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Coopetition 101 pt. 2

In a previous post I introduced the concept of coopetition as it defined by two Italian researchers, Dagnino and Padula. A brief reminder: coopetition is a situation when two or more companies cooperate and compete with each other simultaneously. As I previously mentioned, the theory of coopetition has been overlooked by most researchers who find it easier to focus on either competition or cooperation. Dagnino and Padula ideas are novel not only because they re-conceptualize the idea of coopetition but also because they focus on how this strategy can create value for companies who put it into practice.

By implementing a coopetitive strategy firms involved partially converge their interest and goals to form what is called “coopetitive system of value creation”. This system is represented by a matrix consisting of three level of coopetition and two dimensions of value creation.

Let’s first understand the different terms the two researchers defined. They first introduce three levels of coopetition: macro, meso and micro. Macro level refers to interconnecting clusters of firms across industries who usually compete on government R&D funds, shareholder investments and access to capital markets. These companies usually cooperate through sharing of knowledge and technology and when exploring new markets. Meso level refers to firms who are active in the same industry, and have one of two possible relationships: buyer-supplier or competitors.

If they are competitors, they will typically compete directly on products and market share and will cooperate on product design, distribution channels and new product standards. Buyer and supplier coopetition is usually in the form of complex dyadic coopetition (as described in a previous post) - a purchasers and a supplier who cooperate to manufacture specific components but remain two separate entities who might cooperate with other suppliers or buyers. Micro Level refers to internal coopetition between division and workers within each firm. They compete on inter-firm funds and resources, while cooperating on every level of product development and manufacturing.

Two value creation dimensions are also suggested - economic value and knowledge value. Each level of coopetition creates different economic and knowledge value for the firms involved. At the macro level, knowledge value is created through the sharing of information between clusters of firms which enriches the knowledge base of the whole market. Economic value is achieved through fund sharing agreements and reduced rent-seeking (influencing the social and political environments to attain economic rent). At the meso level, cooperating on product development and design increases knowledge within the industry. Through the sharing of human and monetary resources in the product development process, companies are able to produce a better product quicker, which leads to bigger profits. Finally, at the micro level, economic and knowledge value is added through efficient inter-firm work procedures which improve R&D and manufacturing processes and increase employee commitment and creativity.

I hope it is now clearer how coopetition strategy allows businesses to enjoy the benefits of both cooperation and competition, while adding tremendous value to their market, industry and firm.

Based on: Dagnino, G.B. & Padula G.(2002). Coopetition Strategy: A New Kind of Interfirm Dynamics for Value Creation. The European Academy of Management

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