How firms navigate cooperation and competition in nascent ecosystems

Abstract

Research Summary: Despite a wealth of research on competitive and cooperative strategy, gaps remain with respect to how firms successfully navigate cooperation and competition over time. This is especially true in ecosystems, in which firms depend on one another to collectively provide components and create value for consumers. Through an in-depth multiple case study of five firms in the U.-S. residential solar industry from 2007 to 2014, we induct a theoretical framework that explains how firms navigate nascent ecosystems over time. We identify three strategies, each with a distinct balance of cooperation and competition, as well as unique advantages, disadvantages, and required capabilities. Overall, we contribute to research on ecosystem strategy, crystallize the pivotal role of bottlenecks, and shed light on the dynamic interplay of cooperation and competition. Managerial Summary: Competition and cooperation are fundamental to strategy, and often closely intertwined. But how firms navigate and balance cooperation and competition over time, especially in ecosystems where firms depend on one another to deliver value to consumers, is unclear. In this article, we conduct an in-depth multiplecase study of five firms in the U.S. residential solar industry to examine how firms can successfully navigate nascent ecosystems over time. We identify three distinct strategies, each with a distinct balance of cooperation and competition, and examine the unique advantages, disadvantages, and required capabilities of each. In doing so, we also contribute novel insights into the evolution of ecosystems and bottlenecks.

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

“…These propositions contribute to the handful of studies on the intertemporal dynamics of alliances (Lavie & Rosenkopf, ), alliance terminations (Asgari, Tandon, Singh, & Mitchell, ; Reuer & Zollo, ), and vertical integration decisions concerning “make‐or‐buy” choices (Jacobides, Knudsen, & Augier, ; Leiblein, Reuer, & Dalsace, ). Moreover, our theoretical insights resonate with Hannah and Eisenhardt () because these scholars examine cooperation and competition of entrepreneurial firms in nascent ecosystems (see also Moeen & Agarwal, ), whereas we look at the problem of incumbents facing an ecosystem in which a downstream entrant emerges as a platform leader.…”

Get rich or die trying… finding revenue model fit using machine learning and multiple cases

“…The residential solar industry provides a possible counter‐example. When the industry was disrupted by tax law changes, some firms developed a novel revenue model—that is, free electricity to homeowners, but sell user resources (i.e., rooftops with solar panels) to third‐party investors who could benefit from tax credits (Hannah & Eisenhardt, ). While the details of this finance revenue model are novel (and even complex), it is still a third‐party model.…”

“…Yet choosing a revenue model can be challenging. Falling communication costs and the internet have enabled new ways to create value (beyond the activities of producer‐firms) such as with users and partners in settings like marketplaces and ecosystems (Gambardella & McGahan, ; Hannah & Eisenhardt, ; Ott & Eisenhardt, ; Zott, Amit, & Massa, ). These changes add flexibility in how to create value, but also complicate how to capture it since more actors (e.g., users, partners) are involved.…”

The interplay of competition and cooperation

“…An inductive field study is also used in the article “How Firms Navigate Cooperation and Competition in Nascent Ecosystems.” In this study, Hannah and Eisenhardt () identify three strategies for competing in ecosystems: bottleneck, component, and system. Like Hesterly et al (), Hannah and Eisenhardt focus on the nature of the interplay between competition and cooperation.…”