A Study of Inter-firm Dynamics

8/7/2019 A Study of Inter-firm Dynamics

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www.palgrave-journals.com/dbm/

Correspondence:

Aihie Osarenkhoe

Department of Business

Studies, University of Gvle,

Gvle, Sweden

E-mail: [email protected]

INTRODUCTIONHistorically, goods and services have beendistributed through networks in which

loosely aligned firms have bargained atarms length, negotiated aggressively overprice and other conditions of sale, and

Original Article

A study of inter-firm dynamics

between competition andcooperation A coopetition strategyReceived (in revised form): 23rd April 2010

Aihie Osarenkhoeearned his PhD in Business Administration at Stockholm University, Sweden. He is a member of Editorial Advisory Board of, amo

others, the forthcoming Emerald Emerging Markets Case Studies (EEMCS) series, Business Process Management Journal, and

reviews papers for Emerald and Inderscience Journals. Dr Osarenkhoes research interest and publications in academic journals

encompass strategic marketing issues such as methods for enhancing efficiency in supply chain; management of strategies for

creating and sustaining customer loyalty; implementation of customer-centric strategy; management of processes for the creatio

development and termination of customer relationships; interplay between information technology and marketing paradigms, as

well as the role of relationships and network perspectives in international business practices. The author has published articles

in, among others, European Journal of Marketing, International Journal of Strategic Management, Business Process ManagementJournal,Journal of Database Marketing & Customer Strategy Management, International Journal of Technology MarketingandAs

Journal of Information Technology. Apart from offering courses like Customer Relationship Management, Brand Management,

International Business Strategy, Marketing Theories, Dr Osarenkhoe supervises Bachelor, Master and Doctoral thesis work. The

author is also the Head of the MBA programme in Marketing Management at the University of Gvle in Sweden.

ABSTRACT Little attention has been devoted in extant literature to inter-firm dynamic

that entails both cooperation and competition also known as coopetition. This artic

contributes to extant knowledge by highlighting the complementarity-based nature

coopetition strategy and its impact on collective strategies for value generation amon

actors in three network settings. The empirical data collection draws on three case

encompassing three empirical contexts. The results show that managerial leadersh

and development of trust are the key success factors. Furthermore, this hybrid level o

inter-organizational relationship encompassing both competition and cooperation

coopetition fosters collective intelligence through information and knowledge sharin

This article concludes that coopetition strategy enhances the internal resources an

market shares of competing actors. Thus, coopetitive relationships offer the advantag

of a combination of the need to innovate in new areas as a result of competition whi

accessing new resources as a consequence of cooperation. From a manageri

perspective, the findings demonstrate the multifaceted nature of coopetition. Addition

work on the impact of the concept of coopetition strategy on business practice is neede

to add to this valuable endeavour.

Journal of Database Marketing & Customer Strategy Management(2010) 17, 201221.doi:10.1057/dbm.2010.23

Keywords: inter-organizational relationships; competition; cooperation; coopetition;

network approach

2010 Macmillan Publishers Ltd. 1741-2439 Database Marketing & Customer Strategy Management Vol. 17, 3/4, 201221


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otherwise behaved autonomously.1 Today,planned vertical and horizontal marketingsystems are rapidly displacing theseconventional marketing channels as thedominant mode of distribution in many

economies.2

However, according to Gilland Allerheiligen,1 channels of distributionvary in their degree of organization from:(1) loosely organized channels that routinelyprocess goods, as might be expected withchannels for convenience goods (conventionalchannels), through (2) consensus systemsthat are organized by the cooperation ofchannel participants, to (3) highly organizedsystems typified by vertically integratedchannels (corporate systems), or thoseformalized by contractual agreements(contractual systems). The particular focusof this article is the consensus systems, inwhich the success of a channels marketingeffort depends upon the continuedcooperation of the channel members.

There is a consensus in extant literaturethat cooperation is the prevailing behaviourin channel systems.3 As each firm dependson the others in the channel to performits tasks, cooperation among channelmembers is necessary and vital behaviour.

In this regard, Alderson4 set forth thefoundations of a theory of marketinginteraction and cooperation based on hisbelief that marketing cries out for a theoryof cooperation to match theories ofcompetition and conflict.1,2 Thus, therecontinues to be a need for development ofsuch a theory of cooperation. Althoughmuch of the literature dealing withdistribution channels has concentrated onaspects of conflicts within the channels,

most studies state that the answer to thisproblem is cooperation within the channels,but do not elaborate on the avenues thiscooperation can.1 A more optimistic andproductive view would be to concentrateresearch efforts on ways to encouragecooperation.

Unfortunately, very little research hasfocused on the inter-organizational dynamics

that entails both cooperation and competition,and in most cases the situation can bedescribed as something in between purecooperation and pure competition, alsoknown as coopetition. Participating in

inter-firm networks, according to Thorgrenet al,5 has become increasingly popular toenhance corporate entrepreneurship. Trust,relationship diversity and knowledgetransfer, according to Thorgren et al, areconsidered some of the prominentcornerstones of well-functioning networks.

This article contributes to extantknowledge by highlighting thecomplementarity-based nature ofcoopetition strategy and its impact oncollective strategies for value generationamong actors in three network settings. Atheoretical lens that enables a focus oncontemporary inter-organizational marketsas organized behaviour systems, manifestingnetwork structures, is adopted. In light ofthis, business strategy is seen as an exchangestrategy with an emphasis on exchangeeffectiveness. This effectiveness is achievedwhen some value is produced incooperation with other actors.

LITERATURE REVIEW ANDTHEORETICAL BACKGROUNDThomas6 classified five strategic intentionsin terms of two dimensions assertivenessand cooperativeness namely: competing,collaborating, compromising, avoiding andaccommodating. In this article, the abovecategorization is aggregated to includecompetition, collaboration, coordinationand cooperation. Overarching these strategicintentions is the network perspective.

Below, they are described and anchored inthe body of literature.

Inter-organizationalrelationship mixResearchers of business networks68 havetransposed the social exchange perspectiveon social networks9 to business networks.1012Social exchange theory13 considers exchange



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A study of inter-firm dynamics between competition and cooperation

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relations a dynamic process,6,14 and it canthus be used as a framework to understandbuyerseller, sellerseller and buyerbuyerrelationships.15 Using social exchangetheory, business networks can be defined as

a set of two or more connected businessrelationships, in which each exchange isbetween business firms that areconceptualized as collective actors.16

Firms in the network develop a networkof relationships17 through connected activities,linked resources and related actors, all ofthese elements being interconnected andinterdependent. Efficiency is achievedthrough the interlinking of activities,creative leveraging of resource heterogeneityand mutuality based on self-interest ofactors.10 Through exchange relationshipprocesses with other firms activities, andresources, bonds are created and developed.18Actor bonds connect actors and influencehow the actors relate to one another andform their identities in the networks.Actors in a network can be sellers, buyers,organizations, of smaller groups of individualsinside these organizations.19 Activity linksinclude technical, administrative, commercialand other activities of an organization that

can be connected in different ways to thoseof another organization.

One of the key objectives of the networkapproach is to provide an explanatoryframework of industrial markets as acomplex network of organizationalrelationships.12 This reinforces the view ofthe network approach that actors possessspecific resources and perform specificactivities that create opportunity forexchange relationships among them.10 The

activities-actors-resources model

7,11,14,16

therefore describes how a business relationshipcan be analysed through its individualsubstance layers: actor bonds, activity linksand resource ties. Hence, the need foraccess to resources possessed by other firmsis greater if activities are built aroundheterogeneous resources than if they arebuilt around homogeneous resources.20

CompetitionHutzschenreuter and Israels paper21 reviewthe empirical research on dynamiccompetitive strategy published between1986 and 2005 in nine leading strategic

management journals. An integratedframework is used to showcase the researcin terms of antecedents, strategic actionsand outcomes. Their review demonstratesthat significant progress has been made inthe field of dynamic competitive strategy,and yet that there are still many promisinglines of enquiry for future theoretical andempirical research, particularly in the areasof strategic action timing and pathdependency.

Competition is defined as a dynamicsituation that occurs when several actors ina specific area (market) struggle for scarceresources, and/or produce and market verysimilar products or services22,23 that satisfythe same customer need. With a focus onthe interests of the individual firm, thecompetitive approach emphasizes firmsinterdependence both vertically andhorizontally. Competition has beendescribed in terms of exchange relationshipbetween existing and unchanging econom

units.24 In contrast, Schumpeter25 associatecompetition with internal industrialefficiency and with the development ofnew technology, new sources of supply annew types of organization. According toMcNulty,24 a persistent weakness of theconcept of competition has been the failurto recognize the extent to which thecompetition of one economic unit tends taffect the economic position of others, andthus the overall industrial structure. Hunt

and Morgan

26

point out that this view alsofails to specify how the competing units acand describe the competing units as toopassive.

Rather than just selecting the best termfrom those offered, a competitor maychoose to manipulate the terms of a tradeto his own advantage. As Copeland puts ia competitor that gets ahead in an industr



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may do so in substantial part by developingbusiness connections, that is arrangementsthat give him preferential treatment interms of financing, in terms of purchase, inaccess to market information, in the award

of private contracts, even preferentialtreatment in the administration of a publicoffice.27 Thus, Copeland shifts the focusfrom an internal, independent view ofcompanies, to an external, dependent view.Further, there is an implicit view thatsome competitors may be better able tocompete than others. Such differences incompetitiveness would allow for differentialgrowth and profit rates among firms withinan industry. In the long run, competitivebehaviour may in fact lead to a monopolisticposition of a firm within an industry,instead of a state of perfect competition.24Park28 argues that the Schumpeterian, orneo-Austrian, school views competition asa dynamic process of rivalry among firms inwhich only the fittest thrive and survive.While the classical economists viewedcompetition foremost as behaviour withrespect to prices, Schumpeter25 envisioneda more dynamic world where new productsand technology constantly drive out old

products and technologies. Hence, whatseparates a successful company from anunsuccessful company is the ability tocreate, invent and innovate. Also buildingon the Schumpeterian tradition, dynamicmodels of competition view the nature ofcompetition along dimensions of intensity,and hence intense competition is consideredto be the key defining factor for motivatingfirms to innovate and upgrade theircompetitiveness.22

With reference to horizontalinterdependence, the competitive approachemphasizes the search for above-normalprofits realized through gaining anadvantageous position in an industry29 orby mobilizing and deploying resources anddistinctive competences30 that enable a firmto offer superior products in relation to itscompetitors. In vertical interdependence,

the competitive perspective highlights thesearch for value in economic exchange.Interaction within a network is simple anddirect, and power and dependence areequally distributed among competitors based

on their positions in the network.31

Thisconcurs with Hunt 23 and Gnyawali et al,32who suggest the firms structural positionin such networks becomes important. Afirm with a superior position in its networkis likely to learn about competitiveopportunities sooner and use thatknowledge in planning and executingcompetitive actions.

CollaborationIn todays global economy, firms have beenlooking for alternative means to reinventtheir business strategies for the purpose ofremaining competitive. Collaboration is oneof these alternative strategies and is definedliterally as working together for a commoninterest33 or voluntary cooperation betweenfirms involving exchange, sharing ofresources, or joint development of products,technologies or services.34 Collaboration isa formal type of working relationshipbetween organizations. McCarthy and

Golocic define collaboration as a processwhere a group of autonomous stakeholdersin a problem domain engage in an interactiveprocess, using shared rules, norms andstructure, to act or decide on an issuerelated to that domain.35 Thus, McCarthyand Golocic make a link between thevarious relationship configurations andexogenous environmental dynamics, arguingthat a shift in the strategic priorities of afirm, or a loss of leadership, which makes

a partner less attractive than it was earlier,are both drivers that shift the balance froma more cooperative mindset to a morecompetitive mindset. Blomqvist et al36 assertthat the difference between cooperationand competition interaction is based on theproximity of a business activity to itscustomers: firms compete in activities closeto the customers and cooperate in activities



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far from the customers. In competition, thefocus is on value appropriation strategies,whereas in cooperation the focus is oncollective strategies for value generation.

CooperationCooperation is defined as a relationship inwhich individuals, groups and organizationsinteract through the sharing ofcomplementary capabilities and resources,or leveraging these for the purpose ofmutual benefit.32, 36 From a supply chainperspective,3739 cooperation is defined assimilar, complementary, coordinatedactivities performed by firms in a businessrelationship to produce superior mutualoutcomes. Canegallo et alargue that humanbeings usually cooperate more than wouldbe expected in terms of the maximizationof purely selfish utility functions.40According to Canegallo et al, the idea thatfairness and/or altruistic concerns may bepresent in normal preferences represents amajor shift from mainstream economics.Accordingly, there might be something inhuman nature that drives people towardcooperation.41 For most of our existence,human beings have been hunter-gatherers.

Such societies constitute a good environmentin which to nurture cooperative conventions,due both to their efficiency in maximizingindividual utility and to the existence ofstrong genetic (family) links.41 Thus,Canegallo et alalso argue that it is reasonableto conclude that mankind may havedeveloped an instinct toward cooperation,or at least a genetic propensity to learncooperative behaviours.

According to Tanghe et al,42 it is widely

acknowledged that trust greatly affectswork group functioning. Whereas trust mayfacilitate cooperation, distrust may impedeit. Hence, insight into when distrusters maybe prompted to cooperate may therefore beof importance. Tanghe et als empiricalstudies point to several moderators of theeffect of trust on cooperation. Unfortunately,these studies largely ignored the potential

role of group member affect. Groupmembers affective displays (particularly thactivation level of the displays) have asubstantial impact on the relationshipbetween trust and cooperation. Our study

testifies to the significant role that affectmay play in keeping up cooperation inorganizations and work groups when trustis withering.42

Successful cooperation is based on trust,commitment, and voluntary and mutualagreement that can be set out in a formaland documented contract or an informalcontract aimed at achieving commongoals.38,42 Thorgren et al5 examined thecauseeffect relationships betweeninterorganizational trust, relationshipdiversity and knowledge transfer, andcorporate entrepreneurship amongnetworking firms. They found a causalinfluence of knowledge transfer andrelational diversity on corporateentrepreneurship. That notwithstanding,cooperative relationships can emerge insituations involving competitor interaction.34

The main motive for cooperation is toadopt collective strategies for valuegeneration.43 Basically, firms cooperate for

the purpose of achieving a common goal,and as a result share resources with othercompeting actors or acquire them in theevent they are lacking.43 Firms alsocooperate for the purpose of learning orsharing organizational expertise.

It is pertinent to mention here thatthe development and creation of certaininter-organizational relationships likeindustrial symbiosis/industrial parks aresometimes influenced both endogenously b

the network actors, as well as exogenouslyby political initiators who set the rules thaindividual actors must adhere to.44 In thecase of politically induced cooperation,a varied range of interests may lead toincongruence between the politicallydetermined goal and the individualobjectives of the actors. A government mabe interested in creating more jobs to



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generate more tax income, while theindividual network actors follow theirown interest. That is, the government isinterested in more actors joining a networkto generate more income, whereas the

individual actors would prefer fewer actorsin order to maximize client traffic for theirown benefit.

RESEARCH METHODOLOGYThe empirical base is used to highlight thecomplementarity-based nature ofcoopetition strategy and its impact oncollective strategies for value generationamong actors in three network settings.Given the qualitative nature of theobjective of this study, and the limitedattention devoted thus far to this researchdomain, a qualitative research method andcase study approach are appropriate as weattempt to contribute new knowledge andtheory building.45 Use of secondary data tosupport in-depth interviews and participantobservation is important for triangulation,and is therefore highly recommended incase study research.46 The empirical datacollection draws on three cases from threeempirical contexts. The three cases a food

court in the Gallerian Nian Mall in Gvle,Sweden, Fujitsu Services AB in KistaIndustrial Park in Stockholm, Sweden, andthe Association of Wood Processors ofKosovo (AWPK) contain unobtrusiveinformation about inter-firm dynamics. Thethree cases provide natural settings neededto highlight the existence of a relevant linkbetween cooperation strategy andcompetitive intelligence in general, and thecomplementarity-based nature of

coopetition strategy and its impact oncollective strategies for value generationamong actors in three network settings inparticular.

In the case of the food court in GallerianNian Mall, interviews were held with AnnaAndersson, the commercial manager of themall, 29 food vendors and three janitors inthe food court. Each interview lasted

between 30 min and 1 hour. Owing totime constraint, the interviews with FujitsuServices ABs Chief Executive Officer(CEO) and Strategic Manager were carriedout via Skype or The Swedish University

Network. Interview guide was mailed tothem before the interview. Each interviewlasted 2 hours, and was transcribed by theauthor. In the case of AWPK, face-to-faceinterviews were conducted with theExecutive Director and 20 of AWPKs82 members. The members interviews werechosen randomly. The interviews at AWPKwere conducted by Vjosa Mullatahiri,a student of the author of Kosovo origin.The interview guidelines were constructedin English, but administered by VjosaMullatahiri in Serbian, one of the locallanguages. Vjosa also translated the datacollected from AWPK into English, whichwas then analysed by the author. Additionalinformation was received directly from theExecutive Director of AWPK via e-mail.Secondary data sources from AWPK werealso utilized. The case of AWPK waschosen for its uniqueness as a businessassociation and for its success ininstitutionalizing the cooperation between

producers, suppliers, governmentalinstitutions, universities and other businessassociations operating in Kosovo and in theregion.

The data analysis follows the proceduresapplied by Ang.34 First, we reduced thedata by extracting the information relevantto the variables of our theoreticalframework, and then we used ourframework to categorize the data toenable comparisons. To achieve a logical

flow in the analysis, the data collectedwere linked to the appropriate strategicintentions, (Thomas6) and the hybrid levelof inter-organizational relationshipencompasses both competition andcooperation coopetition in order toreinforce the complementarity-basednature of coopetition strategy. Thisprocess was helpful in distinguishing the



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main results of the study and thereafter indrawing conclusions.

EMPIRICAL FINDINGS

The food court in Gallerian NianThe food court in the Gallerian Nian Mall(hereafter Food Court) is a plaza in themall with contiguous counters of multipleself-serve food vendors and a common areawith tables for dining. The Food Courtcomprises restaurants with mostly Asian,European, African, Middle Eastern, LatinAmerican and North American cuisine 15 restaurants that share a relatively smallspace. With reference to the results fromthe observations made and the 33 interviewsconducted, it is obvious that the FoodCourt concept constitutes a major part ofthe business activities of Gallerian Nian.According to Anna Andersson, The foodcourt in Gallerian Nian Mall in Gvleattracts more customers to the mall. Oftenpeople come in just to have a meal,although some of them browse or do someshopping after that.

Activities in the mall are coordinatedby a management team who serve as the

landlord for, for example, the Food Court.The restaurants at the Food Court are thetenants. The relationship between thelandlord and the tenants in the Food Courtis structural or transactional in nature. Themall (the landlord) only provides the premisesfor the restaurants, and the restaurantsrun their own businesses. The tenants(or restaurants/food vendors) in the FoodCourt cooperate with each other by sharingthe same facilities and janitors. Hence, a

coalition among the various actors has beenformed. There is a spokesperson for all ofthe tenants in the Food Court. Selectionof the spokesperson is done throughelections, held yearly, for a 1-year term asspokesperson. A spokesperson can serve fora maximum of three terms if re-elected bythe majority support of the food vendors.The responsibilities of the spokesperson are

to act as the leader for the food vendors,gathering feedback on a variety of issues,sharing information, collecting the monthlfees to cover the expense of buying andmaintaining the dining tables and dishware

and to represent the food vendors innegotiations with the landlord and janitorsThe current spokesperson for the FoodCourt is the owner of the pizza restaurantOther food vendors usually consult thespokesperson when they encounter anyproblems. General meetings are held on aregular basis and attendance is compulsoryfor all food vendors in the Food Court.Most of the restaurants are satisfied with tcurrent cooperation.

The managers of the mall, propertyowners and all the food vendors meet onca month to share experiences and discusspending and future issues or problems. Thlandlord uses multichannel communicationtools (e-mails, hard copy and so on) todistribute information and other resourcesto the tenants. Events are frequentlyorganized by the landlord to attractcustomers to the mall. To further marketthe shops in the mall, including the FoodCourt, the landlord produces a magazine

that customers can take as they enter themall. The magazine informs visitors aboutupcoming events, new shops and artists thare going to perform on the stage at thecentre of the mall. The landlord is alsoresponsible for mall security, but the costsof security services are shared by all of theshops in the mall.

The majority of the food vendorsinterviewed mentioned that managerialleadership, development of trust and the

structure of the food court are particularlyimportant success factors. (For similarobservation, see also Thorgren et al.5) TheFood Court consists of a number of vendofood stalls and service counters. Meals areordered at one of the vendors and thencarried to a common dining area. The foovendors share the same resource and attraccustomers to the same place. The majority



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technology companies are located, such asMicrosoft, Dell and Sun Microsystems.Over 500 of the worlds 1400 leadinginformation and communications technology(ICT) firms have operations in Kista. This

ICT cluster provides an opportunity forfirms to build networks of relationships.According to Fujitsu Services CEO, the

company has just finished developing alogistics solution for Telia, a large Swedishtelecom company. Jetpack provides FujitsuServices with a car with which FujitsuServices provides distribution and logisticsfor Telia in Swedish cities that othercompanies like DHL do not service.The company also sells solutions to othercompanies, such as Dell. Fujitsu Servicesworks with Dell to provide computers andmanage workstations in Sweden. These twocompanies work together in other parts ofthe world as well, Fujitsu Services helpingDell or Dell helping Fujitsu Services,depending on who is better established inthat market. Another company located inthe Kina cluster is Microsoft, which alsoworks with Fujitsu Services. Microsoft sellssoftware to customers and Fujitsu Servicesthen supplies the training and service for

these customers. Fujitsu Services also sellsMicrosofts software and Microsoft providescustom solutions for their customers.The companies also market products andsolutions together. Another Fujitsucollaborator is Sun Microsystems, whichsupplies servers and super computers storingdata, for which Fujitsu Services handles thecustomer service and provides cards thatenable the employees to log into datastorage servers from any computer. Fujitsu

Services has also networked outside of theICT cluster, for example, with ClearChannel, an advertising company. ClearChannel and Samsung are working togetherto provide television screens to be used inStockholm subway and train stations. Thescreens will feature commercials as well astimetables for train services for StockholmLokaltrafik AB (Stockholms intra-city

transport authority). Even though the firmcollaborate with respect to activity links anresource sharing, however, they alsocompete with each other.

Through exchange relationship processe

with other firms activities and resources,Fujitsu Services develops strong bonds witother firms and, at the same time, maintaiits identity in the networks.

Microsoft also collaborates with WM Daon a variety of projects, and often FujitsuServices ends up competing with them forthe same deals. At other times, the solutionFujitsu Services is involved in are unique,such as in the cases of Sun Microsystems anClear Channel. However, Clear Channelalso cooperates with other companies in thsame industry as Fujitsu Services, but forother business deals. As one respondentnoted, there are more advantages thandisadvantages associated with being a part oa cluster and the networks. Then thecompanies are able to focus on their corecompetence. For example, Clear Channel better at content and advertising, andSamsung is better at screens, which is bettefor Fujitsu Services AB as they can focuson delivering services. Similarly, Sun

Microsystems is good at producing productand Fujitsu Services is good at distribution.When they have trade shows in the area,they can also share marketing costs.According to another respondent, Microsois in a special situation compared to theother companies since they are so dominanin the market. They can use their size andlet others do what they dont want to do ocant do. They also earn more money fromthe deals than Fujitsu Services AB does.

The respondents did not actually see anydisadvantages apart from when one of thepartners plays a dominant role in relation toa smaller partner in the relationship.According to the informant, the imbalancein Fujitsu Services ABs relationship withMicrosoft is not always to our advantage.Resource dependence will lead to imbalancin the relationship.



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Association of Wood Processorsof KosovoWood processing companies in Kosovo facemany impediments, such as low productquality, lack of testing labs and lack of

support in the form of legal infrastructure,which makes them less competitive. TheAWPK was established in 2004 to promotewood processors interest and developmentin wood processing sector. The AWPK isled by its Board and managed by theExecutive Director, and now forms anetwork of 82 wood processor firms. In away, all members of the association arecompetitors who collaborate through thesharing of resources and know-how inaddressing customer needs. On the basis oftheir mutual interest and interdependencyof resources (knowledge and technology),AWPK firms cooperate with other memberfirms in the following areas:

Supply chain management Whenimporting large amounts of raw material,the association is in a better position tobargain, enabling them to negotiate betterprices. Marketing activities When organizingtrade shows for wood processors in Kosovoand abroad. Through the association, firms

get exposure for their products both withinand outside the country. Furthermore,through study visits in the region (Bosnia,Croatia, Slovenia, Albania and so on),AWPK members establish collaborationsand business relationships with other woodprocessor firms and associations in theregion. Information sharing Organizingseminars and presentations on newtechnology. Moreover, development of anonline membership database available to all

members. Customer satisfaction Firmscooperate in order to serve and meet thecustomers needs as an example of theone-stop shop. Capacity building trainingTo increase the capacities and competitivenessof its members, the AWPK makes a yearlyassessment of the training needs of itsmembers. Thereafter, consultants andexperts are hired to implement the training

programme. Provision of services Largecompanies that have new technology(drying kilns, folding machinery) provideservices such as drying wood and foldingplywood and medium-density fibreboard

for other members of the association.Advocacy and lobbying The case of customduty exemption for wood processors whenpurchasing production machinery is anotherexample of how the firms cooperate inorder to be competitive in the domesticand regional market.

According to the Executive Director,AWPK is lobbying and cooperating withthe University of Prishtina and theMinistry of Education to develop aForest and Wood Product programmeto raise awareness about the importance offorest planting and protection. They arealso in the process of establishing a woodproducts certification system that will helpmembers of the association to export theirproducts to EU member states. Theassociation has also established relationswith other domestic business associationsand donors who provide subsidies forservice provisioning to associationmembers. There was consensus among the

respondents that this type of relationshipoffers them the opportunity to shareresources and expertise with other firms.It also offers them a common platform forcollective decision making whennegotiating with authorities regarding avariety of issues that affect their respectiveindustries. According to a respondent,while we participate in certain activitiestogether, we also compete in certain areas,which improves individual performance in

product design, and sourcing for qualityraw materials. We also learn from oneanother in terms of new designs andtechnology. One of the major risks weencounter is how some firms directly copyother firms product designs. Betterresourced firms tend to attract most of thelucrative contracts at the expense of lessresourced ones.



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DISCUSSION

Inter-organizationalrelationship mixThe empirical studies showed different

types of competitive and cooperativerelationships in the three settings studied.The relationship elements in the behaviourof the actors in the Food Court are rathergeneral and long-term in nature. Thisobservation is in line with views expressedby Osarenkhoe.15 Inter-firm interactions,for example, the interactions between thefood vendors, the landlord and the serviceproviders in the Food Court, constitutethe dynamic aspects of relationships (seeJohanson and Mattsson,47 Marret al48). Theactors in the Food Court jointly controland coordinate the resources available inthe Food Court, and jointly implementvarious activities as well.8,10 In other words,actor bonds, activity links and resource tiesprevail in the network. The food vendorsin the Food Court, Fujitsu Services andmembers of AWPK do not act single-handedly, as they are members of a widerweb of a network of relationships, that is,members of an industrial network. Actors/

firms operating in the Food Court inparticular, and industrial markets in general,carry out activities using resources that theyown independently or jointly through theirrelationships with a number of significantothers or actors (for example, the sharing ofjanitors, eating utensils, a common diningarea and so on). Thus, each actor in allthree cases (Food Court, Fujitsu Servicesand AWPK) is embedded in a network ofmore or less strong relationships, which

gives the actor access to other actorstangible and intangible resources. Thesefindings are in agreement with those ofAxelsson and Easton.7 Understanding thesituation of the actors requires knowledgeabout the nature of the actors relationshipswith other actors as well (for example, theservice providers such as the landlord andjanitors in the Food Court).

Compared to other forms of networkmentioned by Craven and Piercy49 (see alsBlankenburg et al14), the association (AWPKshows some fundamental differences in itsnetwork structure. However, similarities

exist in terms of relationship layers assuggested by Sandhu and Helo20 andHolmlund and Trnroos,50 because theassociation also has a production layerowing to the fact that wood processorscooperate among themselves, a resourcelayer, as members of AWPK share theirtechnological and logistical resources, and social layer, as the association providesdifferent training to increase managerialcapacities, vocational training for employeeorganization of trade shows and so on.Owing to the highly volatile environmentAWPK has some elements of a loose andflexible network,49 where members of theassociation have established a platform tofacilitate activities such as joint importingservices, wood drying and folding. Thereare also similarities with respect tocollaborative relationships, in terms ofadvocating and lobbying for custom dutyexemption, regulations, capacity buildingprogrammes, service provision and

marketing activities.The glue that holds the 82 members o

AWPK together is made up of: economictechnological, political and legal factors.The association also enables members toestablish collaborative relationships withother associations in the region andcooperative agreements with woodprocessors, suppliers and customers outsideKosovo. In line with Barrats51 line ofthinking, the AWPK members cooperate

voluntarily by co-developing products andservices, sharing information, conductingjoint marketing activities and exchangingresources in order to be competitive in thdomestic and regional markets.7 Althoughthe association as such is different fromother networking forms, it comprises threelayers as indicated by Holmlund andTornroos.50 Furthermore, it has some



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views by Anderson et aland Veludo et al10,52Through exchange relationship processeswith other firms activities, and resources,bonds are created and developed betweenFujitsu Services and its interacting partners.

The AWPK and Fujitsu Services cases relateto each other in that both the AWPK andFujitsu Services form their identities in thenetworks. Activity links include thetechnical, administrative, commercial andother activities of an organization that areconnected in different ways to significantothers.

The resources possessed by the firmsin the Food Court, the Fujitsu Servicesand AWPK cases are built aroundheterogeneous resources. This reinforces theview of the network approach11,12,53 thatactors possess specific resources and performspecific activities that create opportunity forexchange relationships among them. Thebehaviour of the firms investigated isrelevant in the activities-actors-resourcesmodels actor bonds, activity links andresource ties. Exchange theory13 is relevantin the three cases because all of the actorsin the relationships and networks obtainvalued tangible and intangible resources,

and perform activities through interactionswith other actors through exchange froma cost-benefit perspective based onself-interest. It was apparent from theinterviews that the actors contribute to theexchange only when they expect benefits inreturn. The topography of inter-firmdynamics and relationships is depicted inTable 1.

The key critical factors contributing tothe success of the relationships in the cases

presented include trust, commitment andloyalty. This is in agreement with the viewexpressed in extant literature that thequality of relationships is enhanced as aresult of increased inter-organizationaltrust.54,55 Inter-organizational trust amongthe actors in the three cases is high. Thisindicates the extent to which organizationalmembers have a collectively held confidence

elements of hollow and flexible networks.The firms in AWPK operate in a highlyvolatile environment, but the links betweenmembers are transaction-based, competitiveand cooperative in nature.

Fujitsu Services networks and cooperateswith other companies to gain knowledgein other areas. Collaborating with theircompetitors enables Fujitsu Services toprovide solutions to their customers so as toreap financial benefits. They also networkwith both competitors and suppliers andcompanies in other markets. Perhaps one ofthe reasons for Fujitsu Services ability tonetwork and cooperate with othercompanies is partly due to its location inKista Industrial Park making it easier tobuild relationships with competitorsoperating in other markets, such as ClearChannel. But, as the CEO mentioned, notall companies operate and cooperate on thesame terms. Microsoft has more or less amonopoly in some markets, allowing themto charge higher prices and to set the termsof their relationships in a way that FujitsuServices is not able to do. Fujitsu Servicescollaborates with others not only for itsown gains, but on symbiotic terms. This

also means that they use cooperativebusiness practices. The firm cooperates andcompetes with other companies, such asDell, providing shared solutions for thecustomers. Fujitsu Services is also part ofthe information and communicationtechnology cluster in Kista Industrial Park.

Business activities in the Food Court, theFujitsu Services case and AWPK consist ofsets of connected relationships betweenfirms18,52 in which exchange relationships

are established between firms conceptualizedas collective actors. These findings are inagreement with Cook and Emerson,Anderson et al, Bititci et aland Blomqvistet al.9,10,33,36 Efficiencies in the three casesare achieved through the interlinking ofactivities, creative leveraging of resourceheterogeneity, and mutuality based onself-interest of actors. This is in line with



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2

Table

1:

Topo

logyo

finter-fir

m

dynam

icsan

dre

lations

hips

Directionof

relationship

Natureofindependence

Competition

Collaboration

Cooperation

Coopetition

Vert

ica

l

Arms-lengt

hexc

hange.

Dynam

ic

situa

tionw

hensevera

lac

tors

vy

ing

forscarceresources,

an

d/or

pro

ducingan

dmarke

tingvery

similarpro

duc

tsorserv

ices

(Fu

jitsu

Serv

ices)

Alliancesbe

tween

buyersan

d

supp

liers

,mu

tua

lengagemen

t

inacoor

dina

tede

ffort

toso

lve

apro

blem

(Foo

dCourt,

Fu

jitsu

Serv

ices,

AWPK)

Alliances

be

twe

en

buyersan

d

supp

liers.

Div

isiono

flabour,

eac

hrespons

ibleforport

ions

ofthework

(F

oo

dCourt,

Fu

jitsu

Serv

ices,

AW

PK)

Coope

tition

fos

ters

informa

tionan

d

know

ledges

haring,

ascoope

titors

access

imma

terialresources

inan

interac

tiveway,

due

tothene

twork

struc

tureo

fmod

ernorgan

iza

tions.

Compe

tingandcoopera

ting

simu

ltaneous

lyw

ithpartners,

inc

luding

directcompe

titors.

Mu

ltiface

tedrela

tions

hips

(Foo

d

Court,

Fu

jitsu

Se

rvices,

AWPK)

Horizon

tal

Tra

ditionalc

ompe

titivemarke

ts:

Va

lue-a

dde

dbus

inessprac

tices,

serv

icele

ve

l,re

lations

hipmarke

ting

prac

tices

(Foo

dCourt,

Fu

jitsu

Serv

ices,

AWPK)

Work

ing

toge

ther

foracommon

interest;vo

lun

tari

lycoopera

te

intheexc

hangean

ds

haringo

f

resources,

jointdeve

lopmen

t

ofpro

duc

ts/serv

icesan

d

tec

hnolog

ies.

Alliances

be

tween

non-compe

titors.

Mu

tua

lengagemen

tina

coord

inatede

ffort

toso

lvea

pro

blem

(Foo

dCourt,

Fu

jitsu

Serv

ices,

AWPK)

Re

lations

hipinw

hich

organ

iza

tions

interac

tthroug

h

thes

haringo

fcomp

lemen

tary

capa

bilitiesan

dresources,

or

leverag

ing

these

for

the

purposeo

fm

utua

lbene

fit.

Alliances

betweennon-

compe

titors.

Divisiono

flabour,

eac

hrespons

ibleforport

ionso

f

thework

(Foo

dCourt,

Fu

jitsu,

AWPK)

Align

ing

differentin

teres

tstoward

acommono

bjec

tivean

d

he

lping

tocreate

opportun

ities

forcompe

titivea

dvan

tage

by

remov

ingex

tern

alo

bs

tac

lesan

d

neu

tra

lizing

threa

ts.

Horizon

tal

mu

ltiface

tedrela

tions

hips

base

d

on

trus

t,commi

tmen

tan

dloya

lty

(Foo

dCourt,

Fujitsu

Serv

ices,

AWPK)



14/22

214

Osarenkhoe

orientation toward each other and awillingness and confidence to build trustamong collaborating partners. Owing to therelationship commitment of the firms, thereis willingness to contribute to the

cooperative relationship, which impliessacrificing short-term benefits to achievelong-term gains. This observation is in linewith the viewpoints of Dwyeret al.56

CompetitionThe firms investigated in this study engagein indirect competition against each otherfor the main purpose of value appropriationand utilization32,42,43 and for the purpose ofgaining market position. However, theresources and capabilities of the firms (vendorsin the Food Court, Fujitsu Services andAWPK) are the primary determinants oftheir strategies and performances (see alsoPrahalad and Hamel,30 Grant57). Inaddition, the firms indirectly compete inan attempt to enhance their reputation.Competitive tendencies were demonstratedin the three cases through service deliverysystems, improvements and innovations intheir operations relative to other actors,value-added business practices, relationship

marketing practices and so on. These quasicompetitive behaviours were believed to bea central driving force behind innovationand upgrading of a firms competitiveadvantage.22,23 Moreover, the firms learnfrom past actions, and market/environmentalsensing is needed in order to acquireresources for effective market position andsuperior financial performance.

Collaboration

The prevailing inter-organizational relationshipmix among the firms investigated entailsworking together for a common interest:they voluntarily cooperate in the exchangeand sharing of resources, joint developmentof products/services and technologies.These collaborative arrangements engagedin by the food vendors in the Food Court,Fujitsu Services and AWPK are in line with

the definitions of collaboration in extantliterature.33,34,51,58 The inter-firmcollaboration, with respect to this study, ismotivated by factors such as: increasingactors market share, asset utilization,

enhancing customer service, increasingquality of product, enhancing skill andknowledge (resources) acquisition, andachieving economies of scale in production;sharing and reducing the cost of productdevelopment as in the case of FujitsuServices and AWPK as well as productdevelopment time; decreasing risk ofproduct development failure; achievingtechnological gain; and gaining access tomarkets. All of these factors are in line withthose frequently mentioned in previousstudies.33,35,5962

In addition to the cases presented above,earlier studies18 have identified that poolingresources and exchanging expertise for avariety of purposes, including technologydevelopment and international marketdevelopment, provides SMEs with manybenefits (see the case of AWPK). Accordingto the respondents in the three cases(Food Court, Fujitsu Services and AWPK),inter-firm collaboration has created

favourable conditions for inter-partnerlearning, allowing one firm to acquirecapabilities that they lack from a partner.Furthermore, when partner firms in anetwork are also competitors (as in the caseof Fujitsu Services), there may beopportunities for inter-firm learning, toforge entry into new markets or poolresources to gain greater power in theirnetworks (see also Bernal et al18 for similarviews).

CooperationThe behaviour of the firms investigated inthis study fits the definitions of cooperationoffered in literature.32,38,63 It is obvious inthe three cases (Food Court, FujitsuServices and AWPK) that the respectiveactors interact through the sharing ofcomplementary capabilities and resources,



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and they leverage these for the purposeof mutual benefit, through coordinatedactivities performed by the respective firms(Food Court, Fujitsu Services and AWPK,in the inter-organizational relationship mix

they are involved in, to produce superiormutual outcomes. The cases also demonstratethat successful cooperation is based on trust,commitment and voluntary and mutualagreement that can be set out in a formaland documented contract such as the FoodCourt business model.

RE-INTERPRETATION OF THEEMPIRICAL FINDINGSFigure 1 depicts the complementarity-basednature of coopetition strategy and its impacton collective strategies for value generationamong actors in two network settings. Thefigure demonstrates the continuum natureof actor bonds, resources ties and activitylink of hybrid level of inter-organizationalrelationship between competition andcooperation. Several benefits of cooperationwere mentioned by the respondents: thatthe actors complement and enhance eachother in different areas such as production,product development and entry into new

markets;22 that the actors gain the

opportunity to reduce operation-relatedcosts and risks; the possibility of technologand capability transfer;30 and that inter-firmcooperation produces synergistic outcomesthat a single firm cannot achieve alone.36

These benefits and cooperative strategy,according to neo-classical theory, hampercompetition without which the networkrelationship cannot be effective. Accordingto Lado et al,64 a longer cooperativerelationship can turn into group thinkingwhich may hamper creativity andinnovation efforts. Moreover, politicallyinduced cooperation (as in the case ofAWPK) is artificially established.Consequently, events and activities in thenetwork are interpreted differently by actofrom different backgrounds: what one actointerprets as success, another might interpras failure. This creates a problem for trust-building, which is essential for the norm foreciprocity to apply (for similar views, seealso Tanghe et al42).

CoopetitionThe behaviour exerted in the findingsshows that the firms do not always engagin either competitive or cooperative

relationships with each other. Rather,

Figure 1: Inter-firm dynamics between competition and cooperation.



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they create conditions that enable bothrelationships to coexist. The businesspractices engaged in by firms in the foodvendors in the Food Court, Fujitsu Servicesand AWPK are in line with the definitions

of coopetition offered in extant studies(see, for example, Bengtsson and Kock,22Wang and Krakover,43 Brandenburger andNalebuff,65 Chin et al66). This shows thatthere is a hybrid level of inter-organizationalrelationship between competition andcooperation, which is termed coopetition.Coopetition refers to the situation whencompetitors have both a competitive anda cooperative relationship with each at thesame time.65 Bengtsson and Kock claimthat coopetition is the most mutuallyadvantageous relationship for competitors.According to Brandenburger andNalebuff, coopetition goes beyond theconventional rules of competition andcooperation, in order to achieve theadvantages of both.

Harbison and Pekar67 point out that themajority of all new cooperative arrangementsare between competitors. Luo44 discusseshow multinational enterprises engage incomplex and simultaneous competitive-

cooperative relationships with global rivals(see also Hutzschenreuter, and Israel21). Forexample, Ericsson, Nokia and Motorolacooperate to improve the infrastructure ofChinas telecom industry, negotiate withthe government for greater market access,and build telecom equipment clusters toincrease the efficiency of value chainintegration for the entire industry in China.At the same time, these same companiescompete fiercely to improve their own

gains. Thus, through cooperative relationships,global rivals work together to collectivelyenhance performance by sharing resourcesand committing to common goals in certaindomains, for example, in value chainactivities, at the same time as they competein other domains to improve their ownperformance.44 While coopetition isfortified by the coexistence of market

commonality and resource asymmetrybetween competitors, market commonalitycontributes more to competition, whereasresource asymmetry contributes more tocooperation.

Porter views inter-organization relationsas competitive in nature;29 it fails to identifyoptimal strategic choices; predictingcooperative versus competitive outcomes.When organizations fully understand thesestrategic choices, they can then decidewhich path to take or combine the paths.Combining the paths, as demonstrated bythe empirical findings, is known ascoopetition, and organizations thrive bycooperating and competing: cooperationhelps create a bigger pie so that a businesscan win a bigger piece of the pie throughcompetition.66 According to Chin et al,coopetition creates value throughcooperation between competingorganizations, aligning different intereststoward a common objective and helping tocreate opportunities for competitiveadvantage by removing external obstaclesand neutralizing threats.66

Coopetition strategy is a multidimensionaland multifaceted concept that assumes a

number of different forms and requiresmultiple levels of analysis. Coopetitionencompasses both economic and socialissues related to inter-organizationalinterdependence. This implies thatorganizations can interact in rivalry owingto conflicting interests and at the sametime cooperate due to common interests.22Bengtsson and Kocks research shows thatcoopetition benefits the internal resourcesand the market shares of competing

organizations.

22

One example ofcoopetition is the Swedish breweryindustry, where organizations compete todistribute beer to wholesalers butcooperate in bottle returns. Hence, thereare two critical points in the coopetitionstrategy, namely knowledge sharing andpooling competencies, which can help tostrengthen competitive advantage.



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Coopetition modelFour types of coopetition model, inspiredby Chin et al,66 are hereby proposed:Type 1: Monoplayer(low competition, lowcooperation). A monoplayer is an organization

that does not interact significantly withcompetitors, maintaining a low degree ofcompetition and a low degree of cooperationwith competitors; Type 2: Contender(highcompetition, low cooperation). A contenderis an organization that vies with competitorsfor market power, competitive positionand market share, maintaining a high degreeof competition and a low degree ofcooperation; Type 3: Partner(low competition,high cooperation). A partner is an organizationthat maintains a low degree of competitionand a high degree of cooperation withother organizations in search of jointsynergies created by complementaryresources and capabilities; Type 4: Adapter(high competition, high cooperation).Adapters are organizations that mutuallydepend on one another to achieve theirrespective goals, maintaining a high degreeof competition as well as a high degree ofcooperation.

The three cases (Food Court, Fujitsu

Services and AWPK) belong to Type 3:Partners (low competition and highcooperation).

The three cases (Food Court, FujitsuServices and AWPK) demonstrate that acoopetitive relationship encompasses botheconomic and non-economic/socialexchanges related to inter-organizationalinterdependence. The implication is thusthat organizations can interact in rivalryowing to conflicting interests, and at the

same time cooperate owing to commoninterests (see Bengtsson and Kock22). Thethree cases show that coopetition createsvalue through cooperation betweencompeting organizations, aligning differentinterests toward a common objective andhelping to create opportunities forcompetitive advantage by removing externalobstacles and neutralizing threats.

CONCLUDING REMARKS ANDIMPLICATIONSThis article illuminates the complementarity-based nature of coopetition strategy and itimpact on collective strategies for value

generation among actors in three networksettings (that is, Food Court, FujitsuServices and AWPK). The cases show thatthe firms cooperate with each other in avariety of ways such as standard-setting andeveloping the market but compete inother areas like value-added businesspractices, price, service and quality. Studie(see Bengtsson and Kock,22 Gnyawali et al32

indicate that coopetition strategy enhancesthe internal resource and market shares ofcompeting actors. Moreover, coopetitioncan help to achieve multi-directionallearning, where cooperating organizationsmutually benefit while competing forinternal resources and market share (seeChin et al66). Inter-firm coopetition as anorganizational strategy can bring benefitssuch as reduced costs (when pooling resourcand competence in research and developmeninformation and knowledge sharing),tolerance of risk-taking, pro-activeness inproduct development and anticipation of

healthy competition. Thus, coopetitiverelationships offer the advantage of acombination of the need to innovate innew areas as a result of competition whileaccessing new resources as a consequence cooperation.

In spite the above-noted benefits,coopetitive relationships often involvesome degree of difficulty and risk to theparticipating firms as outlined below. Theadaptation required by participating firms i

often accompanied by time and financialcosts, and may not yield the requiredreturn. Again, an important coopetitiverelationship may be managed so poorly thaa strategic opportunity is lost because ofconflicting goals of the participating firms.Power and dependence can also be viewedas sources of conflict. One party can use itpower (for example, technical, political,



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financial or emotional power) to forceanother party to act in a way that is not inlatters economic best interest (see theFujitsu Services case). Furthermore,Bengtsson and Kock enumerated four

different role conflicts that exist incoopetitive relationship: intra-partner, inter-role, inter-partner and personal conflicts.22In addition, sharing of resources andactivities can create an opportunisticsituation for self-interested partners toexploit a weaker partners interest.Cooperation can hamper a firms operationsby enabling the competitor first to monitorand then to imitate the firm s corecompetencies and tactics.64

When small- and medium-sizedcompanies are in cooperative relationshipswith major partners, there are cases wherethe small firm becomes dependent on adominating partner, making the relationshiptense as resource dependence may lead to apower imbalance. A case in point is therelationship between Fujitsu Services andMicrosoft. However, Fujitsu Services seesthe potential benefits of getting access tonew markets, new distributors, information,knowledge or competence. At the same

time, it is forced to comply with thedominating partners (Microsoft) directions,and may need to give full access to productdata and share core competence in order toobtain guaranteed orders and other valuablethings. The risk is that the relationship canweaken further, and what began as ahealthy relationship can end up being acontrollable relationship. An even higherrisk is that when the dominating partnergains access to the smaller firms core

competence, it becomes easier to replacethe small company with a low-costproducer.

The knowledge developed in therelationships of the firms investigated in thisstudy (Food Court, Fujitsu Services andAWPK) is unique because it is shaped byinformation transferred through connectedrelationships. The more the various partners

interact, the more information they bringfrom their respective connectedrelationships into the focal relationship (seeChetty and Eriksson16 for similar views).The networks that the investigated firms

belong to provide access to various sourcesof information, thus offering moreopportunities to learn than merely relyingon knowledge from within the home firm.Actors in the Food Court, Fujitsu Servicesand AWPK consider themselves as membersof a network within a broader industryframework. Through their respectiveindustry frameworks, members acquireideas, influences, and/or information aboutthe surrounding network that wouldotherwise be unobtainable. This observationis in line with that of Chetty and Eriksson.Though diffused in practice and recentlyconceptualized in research, the concept ofcoopetition warrants further reflection andscrutiny.

Other implications of this study are thatcoopetition strategy has the potential toturn out to be a novel managerial mindsetto guide inter-firm dynamics. It is herebystressed that coopetition implies thatcooperation and competition merge to form

a new kind of strategic interdependencebetween firms, giving rise to a coopetitivesystem of value creation. As the researchand practice of coopetition strategy raises anumber of fundamental challenges that arerelevant to managers and academics, it ishereby emphasized that this notion isintended neither to lay the groundwork fora new paradigm in strategy nor to say afinal word on the subject. Instead, theintention is to use coopetition to provide

new insight into the realities of todaysworld, which depict the simultaneousexistence of cooperation and competitionbetween firms, and thus a behaviouraccording to which interdependencies leadfirms to compete and cooperate at the sametime.

Although coopetition strategies first aimat strategic decision making,42,65 adopting a



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A Study of Inter-firm Dynamics

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