Modelling the Performance Consequences of Coopetition in Business Relationships – a Quantitative Approach

Abstract

The objective of the paper is to develop an analytical tool that is capable of modelling decision-making in coopetitive business relationships. Managers in the same industry differ in respect of their willingness to adopt coopetition. To better understand coopetitive decision-making, we need a model whereby such decisions can be experimented with and analysed. An important prerequisite of such a model would be its capacity to measure the performance consequences of coopetitive interactions at both firm and relationship levels. We show that existing operationalisation has limited capacity to do that. Based on existing game theoretical constructs, we propose a new operationalisation of a coopetitive decision-making episode in horizontal business relationships using a two-step sequential game. We suggest developing what we term a “coopetitive composite solution matrix” by summing up the payoff functions of the two steps of the game. The suggested operationalisation has the capacity to measure all the potential performance consequences of a complex piece of coopetitive decision-making in an episode. In this way, the decision problem’s cognitive representation becomes straightforward and analysis of the impact of the behavioural attributes of managers on the actual decision-making process is unambiguous.