factors which are described below;

Environmental Factors
Firm Size
The cost of cooperation

Environmental factors: A firm’s coopetitive behaviour might be influenced by the environmental context of a firm including the degree of rivalry, availability of resources and market opportunities. For example, in an environmental context where there are lots of opportunities and sufficient resources to transform in competitive advantages there will be little motivation for firms to compete intensely or to cooperate with one another because the costs will likely outweigh the benefits.

Firm size: Small and large firms have less cooperative ties with competitors than intermediate size firms have. Small firms are limited in their ability to form cooperative ties and they have limited motivations to be cooperate because their impact on competition in the industry is low and often specialized forte companies. Large firms have more resources and capabilities to deal with opportunities and uncertainties on their own.

The cost of cooperation: When a firm participates in too many cooperative relations with competitors, coopetitions may fail to improve the competitive position of the firm when the costs outweigh the benefits of the cooperation because of the added complexity and the costs of performing joint tasks with a partner.

Background

From a competition viewpoint, coopetition is seen as a competitive move to deal with modern competitive content. A coopetition relationship can be familiar when two or more competitors form an association with each other. The basic principle of an association is that each participating firm needs the other firm to progress on their individual interests.

Conclusion

This article is to write for the development of a body of research on competition which is acknowledged as a necessity by various researchers. We discuss the relationship between cooperation and competition with coopetition. By this different firms can be compete with their competitors to facilitates their companies and also discuss the different layers of relationships of a firm.

References

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Garrette, B., Castaner, X., Dussauge, P. (2009). Horizontal alliances as an alternative to autonomous production: product expansion mode choice in the worldwide aircraft industry 1945-2000. Strategic Management Journal, (30), 885–894.