Academic journal article Journal of Small Business Strategy

Coopetition as a Small Business Strategy: Implications for Performance

Academic journal article Journal of Small Business Strategy

Coopetition as a Small Business Strategy: Implications for Performance

Article excerpt

ABSTRACT

This paper explores coopetition, a strategy that combines cooperation and competition in addressing relationships between firms. We examine the underlying nature of coopetition, and evaluate the extent to which it represents a relevant strategy for small firms. Inherent problems are identified when attempting to collaborate with competitors. We propose an approach to measuring the coopetitive tendencies of small firms. The measurement approach centers on three underlying dimensions: mutual benefit, trust, and commitment. Applying this approach, we assess the relationship between coopetition and firm performance. Based on a survey of 647 small firms in Turkey, a strong, positive relationship is identified. Theoretical and managerial implications are drawn from the findings.

INTRODUCTION

Having a superior product resource advantage is often not enough to ensure the sustainability of emerging ventures (Sherer, 2003). For these firms, their ability to compete may be tied to their ability to cooperate. This seemingly paradoxical statement reflects the complex nature of the competitive environment facing entrepreneurial organizations. Turbulent external conditions exacerbate the liabilities of newness and smallness that afflict small, emerging firms (Laine, 2002). Dynamic, hostile, and complex environmental conditions also result in an increased emphasis on innovation as a source of competitive advantage. Yet, the high expense and risk associated with innovation can be especially problematic for smaller firms operating with limited resources and that are especially vulnerable to environmental discontinuities (Parker, 2000).

In these circumstances, collaborative relationships with competitors may represent a viable strategy. Parker (2000) notes that firms experiencing high rates of technological and other environmental change, and firms confronting greater product variety in the market, are especially likely to pursue cooperative relationships. A number of researchers cite competitive intensity itself as a major factor driving firms to pursue a strategy of cooperation (BarNir and Smith, 2002). Collaboration is a means of leveraging resources, and can be a useful method for protecting a firm's market position (Dyer and Singh, 1998). Kanter (1994) suggests that cooperative relationships represent a type of corporate asset that can produce "collaborative advantage".

As strategic factors affecting a firm's market position, cooperation and competition have historically been approached independently by researchers. However, pursuing both strategies simultaneously has been the focus of a number of recent studies (Bengtsson and Kock, 2000; Garcia and Velasco, 2002; Gnyawali and Madhavan, 2001; Luo, 2005). When a firm is engaged in both competition and cooperation in a given relationship, the behavior is termed "coopetition." The purpose of the current study is to explore the phenomenon of coopetition in a small business context. Attention is devoted to establishing the nature of coopetition and identifying factors that affect a firm's tendency to cooperate with a direct competitor. The unique nature of coopetition when pursued by small ventures is investigated. Based on the literature, a theoretical model of coopetition is developed that centers on three core dimensions: mutual benefit, trust, and commitment. Conceptualized in this manner, it is posited that coopetition should affect company performance. The model is tested using a cross-sectional sample of Turkish firms. Implications are drawn for theory and practice.

COOPERATION AND COMPETITION: COOPETITION

Coopetition occurs when two firms cooperate in some business activities while simultaneously competing with one another (Luo, 2005). Hence, elements of both cooperation and competition are present. Laine (2002) explains that coopetition means that two firms might cooperate by coordinating their purchasing and service provision operations at the same time that they are competing in the manufacturing and marketing areas. …

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