Reasons Behind Coopetition in Innovation

Reasons Behind Coopetition in Innovation

Coopetition comes from two words which are: cooperation and competition. So in simple terms, Coopetition means collaboration with competitors for mutual benefits. It is the act of cooperation between competing companies by forming a strategic alliance designed to help both companies. The benefits might present themselves in various areas: overall sales, market share, new product development, etc.

Why are companies using coopetition in technological innovation?

Several interrelated factors are drivers for high tech firms and encourage them to engage in coopetition:

• SHORTER PRODUCT LIFE CYCLES: Due to quickly changing consumer preferences and fast changes in technology. companies must invest more in innovation to keep up with the pace.
• INCREASING R&D COST AND CAPITAL COSTS: These costs are very high in high technology companies. They contribute to a considerable percentage of the total expenditure. Also, there is always considerable uncertainty in Research. And product development takes time and also there is a risk that it may not work out in the industry. So in R&D there are high chances of failure and fewer chances of success, even if success can make a fortune for a company. These high costs in R&D encourage coopetition with companies that have huge resources.
• UNCERTAINTY: Technological convergence is always a risk for technological companies as a technologically current product may become useless tomorrow because a better substitute has been launched in the market. But it is also possible that your company's innovative product is the one which is replacing an old one. This creates uncertainty and also serves as a good opportunity for coopetition to share the risks and the uncertainties with the competitors in technological innovation.
• STANDARDS: Coopetition can also be used to set industry-wide standards which will be beneficial for all the players in the market to conduct the business. It means competitors cooperate with each other to set the standards in the industry, which lay a foundation for new product development.

Example of Coopetition in high-tech

A joint venture between Sony Corporation and Samsung Electronics was formed for the development and manufacture of flat LCD TV panels. This project was known as S-LCD. Because of the S-LCD the whole LCD industry took over the PDP technology in flat TV panels. This led to a quick advancement of PDP technologies as well as the LCD technology because of the competition. S-LCD was also responsible for the drop in the price of flat-screen TVs. This price drop was possible due to the competitor's response and the economies of scale.

Please react if you can share some more reasons behind coopetition in various innovative industries.

Sources:
Devi R.Gnyawali, Byung-Jin (Robert) Park, "Co-opetition between giants: Collaboration with competitors for technological innovation", 2011
Gnyawali, D.R., Park, B.J., "Co-opetition and technological innovation in small and medium-sized enterprises: a multilevel conceptual model. Journal of Small Business Management 47 (3), 308–330.",2009

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