Discontinuities, competition, and cooperation: Coopetitive dynamics between incumbents and entrants

Abstract

Research Summary: We advance an integrative model in which distinct types of technological discontinuities (core‐knowledge vs. complementary‐asset) are combined with different appropriability regimes (strong vs. weak) to predict competitive and cooperative dynamics between incumbents and entrants. We posit that incumbents ally with entrants following a core‐knowledge discontinuity when the appropriability regime is strong. When the appropriability regime is weak, incumbents are more likely to acquire entrants. We submit that the additional consideration of complementary‐asset discontinuities reveals a more integrated theoretical model of competition and cooperation between incumbents and entrants. In particular, incumbents tend to cooperate among themselves following complementary‐asset discontinuities, although we highlight theoretical nuances due to different appropriability regimes. We provide falsifiable propositions, and introduce contingencies such as firm‐level heterogeneity and time dynamics. Managerial Summary: Interfirm cooperation is one possible avenue for existing firms to address the challenge of responding to discontinuous technological changes. What is not clear, however, is who should the incumbent ally with: other incumbents or new entrants? We provide an integrative framework to help managers to decide when to cooperate with competitors and when to cooperate with new entrants. When the core knowledge of incumbent firms is made obsolete by technological advances and intellectual property is fairly well protected, managers of existing firms should search out collaboration with new entrants. If intellectual property protection is weak, managers of incumbents firms are better off acquiring new entrants. When the downstream complementary resources such manufacturing, distribution, and sales are replaced by radically new technologies, then incumbents best option is cooperate with other incumbents in order to compete against new entrants.

Unpacking the Disruption Process: New Technology, Business Models, and Incumbent Adaptation

“…Hence, we argue that disruptions making available new manufacturing and distributing technologies induce external economies of scale, and thus positive externalities. We focused, indeed, on disruptive technologies in manufacturing and distribution, a currently under‐researched area (Cozzolino and Rothaermel, ). The internet represented such a type of change by providing a distribution network and new digital manufacturing tools.…”

“…Indeed, especially after 2009, incumbents in most industries (education, TV, banks, telecommunication, etc.) turned to alliances and acquisitions in reaction to the threat of the obsolescence of their business models (see also Cozzolino and Rothaermel, ). Possible examples are Paym (a proprietary mobile payment system developed by an alliance of UK banks in 2014), Hulu (a streaming platform responding to Netflix, owned by Walt Disney, Fox, NBC Universal and Time Warner), and Coursera and edX (platforms formed by a consortium of universities for online education).…”

“…The first novelty of our study derives from analyzing the effect on BMA of technological disruptions in manufacturing and distribution (Cozzolino and Rothaermel, ). The internet and related digital tools represent disruptive technologies because, if we apply the definition by Christensen and Bower (, p. 202), these new technologies ‘disrupt the established trajectory of performance improvement’ and ‘redefine what performance means.’ In fact, the established trajectory of improvement in publishers’ prior ‘manufacturing and distribution’ was to increase print quality (color), speed, automation, and efficiency.…”

A new perspective on open innovation: established and new technology firms in UK bio‐pharmaceuticals

“…The majority of research focuses on technological change that challenges core/upstream (R&D based) knowledge rather than complementary/downstream capabilities (e.g. manufacturing, marketing, product development) (Teece 1986(Teece , 1992Cozzolino and Rothaermel, 2018). Under such conditions, NTFs and ETFs can mutually benefit from collaboration by leveraging new upstream knowledge and downstream competencies, respectively (Rothaermel, 2001a(Rothaermel, , 2001bCozzolino and Rothaermel, 2018).…”

Impact of Age Management on Sustainability in Czech Organisations

“…This is particularly pronounced in sectors where there is a high dynamic of innovation. Loss of this dynamic leads to a loss of the market leader position [38,39]. On the other hand, organisations that do not create the conditions for knowledge management and the knowledge strategy in development are lagging behind their competitors and, over time, the asymmetry between them increases [40,41].…”