Introduction
Previous research highlighted the role of product innovation in sustaining firms’ competitive advantage (Verona & Ravasi, 2003). A firm’s strategy that accounts for how managers invest resources in new product development (NPD) initiatives has been mentioned as a factor that determines that success of NPD. However, the process by which firms manage their resources in order to have successful product launches has been minimally studied (Henard & McFadyen, 2012; Henard & Szymanski, 2001). To maintain and upgrade their resource bases, firms can proceed by using internal research and development (R&D) or by collaborating with external partners through research centers, suppliers, and competitors. While every type of relationship has its own advantages and disadvantages, collaboration with competitors or coopetition has been identified as the most challenging (Bengtsson & Kock, 2000 Das & Teng, 2000; Fernandez et al., 2014; Gnyawali & Park, 2011; Le Roy & Fernandez, 2015; Tidström, 2014). This difficulty of coopetition management stems from the paradoxical nature of coopetition. Firms need to share resources in order to increase value creation, but they must also protect the resources that constitute the source of their competitive advantage and their capacity to appropriate value from these resources (Dagnino & Padula, 2002; Ritala & Tidström, 2014).
Results of previous research on the impact of coopetition on NPD are mixed. Recently, Estrada and colleagues (2016) studied the reasons behind these mixed results and showed that firms that benefit from coopetitive NPDs have both formal knowledge sharing mechanisms (e.g., incentives to employees) and formal protection mechanisms (e.g., patents, trademarks, etc.). Both factors are related to how firms manage their resources. We believe that the different approaches of resources orchestration are a reason why some firms benefit more than others. The way firms manage their internal resources before and through coopetition is essential in determining the actual and future gains from collaboration.
Our research builds on the results of previous works and aims to understand the process of how firms maintain/build their resources in order to achieve a first-mover advantage from coopetition.
In the following sections, we review the literature on coopetition strategy and first-mover advantage before highlighting the role played by firm’s resource orchestrating strategy in enabling FMA based on coopetitive NPD.
Literature review
Coopetition strategy: Motives, management, and impact
Coopetition is defined as “a paradoxical relationship that emerges when two or more rival firms cooperate in some activities, and at the same time compete with each other in other activities” (Bengtsson & Kock, 2000: 412). Research on coopetition can be separated into three groups, including its determinants, its implementation/management, and its impact and outcomes. As coopetition is a complex and multi-level phenomenon, focusing just on the process will give a myopic and incomplete vision and understanding. An understanding of rivals’ motives to enter into coopetition, the resulting process of cooperative/competitive interactions, and its results and consequences will provide a complete coverage of the coopetitive relationship (Le Roy & Czakon, 2016).
Firms adopt this strategy in order to share risks/costs of R&D, to set industry standards, and to reduce time to market (Gnyawali & Park, 2009). In spite of all these positives, coopetition is a phenomenon full of tensions (Fernandez et al., 2014; Ritala et al., 2017) and the way these tensions are managed will determine the benefits of coopetition (Tidström, 2009, 2014). Existing research focuses on the sources, levels, and characteristics of tensions (Bengtsson & Kock, 2000; Fernandez et al., 2014; Raza-Ullah et al., 2014; Tidström, 2014). It proposes two methods to manage them: separation and integration. Recently, Le Roy & Fernandez (2015) proposed the coopetitive project team as an ideal way to handle these tensions by combining separation and integration principles (Fernandez, Le Roy, & Chiambaretto, in press).
With respect to coopetition benefits, the only criterion that we have to justify the effectiveness of this strategy for innovation is the increasing adoption of it by firms in high- and low-tech sectors. This indicator is insufficient to legitimize coopetition as a strategy for value creation, especially in the absence of real evidence on the relationship between coopetition and technological innovation. Different outcome variables were used to study the impacts of coopetition—including innovation type (radical or incremental)—or of the coopetition impact on innovative performance (new product introduction, speed of product introduction, etc.) (Gnyawali & Park, 2011; Park et al., 2014; Ritala & Hurmelinna-Laukkanen, 2009, 2013; Weber & Heidenreich, in press). Belderbos and colleagues (2004) showed a positive impact on innovative capacity of firms, while Nieto & Santamaría (2007) showed a negative one. Therefore, we have contradictory results on the impact of coopetition on technological innovation. These contradictory results mean that the process by which coopetition impacts innovation still needs more investigation and in-depth research.
Academia and professional media also show us that a win-win situation is not always the result of this type of collaboration and that asymmetric benefits between rival/partners may exist. In front of this situation, it is important to analyze how managers of competing firms choose to coopete and generate benefits from this paradoxical relationship. This is important since firms that don’t achieve their objectives from coopetition will not just lose their contribution to the coopetitive project but sometimes will lose a whole market. In this chapter, we focus on the first-mover advantage as a coopetition outcome.
First-mover advantage: Definition, characteristics, and enablers
The first-mover advantage is defined in terms of the ability of a pioneering firm to earn positive economic profits (profits in excess of the cost of capital) (Lieberman & Montgomery, 1988). From the previous definition, we see that in order for a firm to have a first-mover advantage, it has to (1) innovate rapidly to enter the market first, and (2) maintain this advantage.
The first part is related to the innovation speed, defined as the time elapsed between (a) the initial development (including the conception and definition of an innovation) and (b) the ultimate commercialization (which is the introduction of a new product into the marketplace) (Mansfield, 1988; Murmann, 1994; Vesey, 1991). The literature in this stream focuses on the factors that lead firms to quick innovations. This body of research distinguishes between two types. First, a firm’s related factors include (a) strategic orientations (emphasis placed upon fast new product development), (b) scope-related strategic-orientation factors (the relative broadness of the project stream), and (c) individual/team factors (the presence of an influential product champion(s) and empowerment of the project team). Second, the external factors include the degree of technological uncertainty and complexity and how the firm manages its suppliers and R&D collaborations (Kessler & Chakrabarti, 1996).
The second part is related to the first-mover advantage enablers. Literature distinguishes between macro-, micro-, and firm-level FMA enablers (see Figure 27.1). At the macro level, Suarez & Lanzolla (2007) identify two environmental enablers: the pace of market evolution and pace of technological evolution. The pace of market evolution refers to the average market change, or the time elapsed between different product life cycle stages. The pace of technological evolution refers to the average change in the level of technology performance, or the technology “S-curve” (Cooper & Schendel, 1976; Foster, 1986; Sahal, 1982). The authors study the impact of these two environmental enablers on the micro-level enablers, or what Lieberman and Montgomery (1988) call “isolating mechanisms.” These authors distinguish among three different isolating mechanisms. The first is technology leadership, such as learning/experience effects and R&D patenting that gives a firm a technological edge over competitors (Gilbert & Newbery, 1982; Lilien & Yoon, 1990; Spence, 1977). Second, resource pre-emption is the cost advantage that arises from advanced appropriation of scarce input resources or economies of scale that are created from pre-emptive investments in the plant and equipment (Dixit, 1980; MacMillan, 1983; Prescott & Visscher, 1977). Third, switching costs arise from habit formation in buyers or from the installed-base effect in the presence of network effects (Carpenter & Nakamoto, 1989; Nelson, 1980; Schmalensee, 1982).
At the firm level, a firm’s ability to derive FMA should be assessed “with reference to the competence and capabilities which new entrants have, relative to the competitors” (Teece et al., 1997: 529). Early followers and late entrants tend to deploy different skills and resources (Robinson et al., 1992). Some studies outline the substantial effect of a firm’s history on the relationship between entry order and market performance (Carroll et al., 1996; Klepper, 2002). Research on FMA invites scholars to forge links with the resource-based view to design more sophisticated studies on the timing of market entry (Lieberman & Montgomery, 1998). This marriage between the two perspectives is based on the idea that the firm’s resource base tends to influence the likelihood and timing of entry, but in ways that are complex and still poorly understood (Lieberman & Montgomery, 1998).
Resource orchestration strategy as an enabler of first-mover advantage from coopetition
High-tech industries are designated high-velocity environments. One of the coopetition virtues is accelerating the time to market (Gnyawali & Park, 2009). Therefore, coopetition is chosen to adapt to these environments. Until now, the role of coopetition in accelerating time to market was seen as equal for all partners. This meant that all partners that entered into coopetition would accelerate their time to market. Research on FMA or innovation speed (Kessler & Chakrabarti, 1996) contradicts this view and shows that competitors/partners will have different speeds of product introduction based on the external and internal factors mentioned above.
Henard & Szymanski (2001) organized the NPD activities into four broad categories: product, strategy, process, and marketplace. They indicated that one relatively under-researched area is strategy. This category is related to how firms manage and invest resources in NPD initiatives (Henard & McFadyen, 2012).
At the resource management level, Sirmon and colleagues (2011) highlight that achieving a competitive advantage entails optimally orchestrating and configuring firm resources and capabilities. Resource orchestration refers to “the comprehensive process of structuring, bundling, and leveraging the firm’s resources with the purpose of creating value for customers and competitive advantages for the firm” (2011; 1392). In this regard, three mechanisms for resources orchestration are at play. First, structuring refers to the management of the firm’s resource portfolio via acquisition, accumulation, or divesture. Second, bundling refers to the combining of firm resources to construct or alter capabilities. Third, leveraging refers to the application of a firm’s capabilities to create value for customers and wealth for owners. This definition highlights the temporary nature of the competitive advantage in the sense that firms have to orchestrate their resources to implement strategies that help them achieve a series of temporary competitive advantages over time (Sirmon et al., 2010). The temporality of the competitive advantage relates to the velocity of the environment and the firm’s life cycle stage (see Figure 27.2).
Thus, each firm has a perception of the environmental velocity that will lead to a timely evaluation at the industry level. This in turn leads the firm to set its agenda and priorities to orchestrate its resources according to this perception (McGrath et al., 1984). The time spent in developing these resources differs according to the complexity and the efforts required for their development (Pacheco-de-Almeida & Zemsky, 2007). In this regard, speed in developing resources is intrinsic and relates to multiple factors, such as corporate governance, low capital costs, and R&D intensity (Pacheco-de-Almeida et al., 2015). Therefore, each firm will manage its resources at different speeds.
In coopetition, the way a firm manages its internal resources before and through collaboration is essential in determining the actual and future gains from such collaboration. The firm’s situation will in turn determine the resource management conditions, mechanisms, and speed. Different resource orchestration approaches will lead to different levels of both formal knowledge sharing mechanisms (e.g., incentives to employees) and formal protection mechanisms (e.g., patents, trademarks, etc.). This will consequently lead to different learning speeds, different levels of protection of valuable resources (Estrada et al., 2016), and different speeds of product introduction from the coopetitive NPD project.
Firm’s resources have to be ready to be bundled and combined with resources and knowledge absorbed from the coopetitive NPD to achieve the planned product introduction speed (Katila, 2002; Levin et al., 1987). Such coordination is vital in NPD projects that regroup suppliers and academia in general and in coopetitive projects since knowledge absorbed from competitors becomes increasingly obsolete with time, compared to the knowledge gained from other sources (Katila, 2002). This means that competitors’ knowledge gained from coopetition has to be quickly integrated in order to benefit from it in NPD. Resource preparation benefits from competitors’ knowledge and enhances formal protection mechanisms as a determinant of benefits from coopetition (Estrada et al., 2016). These protection mechanisms require time to be obtained and implemented (e.g., patents) (Manzini & Lazzarotti, 2016).
Theoretical implications and future research directions
At a theoretical level, with respect to the first-mover advantage research, the debate on how resource orchestration strategies play a vital role in determining innovation speed (Lieberman & Montgomery, 1998) remains open. Resources from acquisitions require more time to be appropriated and integrated into knowledge and competencies (Ranft, Lord, & Carolina, 2002). In this regard, Maritan & Peteraf (2011) assert that knowledge acquisition is important for innovation and the balance between acquisition and accumulation, which can be achieved through a well-conceived resource orchestration strategy. Market-oriented coopetition has to be pursued when firms have reduced technological uncertainty so they can evaluate their importance and consequently protect them. Future research can study if firms of different sizes with different resource stocks can achieve similar results using different resource orchestration strategies that challenge the positive effect of slack resources. This idea needs to be developed and compared with studies on a contingent view of slack (Lawson, 2001; Nohria & Gulati, 1996).
Moreover, the question of how to rapidly introduce products from coopetitive NPD is also posed. On one side, different resource orchestration strategies are implemented according to the speed objectives. However, in terms of accelerating innovation, coopetition is not a “magical” tool to boost the product development efforts of all the competitors involved, since only those that are ready for coopetition will obtain this advantage. Evaluating the impact of coopetition requires considering innovation speed in addition to traditional impact measurements such as innovation capacity (Gnyawali & Park, 2011; Ritala & Hurmelinna-Laukkanen, 2009, 2013) or competitive behavior (Gnyawali et al., 2006). To benefit from coopetition, firms must plan a rapid launch, diverse product applicability, or both. As Gnyawali and Park (2011) demonstrate, Sony introduced its flat screen to rapidly benefit from its internal development capability while Samsung was slower and integrated the results into a wider product portfolio, thereby gaining greater market share in the medium term.
Future research can analyze the relationship between resource orchestration approaches and FMA via a quantitative approach with a large sample. These studies could benefit from archival data (e.g., SDC platinum database) or they could be based on surveys. Data on product introduction time can be obtained from specialized databases or by extensive research in specialized press via databases such as Factiva.
We approached the relationship between coopetition and innovation speed via the lenses of the resource-based view (resource orchestration), since previous research highlighted the role of ambidexterity to achieve a competitive advantage (Tushman & O’Reilly, 1996). More precisely, firms that balance exploration and exploitation will achieve superior performance. Future research could analyze how different firm strategies balance exploration and exploitation, and organizational and human resources factors could lead to differences in terms of benefits from coopetition (Junni et al., 2013, 2015).
At a methodological level, an issue could be to go beyond the analysis of the organizational level to study the micro-foundations of resources in order to better understand the resource orchestration phenomenon. From the coopetition perspective and beyond the organizational and project team levels addressed here, industry and individual levels could be covered to clarify their impacts on coopetition outcomes.
At the managerial level, firms must choose how to manage their resources to achieve their speed objectives. Those pursuing fast product introductions must start structuring their resources earlier before entering into coopetition so that they can bundle their resources during coopetition and leverage those in terms of new products and services. This early preparation enables benefits from coopetition speed. This speed advantage is also achieved by astutely selecting the strategic activities and key technologies to produce within the firm (make, buy, or ally decision).
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