Introduction
Coopetition research has so far explored the benefits sought by firms and the process of coopeting, leaving the reasons why some firms choose to enter this relationship, while others do not, relatively under-researched. In this chapter we focus on trust, a recognized antecedent of inter-firm relationship formation (Chin et al., 2008). In mutual interdependency situations and consequent mutual vulnerability to actions of others, the role of trust is particularly important (De Wever et al., 2005). While partnering in general exposed firms to risks relative to the misbehaviors of partners, coopetition adds to this exposure its intrinsic inter-firm rivalry. Should coopetition yield the benefits attributed to this strategy (Le Roy & Czakon, 2016), involved firms need to behave collaboratively and predictably. Trust resides between knowledge and unawareness about somebody, i.e., it is some kind of hypothesis about an actor’s behavior (Simmel 1975, p. 396) and is perceived as a form of positive expectation regarding counterparts (Lewichi et al., 1998, p. 438). Trust understanding ranges from a behavior predictor to a positive and benevolent behavior expectation.
The bulk of trust literature has been focused on vertical relationships, leaving horizontal collaboration relatively under-researched (Morris et al., 2007). When a firm is involved in horizontal relationships, trust refers to both collaborative and competitive activities, captured in the coopetition concept. Within collaborative relationships, firms trust that their partners will share resources, communicate openly, meet deadlines, and display commitment, while at the same time refraining from acting opportunistically (Wang, 2008). Trust is a recognized building block of collaboration (Bouncken & Fredrich, 2012). However, competition in horizontal relationships requires firms to trust that partners will not engage in competitive actions that will strengthen them at the focal firm’s expense (Le Roy & Czakon, 2016). Hence, trust in coopetition appears to be more complex than in vertical collaborative relationships; it plays a crucial role even before coopetition actually starts (Morris et al., 2007).
Through two studies of coopetition in a tourist destination in southern Poland we provide in-depth insights into how trust-building mechanisms impact on coopetition formation. By stratifying our results depending on the level of analysis— dyads and networks—we shed light on the differences between both types of coopetition and the role of trust in entering into each of them. We conclude that the relationship between trust-building mechanisms and each type of coopetition is quite complex.
Dyadic and network coopetition formation challenges
Most existing contributions acknowledge coopetition as a complex and dynamic phenomenon (Padula & Dagnino, 2007). Research suggest that the competitive and collaborative behaviors strongly impact each other (Mariani, 2007; Tidström, 2008). For instance, the upsurge of competition within a collaborative agreement alters the relationship and hampers its performance. Similarly, fostering collaboration within an otherwise-competitive relationship alters market structure and provides advantages to competitors. In turn, the complexity of coopetition stems from the number of actors involved, and from their respective relationships. Dyadic relationships expose actors to different contingencies and interdependencies as compared with multiple-actor network coopetition.
The differences between dyadic and network coopetition are particularly identifiable at the formation stage. By analogy to inter-organizational relationship formation, coopetition between two rivals follows “fit logic,” in order to assess the extent to which two firms would cope better with the challenges they face (Czakon & Czernek, 2016). Indeed, competitors face the same challenges and have developed a similar resource base and expertise (Peng et al. 2012), which makes them particularly valuable partners. An in-depth study of collaborative alliances in the airline industry shows that rivals can be the second-best choice for those firms that desperately need a partner to respond to the challenges of an extreme environment (Chiambaretto & Fernandez, 2016). Indeed, competitors are aware of their rivals, motivated to confront, and capable of engaging in rivalry (Chen et al., 2007). As a result, the quest to identify the “best fit” with a rival results in identifying the “worst enemy.” Collaboration with such a rival does not decrease the competitive tension (Le Roy & Czakon, 2016). Trust has therefore been identified as an essential element for building a coopetitive relationship (Chin et al. 2008).
Network coopetition poses quite different challenges to coopetition in dyads. Firms need to identify a common problem that can be solved through joint action (Wang, 2008). Interdependency recognition opens ways to finding a domain consensus necessary for collective action (Selin & Chavez, 1995). Based on domain recognition, the identification of fit among prospective actors is possible, and partner selection is actionable. However, while identifying complementarities and overlaps between two partners requires advanced managerial competencies, the same exercise for a larger number of partners increases the difficulty and inevitably creates overlaps, gaps, and tensions. Actors that occupy central positions in industry networks have been found to enjoy a structural advantage when engaging in coopetitive networks (Gnyawali et al., 2006), and are more able to deploy aggressive competitive actions (Sanou et al., 2016). Additionally, power relationships, the distribution of benefits, authority, and credibility emerge in network settings (Fyall et al., 2012). Extant literature attributes trust with the capacity to mitigate those concerns. Yet, trust is necessary at the formation stage in order to successfully make the “leap of faith” and enter into network coopetition.
Collaborating with rivals is a risky endeavor, and requires as much management (Le Roy & Czakon, 2016) as trust in partners (Czakon & Czernek, 2016; Czernek & Czakon, 2016). Trust is particularly important at the formation stage, where governance and management structures are not yet in place (Bouncken et al., 2015). Hence, trust-building can be viewed as a critical process in coopetition formation.
Trust-building mechanisms in coopetition formation
The concept of trust has a long-standing and popular use in interfirm relationships research. In the vast majority of studies it has been used as a homogeneous variable (Czernek & Czakon, 2016), helping involved actors to establish, maintain, and develop collaborative relationships.
Trust has been found to be a predictor for collaboration with competitors, along with commitment and mutual benefit, conceptualized as relationship dimensions (Morris, Koçak, & Ozer, 2007). A number of studies claim that trust is also key, or at least one of the most important determinants of collaboration, in the tourism sector (Grängsjö, 2006; Nunkoo et al., 2012; Nunkoo & Ramkisson 2011). The reason is that trust favors establishing collaboration, further impacting the collaboration process and outcomes. Researchers claim that “trust is the emotional basis of collaboration” or the “lubricant facilitating collaboration” (Sztompka, 1999).
The role of trust in developing (Morgan & Hunt, 1994) and sustaining relationships has solid theoretical and empirical foundations (Nielsen, 2011). The success of coopetitive relationships depends on how tensions among competitors are managed. Trust is seen as an important factor in alleviating tensions inherent to coopetitive relationships. Scholars attribute trust with the capacity to reduce the potential for tensions, i.e., even before they arise, and the capacity to alleviate tensions when trust is coupled with commitment (Tidström, 2009). Coopetition success has been found to depend on relational antecedents, demonstrating that high trust fosters success, especially if coupled with high dependence (Bouncken & Fredrich, 2012). A theoretical framework based on coopetition in in-depth destination marketing studies provides an even more comprehensive view on trust. It appears to be a precondition to collaboration, an outcome variable, and a success factor throughout the collaboration process (Wang & Fesenmaier, 2007).
However, researchers have seldom opened trust’s black box in order to examine in detail its relationship with coopetition. Not much is known about its role in the formation phase of relationships (Bouncken et al., 2015), especially those among rivals. We encapsulate trust as a complex and heterogeneous result of various mechanisms, i.e., repeatable patterns of actions and responses activated in particular contexts or not, depending on conditions (Huang & Wilkinson, 2013). Several such mechanisms have been identified in the literature (Table 7.1). Each exposes a different source (McAllister, 1995) of a partner’s behavior predictions, ranging from a purely rational calculation of costs and benefits associated with different behaviors, to expectations based on a positive perception of the partner as an individual.
Table 7.1Trust-building mechanisms: Conceptual framework
| No | Type of Trust | Reference | Trust-building Mechanism |
1. |
Calculative |
Bachmann & Zaheer, 2008 |
Benefits of collaboration exceed costs of a partner’s potential opportunistic behavior |
2. |
Reputation-based |
Dolinger et al., 1997 |
Behaviors are relatively stable over time and can be a good predictor of future action |
3. |
Third-party legitimation |
Dacin et al., 2007 |
Trust can be transferred from a more trusted individual to others |
4. |
Embeddedness-based trust |
Buskens, 1998 |
Social networks act as bonds, deterring opportunism with social sanctions |
5. |
Partners’ intentions assessment |
Claro & Claro, 2008 |
Partners’ intentions and motives analysis acts as behavior predictor |
6. |
Partners’ capabilities assessment |
Doney & Cannon, 1997 |
Partners’ capabilities assessment acts as a mutual fit and behavior predictor |
7. |
Partners’ personal predisposition |
Hardin, 2006 |
Morality and personal features act as a behavior predictor |
8. |
Emotional bonds |
McAllister, 1995 |
Friendship, kinship, etc. allow a firm to go beyond calculative trust |
(Source: authors’ own, based on the literature.)
Our studies (Czakon & Czernek, 2016; Czernek & Czakon, 2016) show that trust develops differently in dyadic, as compared to network, coopetition, and that trust-building mechanisms play distinct roles in establishing coopetition (Table 7.2).
Table 7.2Trust-building mechanisms’ roles in coopetition formation
| Trust-building Mechanism | Dyad | Network |
Calculative |
Potential individual benefits exceeding costs are necessary to form coopetition |
Potential costs exceeding benefits justify the decision not to enter coopetition |
Reputation |
Reputation is a necessary but not sufficient condition to start coopetition |
Reputation stimulates coopetition entry |
Capabilities assessment |
Incorporated in reputation |
Partners’ capabilities assessment cannot build trust |
Intentions assessment |
Incorporated in reputation |
Partners’ intentions negatively impact coopetition entry decision |
Third-party legitimation |
Legitimating is not a relevant trust-building mechanism |
Legitimation by a third party stimulates coopetition entry |
Social embeddedness |
Facilitates coopetition for local actors, hampers coopetition for outsiders |
|
Emotional bonds |
Emotional bonds play a moderating role between calculative trust and coopetition formation |
None identified |
(Source: Czakon & Czernek, 2016; Czernek & Czakon, 2016.)
Calculative trust
Our respondents claimed that in each and every single case, economic calculation has been the basis for entering dyadic coopetition (Czernek & Czakon, 2016). In line with prior research, establishing a collaborative relationship with a competitor is instrumental in achieving utility for the focal firm (Morris et al., 2007). Our interviewees declared that they estimated their own benefits and costs of coopetition both in financial and nonfinancial terms. When the benefits of working with a particular rival were very clearly seen, trust developed easily. Thus, dyadic coopetition usually occurs in two situations: in everyday activities—for example, recommending other providers because of full accommodation and no possibility of serving customers; and in a situation of a common problem or opportunity—for example, the possibility of engaging in a development project. Coopetition is more easily initiated with a rival offering complementary services.
For network coopetition it revealed much more difficult to identify individually appropriable coopetition benefits, as compared to clear and measurable costs such as attendance or membership fees (Czakon & Czernek, 2016). While for the network leader the overall benefit of collective action may be clear, it is still necessary that potential members of the coopetitive network develop a shared vision of the problem domain (Selin & Chavez, 1995) followed by a clear definition of benefits and costs associated with collective action. Network coopetition benefits are mainly collective, show up usually in the long term, and are difficult to measure. The diversity and large number of partners make it very difficult to develop a benefit-based trust. Additionally, in some cases the willingness to collaborate with competitors was limited by the fear that a partner’s benefits could be higher than a firm’s own, or that a firm’s own costs could be higher than those paid by its partners. Thus, despite theoretical suggestions that coopetitive networks are formed based on business needs rather than trust (Sanou et al., 2016) we find evidence that, given the difficulties in developing a clear calculation of benefits and costs, firms look for other sources of trust before making the decision to enter network coopetition.
Reputation-based trust
We identified many situations where trust in dyads came from the need to start or continue relations based on reputation (Czernek & Czakon, 2016). Good reputation coupled with clear benefits was enough to initiate coopetition, with no necessity for formal agreements. The reputation of a tourism business was important in recommending services to tourists by other entrepreneurs. Interviewees stressed the importance of an entrepreneur’s reputation, because it translated into their own reputation. At the same time a care to maintain reputation also encouraged the counterpart to try to fulfill agreed commitments.
In network coopetition it reveals difficult to assess the reputation of each member of the partnership structure (Czakon & Czernek, 2016). However, the initiators of network coopetition were often able to select potential network members by assessing their reputation. Those initiators suggested that collaboration with providers with whom they had already collaborated was easier to start, and often was much more successful. Interestingly, those actors who joined different kinds of partnership initiatives often decided to do so because of trust in an initiator having a good reputation.
Intentions- and capabilities-based trust-building mechanisms
Two trust-building mechanisms, oriented at a partner’s intentions or capabilities, revealed to be incorporated into a partner’s perception by the focal firm, stemming either from experience or reputation derived from prior behaviors. These two mechanisms were not identified as distinct and relevant in dyadic coopetition (Czernek & Czakon, 2016).
For network coopetition it was difficult to develop trust based on intentions and competence assessments because the evaluation of partners appeared very challenging. Network coopetition typically involved from several to several-dozen partners, who often had no knowledge about one another (Czakon & Czernek, 2016). Inversely, the perception of intentions as selfish was a source of distrust, and did not encourage entry into coopetition.
Third-party legitimation-based trust
Interestingly, coopetition between two firms did not require third-party legitimization as actors relied on their own knowledge about potential partners (Czernek & Czakon, 2016).
However, this trust-building mechanism was identified in network coopetition. For actors intending to be members of a partnership structure, the lack of possibility to develop trust through the typical methods available in individual settings induced actors to rely on legitimization by a third party. Local government was often desired as the legitimizing third party (Czakon & Czernek, 2016). Its involvement is often substantiated by resource allocation: a legal seat, equipment, or a subsidy. This stimulates entrepreneurs to build trust towards potential partners and organizations as a whole, and to join a network.
Emotional bonds-based trust
We found that trust in dyads emerged from the need to assure one’s own, as well as the benefits of a counterpart because of appreciation and care for a counterpart’s prosperity when, for example, friendship is involved. However, this type of trust only strengthened the coopetition based on positive economic calculation of benefits and the costs of sustaining relations with the partner.
On the other hand, we did not find evidence of trust-building based on emotional bonds in networks; the number of partners often unknown before deciding to join a partnership structure made it virtually impossible (Czernek & Czakon, 2016).
We found no evidence that actors developed trust in others because of their morality, personal features, or character. However, it seems that living in a small environment, caring about one’s own reputation, and being aware of one’s own role in the business provided the actors with some knowledge about such features, and provided enough incentive for actors to try to remain reliable.
Trust based on social network embeddedness
In some cases trust stemmed from existing social networks. Strong social embeddedness helped to gain and transfer information among local society, which allowed trust to be built. However, the role of this mechanism was not only positive. The respondents who did not originally come from the region, or had only been citizens for a short time, often claimed that they were not embedded in dense social networks in which actors trusted only one another. This made potential dyadic collaboration more difficult to establish (Czernek & Czakon, 2016).
The role of trust based on social network embededness in coopetition was identified mainly in dyadic relations. However, actors who were not embedded in the local community had limited access to knowledge about potential forms of cooperation with competitors, which hampered their potential engagement in coopetition.
The complexity of trust’s role in coopetition formation
Our research exemplifies the complexity of trust, which has sociological, psychological, and economic dimensions (Castaldo & Dagnino, 2009). It is in line with this work to present not only the complexity of the trust concept, but also its role as a moderating and mitigating factor in coopetition.
Firms enter coopetitive relationships when additional benefits from joint action are available (Brandenburger & Nalebuff, 1996). Our study extends this claim by showing that calculating counterparts’ benefits breeds trust. The decision to establish coopetition does not rely only on the individual decision-maker’s cost-benefits analysis, but also on how she/he perceives the counterparts’ economic benefit. Benefit-based trust provides a strong basis for coopetition because it assures involved participants that collaboration is more beneficial to each party than acting opportunistically (Parkhe, 1993).
Our study of coopetition in a mountain tourism destination shows that emotions- and social embeddedness-based trust are not sufficient to initiate coopetition. Without clear benefits for its participants, the relationship would not be established, and if established would rapidly be dissolved. When firms perceive collaboration as beneficial, they look for partners they already know, are connected to by social ties, or with whom they have prior collaborative experience (Granovetter, 1985; Gulati, 1995). Our research shows that coopetition can be established through similar processes. Interestingly, business benefits appear in our study as primary, while social relationships impact the partner selection process. This suggests that emotions-based trust plays a moderating, neither direct nor autonomous role in the trust–coopetition relationship.
Reputation in turn appears as a condition for establishing dyadic coopetition and for the long-term collaborative climate of the community. Our empirical setting involves small communities, where any actor’s prior behaviors are widely known. Therefore, a strong desire to preserve good reputation has been noticed. This reflects a propensity to collaborate in the future, even if at present the opportunities are not clear.
The different trust-building mechanisms often appeared together, strengthening one another. However, the use of only a few mechanisms in building trust between the same competitors did not promote the initiation of collaboration if it was not justified by individual economic profits. Also, trust proved to be a dynamic category during the whole process of collaboration. This permanent calculation allowed partners to decide whether to continue or end their collaboration.
Network coopetition data suggest a clearly different relationship with trust. Prior literature seldom differentiated trust between dyadic and network settings. Our study shows that actors underline a number of difficulties in developing benefits-based trust, in using emotions-based trust, and in assessing the motives or competencies of multiple participants in the value network. Interestingly, the assessment logic typically used for dyadic coopetition revealed difficult to perform in network settings. Data access, time, and possibly also the complexity of the task appeared prohibitive in our empirical setting (Czakon & Czernek, 2016). A crucial factor pointed out in our study is third-party legitimation. In establishing collaboration, trust towards an important actor can be transferred to other actors (Oliver, 1990) and to a collaborative project itself. Our study extends prior research by showing that in destination tourism this legitimating role is typically played by local authorities. Interestingly, other network leaders (that is, private businesses) do not enjoy the credibility of a public agent.
Moreover, our study suggests that reputation plays the double role of attracting to the coopetition network both participants to a reputable initiating actor, and reputed participants by the initiating actor (Czakon & Czernek, 2016). Therefore, reputation is a relevant source of trust and conditions the mere possibility of forming network coopetition. We believe that this effect is particularly strong in small communities. However, this mutual reputation attraction can reveal to be exclusive, by always involving the same actors over time. Despite the fact that our data generally display trust in a positive role, it can bring negative results as well. Actors from outside the municipality/region are often excluded from collaboration, even if it would be beneficial. Such a situation has been called over-embeddedness (McLoughlin & Horan, 2002; Rowley, 1997) in prior research, which links it to a number of drawbacks: limited innovativeness, opacity, or structural petrification.
All in all, some general propositions regarding the role of trust in coopetition in tourism can be formulated:
Proposition 1: Dyadic coopetition depends on other sources of trust than network coopetition.
Proposition 1a: Benefits-based trust is a condition of enterting dyadic coopetition.
Proposition 1b: Emotional trust and reputation-based trust strengthen the role of benefits-based trust in establishing dyadic coopetition.
Proposition 1c: Third-party legitimation is a condition of network coopetition formation.
Proposition 1d: In the absence of benefits, trust is not sufficient for coopetition.
Proposition 1e: Dyadic coopetition is easier than network coopetition formation.
Proposition 2: Reputation in small communities is important for long-term coopetition.
This last source of trust seems to be typical of small tourist municipalities such as those that we studied. Perhaps that was the reason why reputation was very often declared as a source of trust between competitors in the researched region.
Conclusions
This chapter presents how different trust-building mechanisms help competitors to enter into two types of collaborative relationships—dyads and networks. Those two types of coopetition rely on different trust-building mechanisms, and the same trust-building mechanism impacts dyadic and network coopetition in different ways.
Research on coopetition formation has clear managerial implications. In order to encourage competitors to enter dyadic or network cooperation, different trust-building mechanisms should be used. To encourage a firm to cooperate with one rival (dyadic coopetition), calculative trust is the most important. Thus, the focus should be on the potential benefits of such cooperation, which should be greater than its cost. Moreover, a belief needs to be developed that it is also in the partner’s interest not to act opportunistically, i.e., that the cost of opportunistic behavior outweighs its potential benefits. To establish dyadic coopetition the role of partners’ reputation, emotional bonds, and social embeddedness cannot be underestimated. Those trust-building mechanisms should therefore be treated by firms as strategic assets that are generated in combination with the perceived benefits of coopetition.
Regarding network coopetition, it is important to use third-party legitimation to encourage entities to join coopetitive networks. In tourist destinations this role can be played by local authorities, or some firm recognized in the local community. Also, partners’ reputation—those being the leaders and potential or actual members of such a network—is very important in establishing network coopetition. Partners have to be aware that the benefits of such coopetition usually come in the long term, although its costs have to be borne immediately (calculation-based trust).
Our study breeds further inquiry into the role of trust in coopetition. A fine-grained analysis stratified by the level of coopetition can be followed by stratification by the scope of coopetition. Furthermore, studies focused on trust dynamics relative to the collaborative component versus the competitive component of coopetition may shed more light on trust complexity and dynamics.
Further research of trust’s varying role throughout the coopetitive relationship life cycle is needed. Extant research indicates that trust mediates success (Morris et al., 2007), yet our understanding of the mechanisms of trust development, management, and the changing nature of its impact is shallow. Moreover, coopetition involves two different types of trust: one connected with the collaborative part of the relationship, and the other with the competitive part of the relationship. The interplay of those two distinct types of trust remains unclear. In a similar vein, high trust and high dependency have been found to increase coopetition success. However, trust-building mechanisms (Czernek & Czakon, 2016) that allow progress from low or moderate to high levels of trust remain under-researched.
Also, trust is seen as a relational factor impacting inter-firm relationships (Bouncken & Fredrich, 2012). Other relational factors, such as commitment (Morris et al., 2007), dependency, and power (Bouncken & Fredrich, 2012) have been found to interact with trust. Therefore, further research needs to bring the various relational factors into the scope of study in order to better understand trust dynamics and their impact on coopetition performance.
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