THEORETICAL PERSPECTIVES AND CONCEPTUAL FRAMEWORKS OF COOPETITION

Suzanna Lamria. Siregar

Fakultas Ekonomi, Universitas Gunadarma Jl. Margonda Raya 100, Depok 16424 [email protected]

ABSTRACT

There are several perspectives that provide useful theoretical frameworks for analyzing coopetition based on its original paradigm – competition and cooperation. They are transaction–cost economics, resource-based view, game theory, industrial- organization, socioeconomics and social network analysis. Theoretical perspectives then developed to conceptual frameworks that explain and predict empirical phenomena of coopetition. The frameworks of coopetition vary from a continuum with cooperation and competition at its ends to the tendency to adopt multidimensionality under orthogonal structure between two constructs of competition and cooperation. – briefly drawing the typology of coopetition with coopetition and cooperation constructs as its axis.

Keywords:, coopetition, theoretical perxpectives

INTRODUCTION (1991) endorses Resource-Based View (RBV) the concept Wernerfelt (1984) Coopetition is investigated under once affirmed. This approach turns to be the inter-organizational relationship one of the significant perspective used in realms. It is lying between two examining coopetition. diametrically different logics of Cooperation is frequently interaction cooperation and competition considered the antithesis of competition, (Bengtsson and Kock, 2000), from where since it is a recursive process where two the new research domain also get its or more firms work together toward an name. intersection of common goals. Within Competition traditionally depicted the cooperative paradigm, the business as direct rivalry between firms. Beneath world is composed of a network of the industrial organization perspective, interdependent relationships developed Porter (1986) brings the notions to win and fostered through strategic competition by overcoming the threats or collaboration with the goal of deriving power of substitute products, new mutual benefits (Contractor and Lorange, competitors, competitive rivalry, 1988 in Lado, Boyd, and Hanlon, 1997). customers and suppliers. The other The inter-firm cooperation agreement distinguished way to succeed in means a strategic option of adjustment to competition is to exploit but at the same gain access to resources that firm does time to maintain the key resources – that not have but are indispensable for its is the resources which have the properties sustainability or progress. Quintana- of being valuable, rare, in-imitable and Garcıa and Benavides-Velasco (2004) non-substitutable (Barney, 1986). elaborate resources as abilities and Interweaving Porter’s five and the VRIN knowledge and sustainability and properties of key resources, Barney

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progress narrowly refer to new product resource to guarantee the creation and development process. furthermore the sustainability of firm’s Coopetition gets its paradox from competitive advantage. The other the simultaneously existence of approach evolves around the idea of how cooperation and competition in the sustainability of competitive advantage relationship. On one side, coopetition strongly depends on firm’s ability to deals with enmity due to conflicting develop capabilities for innovations. This interests related to obtain competitive dynamic capability-based approach advantage and on the other side with emphasizes skill acquisition, learning and necessity to develop trust and mutual capability accumulation which provide a commitment to achieve common aims, convenient basis on which the both towards the same entity. Several accumulation of resource stock through theoretical perspectives have been used to coopetition will be examined. analyze this new stream of research area, they are resource-based view, game Game Theory theory, transaction–cost economics, socio-economics and social network Game theory represents another analysis. Researchers tend to intertwine conceptual framework for examining the the perspectives rather to use a single one potential of rent creation through to explain the phenomenon. coopetition strategy (Brandenburger and Nalebuff, 1996). According to Okura THE PERSPECTIVES (2007) game theory has the following three advantages for analyzing the Resource-Based View. coopetition. First, game theory can contain some strategic interactions among From Resource based-view, direct firms (competitor), the industrial competitive advantage comes from profits entirely are related not only to a owning valuable, rare, inimitable, non- firm’s decisions, but also to those of substitutable capabilities that allow the others. Second, game theory can firm to offer its customers better value represent a complex situation by a very than competitors. Fundamentally, two simple model. Game theory permits assumptions underpin this approach: (a) analyzing a complex situation by firms are heterogeneous with respect to distinguishing in an analytical fashion the their resource profiles and (b) those cooperative and competitive issues that resources are not perfectly mobile across are interwoven in the real world situation. firms (Barney, 1991). Sustained Third, game theory gives a very rigorous differences in firms' profits may be analytical methods. attributed to differences in resources and In the terminology of game not necessarily to a particular industry's theory, coopetition can be depicted as an structural conditions. Accordingly, extensive-form game containing both unique resources and capabilities enable cooperative (positive-sum game) and the firm to generate economic rents, competitive (zero-sum game) stages. By leading to sustained competitive this nature, coopetition can be viewed as advantage. “variable-positive-sum game”. The Based on how economic rent are solution of an extensive-form game is generated and sustained, two approaches expressed as sub-game perfect then develop form RBV perspective. The equilibrium. This equilibrium can be first perspective emphasizes the derived using backward induction, which importance of VRIN properties of means solving the optimal choice of the

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last stages in all possible situations and also gives space for explanation on the then working backward to compute the dynamic of coopetitive relationship. The optimal choice. Mathematical analysis on relationship changes the direction over the equilibrium is the backbone of this certain time range due to the interactions perspective. happened in the network. This approach also frequently used to confirm the Industrial Organization Socio- knowledge and technological (and other economics - Social Network Analysis. resources, e.g. trust (Castaldo and Dagnino, 2004)) flows in the relationship. Beside game theory and RBV, Lado Social network analysis is built et. al. (1997) also exploit socioeconomics based on an assumption of the importance perspective to explore coopetitive of relationships among interacting units. behavior of firms. By socioeconomics The social network perspective approaches, Lado, et al. (1997) fuse encompasses theories, models, and economical, sociological, psychological applications that are expressed in terms of (behavior studies) even mention relational concepts or processes. A biological approaches to conclude the “social network” is defined as a group of main idea that firms are not just economic collaborating entities that are related to beings, they are also social ones. The each other. Mathematically, this is a firms tied in certain norms and ethics, so graph (or a multi-graph); each participant beside maximizing their utility function, in the collaboration is called an actor and they are also considering the moral depicted as a node in the graph. Actors sentiment and/or value. can be persons, organizations, or Bengtsson and Kock (2000) groups—any set of related entities. combine the perspective of industrial Valued relations between actors are organization (economics) and network depicted as links between the perspective when depicting the corresponding nodes. paradoxical nature of coopetition. Four things related to actors, Network approach which focuses more in relations, network focus and structure are the (both vertical or horizontal) considered important in social network relationships adjoined with industrial analysis. First, actors and their actions organization which interests is on the are viewed as interdependent rather than industry structure. With these independent, autonomous units. Second, perspective, the cooperation and the relational ties (linkages) between actors competition can be denoted to happen are channels for transfer or "flow" of within a coopetitive relationship resources (either material or nonmaterial). involving the same entities. The Next, network models focusing on dominance degree whether of cooperation individuals view the network structural or competition in the coopetitive environment as providing opportunities relationship together with the for or constraints on individual action. propositions become the significant And network models conceptualize results from this study. structure (social, economic, political, and I found network approaches go so forth) as lasting patterns of relations along with the focus of socioeconomics among actors. The unit of analysis in perspective. The idea of network network analysis is not the individual, but embeddedness from Gnyawali and an entity consisting of a collection of Madhavan (2001) confirm how behaviors individuals and the linkages among them. of a firm give impacts on the entire Network methods focus on dyads (two networks and vice versa. This viewpoint actors and their ties), triads (three actors

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and their ties), or larger systems spin on" information flows between (subgroups of individuals, or entire disconnected actors. While structural networks (Wasserman and Faust, 1994). holes are the underlying phenomena, In explaining the structure of the structural autonomy is the network network, social network analysis property of actors who have relationships introduced the network centralization free of structural holes at their own end indices. Network centralization indices and rich in structural holes at the other explain the topology of the network. end. (Gnyawali and Madhavan, 2001). Network may have one (or more) actor(s) that dominate(s) as in the star topology; Transaction Cost Economics (TCE). or the connectedness is equally distributed among nodes and forms the According to Williamson (1998), circle topology. As for the importance of transaction cost economics (TCE) is the every actors in the network, social interdisciplinary field of law, economics network analysis used the unit centrality and organization, dealing with measures. Both network centralization governance of transactions, adopting a indices and unit centrality measures contractual approach to economic consist of degree, closeness and organization. A transaction (exchange) betweenness measures. Degree centrality occurs when a good or service is measure represents number of ties an transferred across a technically separable actor has with other actors in the network. interface. Governance is the means to Closeness centrality represents number of accomplish order in an exchange shortest path an actor has with other relationship, in which potential conflict actors in the network. Betweenness threatens to diminish mutual gains. TCE centrality of an actor indicates the number doesn’t not estrange friction in the inter- of relations between two other actors in firm relationship, in fact friction becomes the network that regard it as connecting the engine of the economic system. node. Much of the TCE literature Drawn from Burt's (1992) centers on make-or-buy decisions, with influential work on structural holes, choice of mode influenced by the markets structural autonomy is a key actor-level for those goods and necessary property: a structurally autonomous actor investments in facilities to produce or has structural holes between the actors it utilize those goods (Park and Russo, is connected to but is free of structural 1996). Eriksson (2006) then continue the holes at its own end. If actor A has ties to tradition by associating the three both B and C but B and C are not tied dimensions of TCE, (i.e.: asset directly to each other-that is, B and C can specificity, uncertainty and frequency) reach each other only through A-a with the three different structures and the structural hole exists between B and C, governance mechanism, that is market – which can be exploited by A. Structural price, hierarchy – authority and hybrids – holes enhance information benefits in trust to build the model for procurement several ways: diversity of contacts across procedure of construction firms. Even unconnected groups means less though the empirical results do not agree redundancy and higher quality of with the proposed hypothesis, yet the information, earlier access to new model succeeds to capture the description information, and inclusion in more of client and contractor relationship that interactions. Similarly, a network rich in is still dominated by the competitive structural holes presents opportunities for behaviors. control, in that the focal actor can "put a

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FRAMEWORKS references is the Syncretic Model of From Perspectives to Frameworks. Rent-Seeking Strategic Behavior by Lado et al. (1997). Figure 1 depicts the model Some distinguished coopetition rigidly formulated on the basis of RBV, propositions, hypothesis and frameworks game theory and socioeconomic developed from thorough exposition of perspectives. Syncretic rent-seeking theoretical perspectives. Among the behavior in this model places the earliest framework which still used as

Syncretic Rent-Seeking High Collaborative Rent-Seeking Behavior Behavior

Cooperative Orientation

Monopolistic Rent-Seeking Competitive Rent-Seeking Behavior Behavior Low

Low High

Competitive Orientation

Figure 1 A Syncretic Model of Rent-Seeking Strategic Behavior (Lado, et al. – 1997)

coopetition among other possible only seen as a single unit composed by behaviors. So the dialectical perspective two extremes that is pure cooperation and of coopetition suggested by pure competition (see Figure 2). Brandenburger and Nalebuff (1996) not

Figure 2 Competition – Cooperation Dimension (Brandenburger and Nalebuff , 1996)

The dimension then developed by (see Figure 3). Galvagno and Garraffo Bengtsson and Kock (2000) using the (2008) add the element of time and network and industrial organization direction to the continuum to accentuate (economics) and network approaches the dynamic of coopetitive relationship. makes the dimension appeared with more It changes its direction over a particular details about the coopetition continuum time span.

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Pure Cooperation- Equal Relationship Competition- Pure Cooperation dominated dominated Competition Relationship Relationship

Coopetition

Figure 3 Types of Coopetitive Relationship (Bengtsson and Kock, 2000)

Examples of the similar framework dimension that includes competition and built on the basis of socio- (includes the cooperation. The basic concept of psychological)-economic perspectives coopetition is shown in Figure 4. This also given by Castaldo and Dagnino description of dimension then followed (2004). Coopetition in the study by other several descriptions of composed in two dimensions, that is: (1) coopetition typologies drawn on the same content dimension which covers social axis. and economic aspects and (2) process

Figure 4 Basic Concept of Coopetition (Castaldo and Dagnino – 2004)

The work of Castaldo and Dagnino assume a number of different values, (2004) eventually develop what Mandal especially when observed in an (2004) summarizes as conventional orthogonal structure between the two cooperation competition framework constructs of competition and (Figure 5). Coopetition is defined as cooperation. multidimensional variable, which may

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Figure 5 Conventional Cooperation Competition Framework (Mandal, 2004)

CONCLUSION Advantage?” Academy of Galvagno and Garraffo (2008) Management Review. Vol. 11, pp. conclude that coopetition has not had any 656-665. well-defined theoretical perspective yet. -----, 1991. “Firms Resources and The prominent perspective applied for Sustained Competitive scrutinizing coopetition are resource Advantage.” Journal of based-view, game theory, transactions Management. Vol. 17, No.1, pp. cost economics and social network 99–120. analysis. Researchers tend to intertwine Brandenburger, A.M., Nalebuff, B.J., the perspectives rather to use a single one 1996. Co-optetition. Doubleday, to explain the phenomenon. This New York.. propensity is performed to consider Bengtsson, M., Kock, S., 2000. coopetition as a new entity, not only a ‘Coopetition’ in Business hybrid of its main paradigms, cooperation Networks-to Cooperate and and competition. Compete Simultaneously.” Yet to date, coopetition is mostly Industrial Marketing explained and examined using theoretical Management.Vol. 29, No. 5, pp. perspectives that treat competition and 411–426. cooperation as two paradigm separately. Burt, R. S. 1992. Structural Holes: The This fact leads to the lack of conceptual Social Structure of Competition. framework that can explain and predict Cambridge, MA: Harvard empirical phenomena of coopetition. University Press. Multidimensionality that accommodates Castaldo, S. and G. B. Dagnino. 2004. orthogonality seems potential to depict “Trust and Coopetition: The the typology of coopetition. Exploring Strategic Role of Trust as A other theoretical perspectives and Moderating Mechanism in developing conceptual frameworks Interfirm Coopetitive Dynamics.” definitely become important stages to EIASM Conference Workshop on confirm coopetition as new form of Coopetition Strategy: Toward a research field in management strategic. New Kind of Interfirm Dynamics?, Catania, Italy, EIASM - The REFERENCES European Institute for Advanced Barney, J. B. 1986. “Organizational Studies in Management. Culture: Can It Be a Source of Sustained Competitive

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Eriksson, P. E. 2006. “Coopetition in European Institute for Advanced Buyer-Supplier Relationships - Studies in Management. An Empirical Investigation of Park, S.H., Russo, M.V. 1996. “When Swedish Construction Clients' Competition Eclipses Procurement Procedures.” 2nd Cooperation: An Event History Workshop on Coopetition Analysis of Joint Venture Strategy, Milano, Italy, EIASM - Failure.” Management Science. The European Institute for Vol. 42, No. 6, pp. 875–890. Advanced Studies in Porter, M.E. 1980. Competitive Strategy. Management. Free Press, New York. Galvagno, M. and F. Garraffo. 2008. Lado, A.A., Boyd, N. and Hanlon, S.C. “The Promise of Coopetition as a 1997. “Competition, Cooperation, Stream of Research in Strategic and the Search for Economic Management.” Working Paper. Rents: A Syncretic Model.” University of Catania. Academy of Management Review. Gnyawali, D. R. and R. Madhavan. 2001. Vol. 22, No. 1, pp 110-141. “Cooperative Networks and Quintana-Garcıa, C and C. A. Benavides- Competitive Dynamics: A Velasco. 2004. “Cooperation, Structural Embeddedness Competition, and Innovative Perspective.” Academy of Capability: A Panel Data of Management Review. Vol. 26, No. European Dedicated 3, pp. 431-445. BiotechnologyFirms.” Okura, M. 2007. “Coopetitive Strategies Technovation. Vol. 24, pp. 927– of Japanese Insurance Firms, A 938. Game-Theory Approach.” Wasserman, S. and Faust, K. 1994. Social International Studies of Network Analysis. Cambridge Management & Organization. University Press. New York. Vol. 31, No. 2, pp. 53–69. Williamson, O. 1998. “Transaction Cost Mandal, A. 2004. “Virtual Coopetition: Economics: How It Works; Where Mutual Value Preservation in The It Is Headed.” De Economist. Vol. Consulting Industry.” EIASM 146, No. 1, pp 23-58 Conference Workshop on Wernerfelt, B. 1984. “The Resource- Coopetition Strategy : Toward a Based View of the Firm.” New Kind of Interfirm Dynamics?, Strategic Management Journal. Catania, Italy, EIASM - The Vol. 5, No.2, pp. 171-180.

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