buyers, the firms tend to cooperate more frequently. When activities are closer to buyers, such as customer service activities, they tend to compete more intensely. This phenomenon also appears to be tied to resource heterogeneity. Where each firm has unique resources not held by the other, and each firm perceives that sharing the resources does not undermine its own competitive position, cooperation will be stronger. Coopetition entails both benefits and costs to the participating firms. In terms of benefits, Garcia and Velasco (2002) found that cooperation with competitors has a positive effect on performance of particular business activities, coordination of product lines, and technological diversity. Spence, Coles, and Harris (200 I) discuss the ability to gain access to external knowledge sources, while
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Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.Journal of Small Business Strategy Bengtsson and Kock (2000) found that coopetition can serve as a mechanism for organizational learning, especially as it relates to core competencies of competitors. Other observers emphasize cost sharing, shorter lead times, more stable supply sources, access to scientific resources, and opportunities for scale economies as direct benefits (Dowling & Roering, 1996). Dussauge, Garrette, and Mitchell (2000) use the case of joint manufacturing to demonstrate cost savings from coopetition. Parker (2000) illustrates how collaboration enables firms to respond better to customers. From a more strategic vantage point, cooperation with competitors can enhance company flexibility and give the firm more control over market uncertainties (Borch & Arthur, 1995; Dennis, 2000). Gummesson (1997) suggests that sufficient levels of competition keep managers alert, while sufficient levels of collaboration make them feel secure. Garcia and Velasco (2002) argue that organizational benefits derive from the 'creative tension' that is fostered by coopetition. Competition ensures the relationship remains dynamic by forcing both sides to innovate and improve, and by driving out inefficient firms, ineffective relationships, and old technologies. Firms cooperate to be more effective by achieving synergy and they compete to realize the advantages of this synergy (Zineldin, 1998). Coopetition also involves costs to the parties. Parker (2000) notes that being in a relationship can cause additional financial and time costs that offset the gains from the relationship. Being in a relationship can also cause firms to experience a loss of control over key activities or resources, including control over proprietary information (Hakansson & Ford, 2002). Firms are especially vulnerable when partners become less committed to the cooperative side of the relationship or focus only on their own benefits (Amaldoss, Meyer, & Rapoport (2000).
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