The Interpretive Nature of Coopetition: From CEO Temporal Cognition to Investor Evaluation
Collaborating with Competitors Pays Off, but Not Always
Collaborating with competitors can help companies share knowledge, reduce innovation risks, and develop new products or technologies. However, research by organizational scientist Xiya Luo shows that more collaboration isn’t automatically better. Investors respond most positively when collaborations with competitors make up a moderate portion of a company’s total partnerships.
Circumstances also play an important role. In stable times, collaboration with competitors is associated with stronger growth in the valuation of innovation. During the COVID-19 crisis, that benefit was much smaller. Investors therefore seem to assess such collaborations differently in uncertain times.
Luo’s research shows that companies must not only carefully consider the extent of their collaboration with competitors but also how they explain the purpose and risks of such collaborations to investors. This is particularly relevant now that companies are increasingly relying on collaboration - including with parties with whom they also compete- to tackle major innovation challenges.
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