Production Coopetition Strategies for Competing Manufacturers that Produce Partially Substitutable Products

Xu Chen*, Xiaojun Wang, Yusen Xia

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

22 Citations (Scopus)
20 Downloads (Pure)

Abstract

This study examines the strategic choices of two rival manufacturers between competition and coopetition. A complex relationship exists between these two firms, who manufacture substitutive products. In addition, each of these firms has an option to purchase (or sell) a key component from (or to) the other. We develop a benchmark competition model and two coopetition models in which the manufacturers compete for end-customer demand while simultaneously collaborating on component production through wholesaling (wholesaling coopetition) or licensing (license coopetition). By comparing the equilibria of the competition model and two coopetition models, we find that the optimal strategy for coopetition is determined by not only the degree of product substitution but also the inter-firm power relationship in the negotiation of a cooperation contract (i.e., wholesale price and license fees) and the difference in production efficiency between the two manufacturers. Our research comprehensively examines how the external, relationship-specific, and internal factors affect firms’ optimal strategy selection and suggests a broad set of decision outcomes. Our study provides important managerial implications that can be utilized as strategic guidance for firms to pursue coopetition in various business environments.
Original languageEnglish
Pages (from-to)1446–1464
Number of pages19
JournalProduction and Operations Management
Volume28
Issue number6
Early online date17 Jan 2019
DOIs
Publication statusPublished - 13 Jun 2019

Keywords

  • competition
  • wholesaling coopetition
  • license coopetition
  • supply chain
  • production

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