Many discussions of the creation and appropriation of value stop at the firm level. Imperfections in the market allow for a firm to gain competitive advantage, thereby appropriating rents from the market. What has often been overlooked is the continued process of appropriation within firms by parties ranging from shareholders to managers to employees. Porter’s “five forces” model and the resource-based view of the firm laid out the determinants of value creation at the firm level, but it was left to others to explore the onward distribution of that value. Many strategic management and strategic human capital scholars have explored the manner in which employees and managers use their bargaining power vis-à-vis the firm to appropriate value—sometimes in a manner that may not align with the interests of shareholders. In addition, cooperative game theorists provided unique insights into the way in which parties divide firm surplus among each other. Ultimately, the creation of value is merely the beginning of a complex, multiparty process of bargaining and competition for the rights to claim rents.
Andy El-Zayaty and Russell Coff
Ray Noorda, the former CEO of Novell Inc., first coined the term “coopetition” in 1992 to describe a common phenomenon in the computer industry: cooperation between competitors. This phenomenon is inconsistent with classical economic and business theory going as far back as Adam Smith, who viewed the production system as based on a separation between suppliers and buyers. Micro-economists have traditionally viewed the firm as buying raw materials and components from suppliers, producing finished goods, and selling those goods in competition with other firms to a different set of firms or consumers. However, starting in the 1990s, research on forms of cooperative relationships between competitors became very common. The most common types are (a) competing firms engaging in horizontal alliances along the same level of the value chain and (b) vertical cooperation along different levels of the value chain between suppliers and firms in the focal industry or between customers and firms. In the last 25 years, there has been a great increase in research on coopetition. In a systematic literature review conducted in 2014, one researcher found over 130 academic articles in more than 80 academic publications published since 1996. The majority of the research to date has been qualitative, with many cases studied conducted. A number of special issues in academic journals have been devoted to the topic in general or to special topics concerning coopetition. The Strategic Management Journal organized a special issue in 2018 on the interplay of competition and cooperation, and a number of workshops have been held on coopetition strategy and innovation.
The Resource-Based View of the firm (RBV) is a set of related theories sharing the assumptions of resource heterogeneity and resource immobility across firms. In this view, a firm is a bundle of resources, capabilities, or routines which create value and cannot be easily imitated or appropriated by competitors due to isolating mechanisms. Grounded in the economic traditions of the “Chicago School” of economic efficiency, the “Austrian School” of economics, and organizational economics, the RBV comprises theories that explain the existence of (sustained) competitive advantage and of economic rents. Empirical research from this perspective addresses both firm performance and firm behavior at the level of business strategy (e.g., within-industry competition) and corporate strategy (e.g., acquisitions). Initially developed through a series of papers by several authors in the 1980s–1990s, major extensions and refinements of the RBV include the knowledge-based view of the firm (KBV), dynamic capabilities, and the relational view, which recognizes capabilities can be developed and shared through alliances between firms.
Vinícius Chagas Brasil and J.P. Eggers
In competitive strategy, firms manage two primary (non-financial) portfolios—the product portfolio and the innovation portfolio. Portfolio management involves resource allocation to balance the important tradeoff of risk reduction and upside maximization, with important decisions around the evaluation, prioritization and selection of products and innovation projects. These two portfolios are interdependent in ways that create reinforcing dynamics—the innovation portfolio is the array of potential future products, while the product portfolio both informs innovation strategy and provides inputs to future innovation efforts. Additionally, portfolio management processes operate at two levels, which is reflected in the literature's structure. The first is a micro lens which focuses on management frameworks to boost portfolio performance and success through project-level selection tools. This research has its roots in financial portfolio management, relates closely to research on new product development and marketing product management, and explores the effects of portfolio management decisions on other organizational functions (e.g., operations). The second lens is a macro lens on portfolio management research, which considers the portfolio as a whole and integrates key organizational and competitive concepts such as entry timing, portfolio management resource allocation regimes (e.g., real options reasoning), organizational experience, and the culling of products and projects. This literature aims to set portfolio management as higher level organizational decision-making capability that embodies the growth strategy of the organization. The organizational ability to manage both the product and innovation portfolios connects portfolio management to key strategic organizational capabilities, including ambidexterity and dynamic capabilities, and operationalizes strategic flexibility. We therefore view portfolio management as a source of competitive advantage that supports organizational renewal.