competition-cooperation conceptual frameworks

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The competition–cooperation paradox in inter-rm relationships: Aconceptual framework

Devi R. Gnyawali a,⁎, Ravi Madhavan b, Jinyu He c, Maria Bengtsson d

a Pamplin College of Business, Virginia Polytechnic Institute and State University (Virginia Tech), Blacksburg, VA 24060, USAb Katz Graduate School of Business, University of Pittsburgh, 208 Mervis Hall, Pittsburgh, PA 15260, USAc Department of Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong d Umeå School of Business and Economics, Umeå University, S-901 87 Umeå, Sweden

a b s t r a c ta r t i c l e i n f o

Article history:

Received 26 August 2014

Received in revised form 27 May 2015

Accepted 16 July 2015

Available online 11 December 2015

With a focus on inter-rm relationships involving the simultaneous pursuit of competition and cooperation, we

develop a conceptual framework that explicates key paradoxical conditions, paradoxical tension, and

performance implications of tension in such relationships. We propose felt tension as the actual manifestation

of the paradox and offer insights on critical capabilities necessary to understand and manage the paradox. Our

paper extends the paradoxliterature in the inter-organizational contextand providesa set of conceptsand prop-

ositions designed to stimulate systematic empirical research on the competition–cooperation paradox.

© 2015 Elsevier Inc. All rights reserved.

“The test of a rst-rate intelligence is the ability to hold two oppos-

ing ideas in mind at the same time and still retain the ability to

function.” (F. Scott Fitzgerald).

Many inter-

rm relationships such as strategic alliances and buyer–

supplier transactions involve the simultaneous pursuit of competition

and cooperation (Chen, 2008; Gnyawali & Madhavan, 2001). Such rela-

tionships, often referred to as “coopetition” (Bengtsson & Kock, 2000;

Brandenburger & Nalebuff, 1996; Gnyawali & Park, 2011; Padula &

Dagnino, 2007), are inherently paradoxical as they involve parties

with different identities, motives, and goals that engage in projects

aimed at simultaneously creating common value and realizing greater

private benets from that value (Khanna, Gulati, & Nohria, 1998).

When a rm engages in collaboration with a close rival, the paradox of

simultaneous competition and cooperation becomes most prominent.

Scholarly attempts to investigateparadoxical conditions in coopetition

are very limited. Lado and colleagues (Lado, Boyd, & Hanlon, 1997)

viewed the simultaneous pursuit of competition and cooperation strate-

gies as a paradox and suggested that syncretism between competition

and cooperation leads to higher rents than in either/or situations. Chen

(2008: 290) argued that “competition and cooperation are among the

most noted paradoxical organizational phenomena” and urged a more

holistic view of competition and cooperation. While these and other

related papers (e.g. Bengtsson & Kock, 2014; Gnyawali & Park, 2011)

highlight key paradoxical conditions and suggest the importance of

paradox-based theorizing, little research has systematically addressed

the nature of the paradox or discussed the implications for managing

the paradox. Further, while managers confront theparadox of coopetition

on a regular basis, the eld lacks a coherent framework to help managers

understand and manage the paradox. Hence, there is a compelling need

to develop a theoretically sound framework that enriches scholarlyunderstanding of paradox in inter-rm relationships, stimulates future

research, and guides management practice on this intriguing and

important phenomenon. Accordingly, we address the following research

questions: (a) How does the competition–cooperation paradox manifest

itself in the focal rm's inter-rm relationships? And (b) How can this

paradox be managed effectively?

We build on the burgeoning literature on paradox (e.g. Cameron &

Quinn, 1988, chap. 1; Lewis, 2000; Smith & Lewis, 2011; Smith &

Tushman, 2005), on the interplay of cooperation and competition

(e.g. Chen, 2008; Gnyawali & Madhavan, 2001; Lado et al., 1997), and

on behavioral strategy (e.g. Eggers & Kaplan, 2013; Gavetti, 2012) to

offer insights on how paradoxes emerge, are manifested, and get

managed in inter-rm relationships. Following Smith and Lewis

(2011: 383), we dene paradox as “contradictory yet interrelated

elements that exist simultaneously and persist over time”. We suggest

that in the context of coopetition, a paradox emerges both from the in-

herent dualities that exist due to the simultaneity of cooperation and

competition and from contradictory views or priorities of the partners

engaged in these relationships. These contradictions and dualities

serve to increase tension, which in turn could inhibit the effectiveness

of the rms' responses and ultimately the outcomes of the inter-rm

relationship. We develop the construct of felt tension as the locus of

this powerful paradox and identify factors that lead to different degrees

of felt tension and subsequently to differential responses to the

associated challenges. We further suggest that rms experiencing the

Industrial Marketing Management 53 (2016) 7–18

⁎ Corresponding author.

E-mail addresses: [email protected] (D.R. Gnyawali), [email protected]

(R. Madhavan), [email protected] (J. He), [email protected] (M. Bengtsson).

http://dx.doi.org/10.1016/j.indmarman.2015.11.014

0019-8501/© 2015 Elsevier Inc. All rights reserved.

Contents lists available at ScienceDirect

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competition–cooperation paradox can effectively manage the situation

through the development of a unique set of capabilities. We explicate

the nature and role of such capabilitiesin analyzing the opposing forces,

in maintaining an appropriate level of felt tension, and in leveragingthe

opportunities and mitigating the challenges related to the competition–

cooperation paradox.

This paper contributes to the literature in several ways. First, it offers

a conceptual framework of paradox in inter-rm relationships by

unpacking the drivers, nature, and implications of paradoxical tensionwhen rms engage in simultaneous cooperation and competition with

each other. Given the centrality of inter-rm relationships to innovation

(e.g., Ahuja, 2000), a better understanding of paradox in the coopetition

context should contribute to the development of a paradox perspective

that could help understand innovation. Our theory helps to understand

howand whyparadoxes and tensionsemerge in inter-rm relationships,

an understanding of which is critical in order to advance future research

on paradox and coopetition.Second,we propose felt tension as theactual

manifestation of the cooperation–competition paradox in the inter-rm

context. Our construct of felt tension enables us to link the paradox view

with practical organizational issues and to illuminate the capabilities

needed to manage it. Third, we provide insights on the capabilities criti-

cal in dealing with such paradoxical relationships and how such capabil-

ities facilitate the understanding and management of the paradox.

1. Theoretical background

In order to introduce the building blocks of our theoretical frame-

work, we begin with an illustrative example of paradoxical inter-rm

relationships involving simultaneous competition and cooperation.

Despite their erce rivalry for many years, Samsung Electronics and

Sony Corporation formed a joint venture (called S-LCD) in 2004 to

develop and produce LCD panels for at screen TVs with initial invest-

ments of $1 billion each, subsequently doubling their investment and

further intensifying their cooperation (Gnyawali & Park, 2011). While

the venture was critical for both rms to penetrate and create domi-

nance in the at-screen TV industry, both rms experienced substantial

tension while initiating and managing the venture. Public reaction in

Japan included accusations that Sony was a traitor, and Sony had topull out of a government-backed LCD-panel development consortium

in order to address concerns that the condential technology would

fall into rival Samsung's hands (Dvorak & Ramstad, 2006). Internally,

Sony engineers and managers were worried that Samsung would even-

tually use Sony's TV expertise to beat Sony, while their counterparts at

Samsung were concerned that helping such a big and erce rival could

hurt Samsung (Gnyawali & Park, 2011). While all inter-rm relation-

shipsembody some degreeof paradox, those that by designentail simul-

taneous competition and cooperation, such as the relationship between

Samsung and Sony, are highly paradoxical, involve high levels of tension

(Das & Teng, 2000; Gnyawali & Madhavan, 2001; Lado et al., 1997) and

yet promise to deliver signicant innovation.

The literature on paradox underscores the prevalence of tensions

and suggests that managing paradox requires developing the capabilityto deal with tension (Lewis, 2000). The salient tensions,

i.e., “contradictory yet interrelated elements experienced by organiza-

tional actors” (Smith & Lewis, 2011: 389) could spur vicious cycles

due to individuals' cognitive and behavioral drive for consistency and

due to organizational inertia. On the other hand, they could also poten-

tially lead to a virtuous cycle when the organization has paradoxical

cognitive frames and ability to engage in paradoxical information

processing (Smith & Tushman, 2005). Furthermore, this literature

highlights that contradictions and dualities are important characteris-

tics of paradox that create tension, thus necessitating strategies to re-

spond to these characteristics. These insights from the mainstream

paradox literature serve as critical building blocks for our theory.

Compared to commonly discussed organizational paradoxes such as

learning, belonging, and organizing (Lewis, 2000; Smith & Lewis, 2011),

paradoxes stemming from inter-rm relationships, especially those

involving simultaneous cooperation and competition, demonstrate

unique characteristics. First, the contradictions in the coopetition para-

dox stem from the situation faced by two organizations with distinct

identities, goals, and motives. Both sides have to understand each

other's perspectives and develop a shared perspective that transcends

their differences. Second, the coopetition context involves several

unique dualities such as working together with a competitor to create

common bene

ts while competing vigorously in realizing largerindividual gains. These contradictions and dualities persist at varying

degrees depending on the intensity of the simultaneous pursuit of

competition and cooperation. Third, because of these contradictions

and dualities, the source and nature of tension are unique in the inter-

rm context and therefore approaches to deal with the tension and to

generate benecial outcomes would also be unique. These unique con-

ditions provide a rich and appropriate context to apply the paradoxlens

in inter-rm coopetition relationships.

As Lewis (2000: 761) points out, “Paradoxical tensions are

perceptual—that is, cognitively and socially constructed polarities that

mask the simultaneity of conicting truths… signify two sides of the

same coin. Yet actors' perceptions often obscure this relatedness.” The

cognitive nature of paradoxical tension necessitates the need to inte-

grate insights from cognition research to understand and manage the

competition–cooperation paradox. We therefore build on the behavior-

al strategy literature with its focus on capabilities and cognition.

Founded on the core ideas of bounded rationality (March & Simon,

1958), routines (Nelson & Winter, 1982), capabilities (Zollo & Winter,

2002), and cognition (Barr, Stimpert, & Huff, 1992), this literature sug-

gests that a rm's routines andshared cognitionplay a critical role in de-

termining the managers' perceptions and rm behaviors (Gavetti,

2012). Eggers and Kaplan (2013) suggest a reciprocal connection be-

tween cognition and capabilities and stress the critical role of managers

in accurate perception and leveraging of capabilities. Thus, both the un-

derstanding (or analytical) part and theleveraging (or executional)part

of capabilities are critical. As we develop later, this distinction provides

us the basis for unpacking the capabilities to manage the paradox.

2. A conceptual model of paradox in inter-rm relationships

Fig. 1 depicts the model we develop in this paper. The selection of

the constructs and the development of the conceptual model are driven

by several key considerations from the literatures highlighted above.

First, the constructs ought to represent the competition–cooperation

paradox and should match with the core concepts discussed in the par-

adox literature. This consideration led to the selection of contradictions

and dualities, which are central in the paradox literature ( Lewis, 2000;

Smith & Lewis, 2011), as the key paradoxical conditions in relationships

that involve simultaneous competition and cooperation. Second, be-

cause tension is underscored in the literature on both paradox (Smith

& Lewis, 2011) and strategic alliances involving competition and

cooperation (Das & Teng, 2000), our constructs and theory need to

incorporate tension. The constructs of dualities, contradictions, andfelt tension explain the manifestation of the paradox (research question

[a]). Third, because our goal is both to illuminate paradoxical situations

and tensions and to explicate ways of addressing them, our theory

needs to offer cognitive and behavioral explanations on how paradoxi-

cal tensions could be understood and managed in coopetition. This con-

sideration led to the focus on analytical capability to understand the

paradox and executional capability to manage it (research question

[b]). Finally, we incorporated performance in the model as our theory

aims to provide explanations on why and how rms differ in beneting

from coopetition.

Our conceptual model suggests that paradox in relationships

involving simultaneous competition and cooperation is driven by criti-

cal dualities and contradictions, which are key sources of felt tension.

Felt tension is the actual state of cognitive and emotional stress

8 D.R. Gnyawali et al. / Industrial Marketing Management 53 (2016) 7 –18


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experienced by the focal organization. It consists of strain (discomfort

with respect to the paradoxical situation) and con ict (friction or

discord that manifests between partners). Specically, we propose

that dualities give rise to strain and that contradictions lead to conict.

While some degree of felt tension (either strain or manifest conict)

will always exist in all inter-rm relationships (Das & Teng, 2000),

coopetition relationships are particularly prone to high degrees of ten-

sion due to strong dualities and contradictions. Further, we propose

that rms that possess paradox management capabilities could keep

thefelt tension at a reasonable level (through their analytical capability)

and create positive effects of felt tension on performance (through their

executional capability).

2.1. Dualities and contradictions in inter- rm relationships

What makes coopetition especially challenging is that it requires

companies to manage incongruities in a number of areas. We proposethat there are two sets of key incongruities—dualities and

contradiction—which are two of the dening elements of a paradox

(Smith & Lewis, 2011). Dualities are non-partner-specic forces that

exist within a unied whole (Smith & Lewis, 2011: 387) and stem

from engagement of activities that are opposing in nature (e.g., value

creation and appropriation) but are pursued simultaneously in

coopetition (Brandenburger & Nalebuff, 1996). Contradictions are

partner-specic and stem from interactions with partners that are

different. The two sides of a duality are inseparably linked to each

other (such as the Chinese concept of Ying and Yang), while contradic-

tions emerge from therms' comparisons of “we” versus “them”. Using

Sony as an example, dualities exist because Sony is engaged in

coopetition (regardless of who the partner is), but contradictions exist

because Sony is engaged in a coopetition relationship with Samsung,

which has itsunique rm characteristics and strengths. Table 1 provides

a comparative summary on dualities and contradictions. We discuss

below the nature of dualities and contradictions before developing

propositions linking them to felt tension.

2.1.1. Dualities

We suggest that three critical dualities are inherent in relationships

that simultaneously embody competition and cooperation: (a) value

creation versus value appropriation (Brandenburger & Nalebuff,

1996), (b) separation versus integration (Bengtsson & Kock, 2000),

and (c) bridging versus bonding (Bengtsson & Johansson, 2011).Value creation versus value appropriation is the most commonly

discussed duality in the literature on coopetition (Brandenburger &

Nalebuff, 1996). Firms collaborate to create a larger pie or more com-

mon benets and at the same time compete to realize a bigger private

share of that pie (Hamel, 1991; Khanna et al., 1998). Mutual commit-

ments and creation of synergy through resource combinations are crit-

ical in creating a larger pie, but the focus on getting a bigger portion of

the pie could limit value creation in the rst place. A related aspect of

Fig. 1. A conceptual model of paradox in coopetition.

Table 1

Differences between the two constituent parts of paradox in coopetition: dualities and contradictions.

Paradox

Dualities Contradictions

Description Generalized forces present in inter-rm relationships that

involve the pursuit of seemingly opposite ends

Partner-specic forces that stem from divergence between partners

Primary source Engagement in activities that are opposing in nature Engagement with partners that are different

Relationship between the parts and

the whole

Opposites exists within a unied whole Differences persist, cannot be unied but are somewhat overlapping

Illustration

The size of the space between Yin and Yang is an indicator of

degree of challenge

Larger overlapping space means less contradictions

Illustrative dimensions Value creation and appropriation, bridging and bonding,

separation and integration

Divergence in economic interests, strategies, and identities between

partners

Key t ask Develop a holistic p erspective to int egra te t he opp osit es Ac cept the d iff erenc es and b alance the interest s

Primary consequence Strain due to challenges in (a) seeing holistically and

(b) integrating the opposing activities

Conict due to (a) underlying differences in strategies, identities, etc.

and (b) challenges of balancing the interests

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this duality is the simultaneous need to share knowledge for joint value

creation and to protect core competencies and resources in order to re-

alize more private benets. While collaboration with external partners

is a key means to access external knowledge and pursue innovations

(e.g., Ahuja, 2000), collaborating rms could unintentionally expose

valuable technological assets that competitors can utilize opportunisti-

cally. The more a rm sees these as irreconcilable tasks, the more chal-

lenging coopetition would be for the rm.

The second duality of separation versus integration derives from theprofound incompatibility between the competition and cooperation

logics of interaction inherent in coopetition engagements (Bengtsson

& Kock, 2000). In dealing with these incompatible situations, rms

might pursue the temporal or spatial separation of competition and co-

operation activities or develop a more integrative perspective by recon-

ciling them (Chen, 2008). And even if separation is pursued, integration

is still needed to link the different parts together. For example, when

twormscollaborate in R&D but compete in the market, theknowledge

received in their competitive interaction needs to be integrated in their

collaborative endeavors, as market knowledge is important for their

R&D activities. While integration would be most benecial (Lado et al.,

1997), the incompatibility between the two different logics of interac-

tions makes the task of integration challenging.

Thethird duality is bridging versus bonding , which essentially means

working closely with competitor-partners in order to create value but

not become too close and be vulnerable. Bridging through weak ties be-

tweendisconnected entities provides access to new and non-redundant

information and resources, and the informational and control advan-

tages in bridging can improve the focalrm's competitive performance

(Burt, 1992) but bridging can make the partners wary of each other.

Conversely, deep bonding (Coleman, 1988) could help minimize coordi-

nation costs and foster deeper exchanges and mutual pursuits

(Krackhardt, 1992; Szulanski, 1996). Some level of bonding is necessary

in order to mutually create value, but if bonding becomes too dominant,

therm might become over-embedded (Uzzi, 1997). Forexample, man-

agers at Ericsson described that Ericsson and Sun. over the years became

very close and grew mutually, but that became a big problem when a

major competitor of Ericsson, Oracle, acquired Sun. (Bengtsson &

Johansson, 2011). A related issue is the challenge of maintaining an ap-propriate level of breadth and depth in coopetition relationships. Time

and resource constraints make it dif cult to maintain both. Pursuit of a

deep relationship with a particular partner may constrain the breadth

(having multiple partners), or vice versa.

Just like Yin and Yang, each duality has two unique elements but

they need to be seen in a holistic way (Lewis, 2000; Smith & Lewis,

2011). It is important to emphasize that the effective pursuit of

coopetition calls for seeing the two elements of each duality both

separately (to realize the full potential of each aspect) and jointly (to

make appropriate tradeoffs). For example, value appropriation cannot

be maximized if little value is created in the rst place, and value

creation will be compromised if rms have major concerns with regard

to value appropriation.

2.1.2. Contradictions

Contradictions emerge due to interactionsbetween partners that are

different from each other. Di Domenico and colleagues (Di Domenico,

Tracey, & Haugh, 2009) suggest that in inter-organizational settings,

contradictions often exist in goals, priorities, and business logics. We

suggest that as competing rms come together through cooperation,

several contradictions become salient: divergent economic interests,

different strategies and approaches, and identity differences. Divergence

of economic interests is about the underlying (both expressed and unex-

pressed) economic motives of partners in a particular relationship.

Shared goals would bring the partners together (Gnyawali & Park,

2011), and yet the partners may have different economic motives be-

hind the relationship. For example, while the focal rmmay want to in-

troduce new products from a technology that is jointly developed, its

partner may instead want to license the technology to others. Difference

in strategies and approaches, the second contradiction, is about differ-

ences between rms in their prior commitments and future priorities.

Pre-commitments to particular technologies (Ghemawat, 1991) may

lock partners into opposing trajectories. For example, managers at

Ericsson's multimedia division described how they moved toward

“open solutions” and “best of breed solutions” whereas they believed

that the new owner of Sun. (a long time partner of Ericsson), Oracle,

wanted to keep as much as possible within its own hierarchy(Bengtsson & Johansson, 2011). Similarly, partners may hold different

mental models about the industry's future, which predispose them to

different strategies and investments. Partners also differ in their tempo-

ralorientation (Das & Teng, 2000). Onerm might be short-termorient-

ed, favoring quick results, whereas the other can be long-term oriented

putting more efforts into investing in and building the relationship.

Such differences maycreate conicts and could evenleadto the dissolu-

tion of the relationship if not managed well (c.f. Barkema & Vermeulen,

1997; Das & Teng, 2000).

The third contradiction, difference in identities, is about the partners'

views of themselves as distinct from each other (Whetten, 2006).

Because identity is distinctive, enduring, and broadly shared by organi-

zational members (Whetten, 2006), a rm's identity deeply inuences

what it does and how it does (Cornelissen, Haslam & Balmer, 2007).

Deeply held beliefs and values relating to who they are and how

they should act determine goals, priorities, and related behaviors

(e.g. Ashforth, Harrison, & Corley, 2008). Competitor rms are more

likely to differ in their identities than non-competitor rms do, and

these differences in turn signicantly affect the coopetitive partners'

preferences and commitments to each other and consequently their be-

havior toward each other (Livengood & Reger, 2010).

3. Felt tension

Felt tension is the actual or experienced state of cognitive and

emotional stress inside an organization due to its engagement in

coopetition. Scholars have acknowledged the role of tension in inter-

rm relationships and emphasized the importance of understanding

the nature and the effects of tension (Das & Teng, 2000; Zeng & Chen,2003). Consider our example of Sony, which had a deep-rooted tradi-

tion of innovating on its own with little engagement with outsiders

(Chang, 2008). Its decision to engage in coopetition with Samsung led

to Sony being labeled as “traitor” by Japanese media, and it had to deal

with the new reality of working together with a erce rival. While

these two competing giants in the electronics industry had very

different strategic and technology priorities, they had to set aside their

differences and work together. The paradoxical situation of cooperating

with a erce rival while maintaining the existing level of vigorous com-

petition led to increased tension inside a company that had a strong

inward-looking culture.

A reviewof literature that examines tension in coopetition (present-

edin Table 2) indicates a lack of clear conceptualization of theconstruct.

Research shows that different types of tensions occur at different levels(Fernandez, Le Roy, & Gnyawali, 2014; Raza-Ullah, Bengtsson, & Kock,

2014). At thenetwork level, role tension develops asrms play different

and changing roles in relation to each other ( Johansson,2012). Different

types of organizations in the network, such as customers (Lacoste,

2012) and suppliers (Wilhelm, 2011) affect the tension in different

ways. Fernandez et al. (2014) provide illustrations of how tension in

coopetition develops at multiple levels: individual, inter-unit, and

inter-organization. Given that an organization consists of individual

members, the feeling of tension starts with individuals, and aggregates

to group, unit, and overall organization levels in a manner that is similar

to howemotions becomecollective (Huy, 2012). Themajority of studies

in coopetition discusses tension arising from inter-rm conditions.

Fernandez et al. (2014) through their in-depth case study spanning

multiple levels of a coopetition relationship show that different sources



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of tension exist at different levels. While we acknowledge that the feel-

ingof tension often startswith individuals,our conceptualization of ten-

sion is at the organizational level for two reasons. First, as Huy (2012)suggests individual and team feelings spread beyond these levels and

become organizational. Second, our other constructs and the overall

theory are at the organizational level.

In previous research tension is often equalized with contradictions

and dualities inherent in the coopetition paradox (Fernandez et al.,

2014; Lacoste, 2012; Tidström, 2014; Wu, 2014), or viewed as a result

of competition (Pellegrin-Boucher, Le Roy, & Gurău, 2013). We under-

score theneed to examinetension as a core construct and argue that con-

tradictions and dualities serve as critical antecedents of felt tension. We

also note that a few attemptshavebeenmade in previous research to dis-

tinguish tension from the paradox. Raza-Ullah et al. (2014), for example,

show that tensionresultsfrom cognitive appraisal of paradoxthat engen-

ders ambivalent emotions. Lado et al. (1997) argue thatthe paradoxleads

to constructive conicts.We suggest that felt tension has two related components: strain and

conict. These two components are in line with the distinction between

latent and salient paradoxical tensions suggested by Smith and Lewis

(2011) in that latent tension (or strain) is embedded in coopetition and

salient conictis experienced throughinteractions. Strain is often internal

(felt discomfort with respect to a paradoxical situation)and mental,while

conict is often external (expressed in the interaction and relation be-

tween partners). We propose below that in coopetition the dualities or

the challenges of comprehending and dealing with incompatible issues

primarily lead to strain, and contradictions or differences between part-

ners primarily lead to conict.

3.1. Effects of dualities on felt tension

As noted earlier, dualities are inherent in any coopetition relationship

and are correlated with the intensity of a rm's engagement in

coopetition. We suggest that intensied dualities increase strain through

bothcognitiveand behavioral reasons. Cognitively, it is highlychallenging

to comprehend opposing situationsin a dualityand to discern the interre-

latedness between multiple dualities. The perceived incompatibility in

the various dualities could lead to cognitive dissonance (Festinger,

1957), and the task of balancing the dualities could create complexities,

both of which can induce high tension (Das & Teng, 2000).

Thetask of balancingboth withina duality(such as value creation ver-

sus appropriation) and between the various dualities can cause a high

level of strain for multiple reasons. The rst logic relates to issues stem-

ming from within a duality. Potential gains are high if both sides of a du-

ality are relatively high and are in balance (Park, Srivastava, & Gnyawali,

2014). Strong competition to extract higher benets from a coopetition

relationship can lead to a stalemate (Miller & Chen, 1994). The balancing

act of keeping both sides of a duality at a high level is inherently dif cultdue to the conicting demands of each duality on the roles of individuals

and organizationalunits. Second, as the multiple dualities are interwoven

with each other, lack of balance in one duality could have negative impli-

cations on the other dualities. High focus on bonding (vis-à-vis bridging),

for example, leads to over-embeddedness (Uzzi, 1997) and to recyclingof

known information rather than to new pursuits for value creation. If ties

between partners aretoo strong thepartners could becomeoverly similar

to each other, which could hamper value creation.

Third, the strategic importance of coopetition places additional cog-

nitive demands on the focalrm. Coopetition would be strategically im-

portant for the focal rm if coopetition pursuits are in its priority areas

and iftherm is highly dependent on the competitor-partner. Typically,

engagements aimed at pushing major technologies and setting techno-

logical standards, such as the Samsung-Sony coopetition (Gnyawali &Park, 2011), have high strategic signicance. The strategic importance

and the need to manage the conicting dualities may easily raise the

level of stress felt by the involving members of the rm and even lead

to dysfunctional behaviors. The on-going struggle to understand and

balance the competingpressures, as well as thesubsequent strain,starts

primarily at the individual level but is magnied when multiple individ-

uals and units face such situations. Individual challenges become orga-

nizational challenges when multiple individuals in the organization

face similar situations and use similar interpretations in responding to

them (Huy, 2011). This individual and collective strain intensies with

increased intensity of each duality, with increased challenges of dealing

with multiple dualities as the same time, and with high strategic stakes

in coopetition. Based on the above reasoning, we propose the following.

Proposition 1. Ceteris paribus, as the intensity of the dualities increases,the level of felt tension experienced by the focal rm increases primarily

through the development of strain.

3.2. Effects of contradictions on felt tension

Contradictions are incompatible inter-partner forces that coulddrive

the partner rms in different directions. The competitor-partners are

often wary of each other to begin with (Gnyawali & Madhavan, 2001).

While they nd their collaboration necessary for survival and growth,

the competitive challengesof reconcilingtheirstrategic and identity dif-

ferences are striking. More critically, the deep-rooted differences be-

tween the partners in terms of their identity would make them see

each other differently. These forces have important implications for

Table 2

Sources and types of tension coopetition.

Authors Sources of tension Types of tension

Das and Teng (2000) Competing forces in alliances Cooperation versus competition, rigidity versus exibility, and

short-term versus long-term orientation

Fernandez et al. (2014) Different sources of tension at different levels

Inter-organizational: differences in value expectations, goals, and

strategies

Intra-organizational: internal units competing and cooperating,

dif culty seeing past competitor as a partnerIndividual: differences in emotions, beliefs, identities

Units and organizations facing paradoxical forces such as competition

and cooperation, as well as value creation and appropriation

Individuals experiencing conicting beliefs and identities

Johansson (2012) Conicting expectations and demands in different roles (competitor

supplier or customer) in different activities

Balancing long-term relationships and short-term interactions, in

cooperation and competition

Lacoste (2012) Third party demands. The customer demands that suppliers cooperate

but at the same time make them compete

Value creation through collaboration and value appropriation through

price competition in value chain

Lado et al. (1997) Opposing dualities of cooperation and competition Managerial cognitive systems that embrace constructive conicts

Pellegrin-Boucher et al. (2013) The risk related to partners' competing intensions On-going competitive interactions

Raza-Ullah et al. (2014) The coopetition paradox (simultaneous cooperation and competition)

triggers emotions

Emotional ambivalence due to simultaneous positive and negative

emotions

Tidström (2014) Co ope ratio n and competition Ov erlappin g do mai ns, de livery, advertisi ng and coope ratio n

Wilhelm (2011)

Cooperation and competition and inuences of third party (supplier

association)

On-going competitive interactions and simultaneity of cooperation

and competition

Wu (2014) Cooperation and competition Inherent dif culty in pursing both cooperation and competition



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the partners' perceptions of the relationship as well as for their behav-

iors toward each other, likely engendering high levels of conict. First,

the genuine and deep differences in the two rms' beliefs and values

about who they are and how they should act in any situation would

lead to differences in their views of the same situation. Identity drives

information processing and behavior when faced with an ambiguous

and challenging situation (Livengood & Reger, 2010), and the vulnera-

ble situation of coopetition would therefore make identity more salient

in shaping the

rms' cognition and behaviors. Exactly when there is aneed to create a common locus, such identity differences are likely to

drive actual behaviors that make it dif cult to nd common ground.

Furthermore, deeper identity differences could also be a cause for

exacerbating the partners' differences in economic interests and

strategies.

Second, the economic interests (or goals for thecoopetition relation-

ship) of therms determine their strategies and priorities. Widerdiffer-

ences in their goals will make managers feel uncomfortable about what

to choose or focus on. The feeling of unease may simply escalate to a

point that prevents the managers from making sound decisions in a

relationship. Even if decisions are reached to satisfy both parties, such

decisions are likely to entail unusual discrepancies and may confuse

other employees of the rm.

Third, the need to deal with multiple contradictions might lead to

loss of strategic coherence. Effective pursuit of a strategy requires a

system of activities that support and reinforce each other ( Porter,

1996). To collaborate effectively with a competitor-partner, both

rms need to establish strategic objectives and operational proce-

dures that are aligned with each other. Yet, the new activities tai-

lored for the collaboration may not be compatible with the focal

rm's existing activity system, which has been established over

time. The task of implementing the conicting priorities and inco-

herent activities could demand signicant changes to the rm's rou-

tines and core competences (Nelson & Winter, 1982). Although such

changes may be perceived as necessary from a strategic point of

view, resistance from employees and other stakeholders can still

arise. This is not only because new ways of doing business pressure

themto alter those organizational routinesthat they are comfortable

following but also because their personal interests may be threat-ened when the rm's current “value system” needs to be

restructured (cf. Christensen, 1997). Thus, deeper-level identity

differences between the partners coupled with greater disagree-

ments on goals, strategic approaches and priorities, and lack of co-

herence in various activities could intensify the level of

contradictions in a coopetition relationship. As a result, the focal

rm would encounter higher levels of conict. Therefore, we pro-

pose that:

Proposition2. Ceteris paribus, as the level of contradictions in coopetition

increases, the level of felt tension experienced by the focal rm increases

primarily through the development of manifest con ict .

Two important points are worth noting here: First, strain is likely to

lead to conict. When strain becomes too strong, the actors will take astance to escape from schizophrenia (e.g., by making a decision that is

not acceptable to the partner), which subsequently will lead to conict.

Second, while both strain and conict could arise from dualities and

contradictions, our propositions and related arguments are focused on

the primary effects. Development of these points is beyond the focus

of the current initial attempt to address the coopetition paradox, but is

a worthy topic for future study.

3.3. Effects of felt tension on coopetition performance

We dene coopetition performance as the actual returns or out-

comes that the focalrm generates from a coopetitionrelationship. Suc-

cess in technological pursuits and innovations is an important outcome

in coopetition (Gnyawali & Park, 2011). Note that the focus is on the

marginal gain driven by, and directly attributable to, the coopetition

relationship; it is not the overall rm performance.

We propose that felt tension has a curvilinear inuence on

coopetition performance. Anchoring our proposition is the core idea

that felt tension is linked in complex ways to the retention and alter-

ation of routine behaviors mainly because a reasonable level of strain

and conict has the potential to stimulate organizational changes to

help the

rm to reach equilibrium again. At low levels of felt tension, in-dividuals and organizations are prone to routinized behavior, relying

primarily on standard operating procedures, heuristics and automatic

processing (Nelson & Winter, 1982). Low tension could also mean that

the tension is not salient (Smith & Lewis, 2011), i.e., implying the lack

of realization or acceptance of the opposites. At medium levels of felt

tension, alert perception and conscious processing take over in a

coopetition relationship. As a result, automated routines are suspended,

and consciousdecision-making replaces standard operating procedures,

and innovative solutions are identied. At high levels of felt tension,

the individuals and the organization are likely to revert to routine be-

havior and automatic processing because computational capacity gets

swamped by the felt tension, leading to little or no improvement on

organizational outcomes unless the organization has the capability to

understand and manage high tension.

The positive effects of felt tension occur due to the active and mind-

ful search for superior and innovative solutions to challenges related to

coopetition. Suspension of the automatic response mode and mindless

routines liberates individuals and organizations to engage in conscious

and deliberate explorations. Such mindful search may promote greater

intentionality, increase the range of solutions considered, and reduce

blind spots. Thepartners could benet from the searchfor creative solu-

tions for common problems (Fernandez et al., 2014). The intentionality

and conscious deliberation help to overcome complacency and organi-

zational inertia and stimulate innovation.Mindful engagementand con-

structive debate about contentious issues force each party to articulate

and clarify their own positions and to stress-test their own models of

the world. Such robust dialog serves to enhance the rigor of analysis,

and canbe especially valuable in coopetition situations wherein thejux-

taposition of competinganalytical models and roadmaps can help to re-duce ambiguity about the future.

At the same time, felt tension is not without its downsides. As felt

tension increases, more of the individual's and the organization's capac-

ity is devoted to processing the stressrather than to performing creative

tasks. Also, increase in strain and conict can engender mistrust and

compromise the quality of communication. In turn, ineffective commu-

nication leads to poor coordination, reduced quality of decisions and

slower decision speeds. Furthermore, opportunities to share knowledge

productively and to create new synergistic advantages may be missed.

Negative emotions could divert managerial attention from task- and

process-related issues, and such emotional anxiety and organizational

inertia could spur the vicious cycle (Smith & Lewis, 2011).

In sum, both the absence and the predominance of felt tension rep-

resent negative territories for coopetition performance. As felt tensionlevel increases to the mid-point of the range (the sweet spot), positive

effects outweigh the negative effects. The alertness, mindful search,

and robust debate stimulated by healthy felt tension levels serve to im-

prove mutual understanding necessary to effectively engage in

coopetition and thereby to generate innovative outcomes through

coopetition. However, as the felt tension goes beyond the sweet spot,

extra time and resources would be spent in the attempt to manage

the conict. At precisely those moments that coopetition partners

should be communicating more and addressing critical issues, the chan-

nels shut down. This is possibly why a recent empirical study (Park

et al., 2014) shows that pursuit of moderate to high levels of competi-

tion and cooperation generates higher performance than does pursuit

of extremely highlevels of both. Thus, in the extremely high felt tension

regions, the negative effects override the positives.



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Proposition 3. An inverted U -shaped relationship exists between felt

tension and coopetition performance with low felt tension and high felt

tension being associated with low coopetition performance and mid-level

felt tension evidencing the best coopetition performance.

The subjective nature of felt tension suggests that competitors-

partners, although facing the same set of dualities and contradictions,

can feel asymmetric pressure or uneasiness, thus likely demonstrating

different responses and outcomes. The key contingency for such asym-

metry is each competitor-partner's paradox management capability,which consists of both analytical and executional capacities.

4. Paradox management capability and its moderating role

Paradox management capability refers to a rm's capacity to per-

ceive and analyze key issues and challenges in inter-rm relationships

and to devise appropriate managerial responses. Among the four ap-

proaches (mere acceptance, temporal separation, spatial separation,

and synthesis) to dealing with paradox (Poole & van de Ven, 1989),

our focus here is mostly on the last one (synthesis and integration).

We suggest that integration of the opposites of competition and cooper-

ation and the resulting dualities and contradictions could be managed

more effectively if rms have adequate analytical and executional

capabilities. Analytical capability helps in the accurate assessment of the paradoxical situation and the executional component helps in the

design and implementation of actions that address the paradox.

We propose that both components play distinct roles in coopetition,

and that the analytical component shapes the development of the

executional component (Eggers & Kaplan, 2013). To add clarity to the

overall construct of coopetition capability before we elaborate on its

analytical and executional components, we provide some illustrative

elements and their effects in Table 3. As illustrated in the table,

coopetition capability helps to enhance helpful aspects and minimize

harmful aspects as rms engage in coopetition.

4.1. Analytical capability

Analytical capabilityrefers to therm's capacity to obtaina clear andaccurate understanding of the coopetition situation, including how spe-

cic contradictions and dualities differentially impact the relationship.

Firms with high analytical capability would be adept at mapping out

contradictions and dualities in coopetition and in understanding possi-

ble implications. Analytical capability is analogous to Cameron and

Quinn's (1988, chap. 1) concept of ‘ Janusian thinking’. In Janusian think-

ing, two contradictory thoughts are held to be true simultaneously and

resolution of apparent contradiction leads to major breakthrough in in-

sights. Smith and Tushman's (2005: 526-27) discussion of paradoxical

cognition—consisting of paradoxical cognitive frames and cognitive

processes—provides a concrete basis to explicate analytical capability.

Paradoxical cognitive frames are “mental templates in which managers

recognize and accept the simultaneous existence of contradictory

forces.” Such frames enable the cognitive juxtaposition of opposing

forces, the recognition of dualities and potential synergies, and the em-

bracing of tensions. Such paradoxical frames create a foundation for

cognitive processesthat can handle inconsistencies. Cognitive processes

are ways in which managers think about and respond to information.Smith and Tushman (2005) suggest that paradoxical cognitive process-

es enable the handling of inconsistencies. They further suggest that it is

the combination of cognitive frames and processes that allow decision

makers to effectively embrace contradictions,rather than to avoid them.

Paradoxical frames and information processing allow managers to

sense and interpret conicting cues in the environment, assess critical

dualities and contradictions, and understand the complexity of issues

involved in the paradoxical inter-rm relationships. In other words,

the cognitive frames or mental models would enable managers to see

and sense what ought to be sensed (Barr et al., 1992; Huff, 1990;

Porac, Thomas, & Baden-Fuller, 1989), as well as to process conicting

information. Further, high analytical capability entails a rm's capacity

to tell the difference between dualities and contradictions in

coopetition, which is critical in developing effective responses.

We suggest that a high level of analytical capability is key to reduc-

ing felt tension: faced with the same kinds of contradictions and duali-

ties, a rm with a higher level of analytical capability will experience

less tension, mainly due to reduced misperceptions and increased accu-

racy in understanding the situation. Analytical capability enables man-

agers to realize that both cooperation and competition are benecial

and therefore make it easier to see and accept the dualities. A rm

with high analytical capability also has a more accurate sense of the

challenges ahead and could identify a greater range of countermeasures

necessary to manage the contradictions. Social cognition research

has long recognized that different actors perceive the same reality dif-

ferently (e.g., Bruner, 1957). Accordingly, in the context of a dyadic

coopetition relationship, the same set of dualities and contradictions

may lead to different levels of felt tension experienced by the

competitor-partners due to two critical roles of cognitive frames andinformation processing: (1) each rm's awareness of the nature of

dualities and the scale of contradictions and (2) each rm's perception

of these antecedent conditions. These two forces work in unique ways,

which both mitigate and intensify the effects.

As highlighted in competitive dynamics literature (e.g., Chen, 1996;

Smith, Ferrier, & Ndofor, 2001), awareness of another competitor's stra-

tegic move is a prerequisite for a rm's competitive response. Similarly,

without full awareness of the dualities and contradictions in coopetition,

the focal rm only partially experiences the strain and conict derived

Table 3

Coopetition capability: illustrative elements.

Capability elements Enhancing helpful aspects Reducing problematic aspects

Parado x management Increases ability to engage in active, mindful search; leads to

greater creativity and innovation due to capability to nd

integrative, synergistic solutions; leads to increased

stimulation in nding solutions between contrasting forces

Reduces mistrust, miscommunication, risk of

paralysis in decision making

Core protection Greater sense of security leads to greater willingness to share

knowledge; higher creativity

Serves as a safety net and therefore reduces feeling

of vulnerability and chances of errors

Relationship management

- Motivating the partner (unilateral commitment,

setting aside small issues for the larger good)

- Enabling the partner

Leads to trust building

Partner sees long-term benets and upsides and commits more

Working with strong partner enhances innovativeness

Reduces mistrust

Reduces feeling of vulnerability of the partner

Reduces mishaps due to lack of capabilities

Supporting capabilities (such as HR system that hires

people with coopetition mindset, trains for such mindset,

and matches people to situations, culture of fast decision

making, leadership with paradoxical cognition)

People with a coopetition mindset (who have the cognitive

frames and cognitive processes to understand and handle

paradox) are more effective and ef cient in decision making

Fast decision-making helps to achieve quick adaptation

Paradoxical cognitive frames and processes help to

reduce confusion, stalemates, and shocks

Paradoxical mindset and cognitive frames help to

understand and diffuse challenges

Leadership integrates divergent thoughts into a

holistic view



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from the dualities and contradictions. This is because coopetition entails

a high degree of strategic novelty and complexity, which constitutes a

serious test of the rm's capacity to process information and anticipate

future scenarios. If the rm has previously experienced coopetition, it is

more likely to have the cognitive ability to comprehend the complex

interplay between competition and cooperation and to sense the

existence of dualities and contradictions. Having the cognitive frames

and information processing ability to sense and understand the dualities

and contradictions in coopetition could increase felt tension. By contrast,weak analytical capability may predispose the rm to miss (or ignore)

dualities and contradictions that have the potential to generate strain

and conict. Simplistic cognitive processes could result into selective

perception (Dearborn & Simon, 1958) or selective imperceptions

(Beyer et al., 1997:718), which can incline managers to neglect impor-

tant cues that do not relate to their roles. As a result, it can be dif cult

to fully understand and appreciate the actions and priorities of others,

thus increasing strain and manifest conicts. In other words, limited

vision may prevent the rm from recognizing likely challenges and

thus from experiencing intensied stress. Therefore, a rm's analytical

capability can help it to more accurately sense the dualities and contra-

dictions in coopetition and therefore moderate the effects of dualities

and contradictions on felt tension.

Analytical capability also affects the rm's perception of dualities

and contradictions in detail once it senses their presence. Even when

two rms have the same level of awareness of the same set of dualities

and contradictions, they may not feel the same level of tension because

the difference in their analytical capabilities can affect the extent to

which each rm perceives the contradictions as cognitively, strategical-

ly, or organizationally challenging. Particularly, the ability to perceive

the difference between dualities and contradictions may lead the rm

to develop a more holistic understanding of the competitive–collabora-

tive situation (as opposed to either/or) and at the same time enable the

rm to actively seek ways of managing contradictions. However, the

rm with lower level of analytical capability is more likely to “panic”

or feel disoriented, as it does not have suf cient knowledge about the

situation and ways of reducing activity incoherence. Development of

more complex, holistic, and accurate mental models of the coopetition

situation will help avoid vicious circles and spur virtuous circles of paradox response (Smith & Lewis, 2011). Thus increased understanding

or analytical capability is likely to help keep the felt tension at a moder-

ate level for given levels of dualities and contradictions. Accordingly, we

propose that:

Proposition 4. A rm's analytical capability moderates the relationship

between antecedents (dualities and contradictions) and felt tension such

that for a given level of dualities and contradictions , greater analytical

capability will help keep the felt tension at moderate levels .

4.2. Executional capability

Executional capability refers to the focalrm's ability to manage thetension in a coopetition relationship productively. Building on Eggers

and Kaplan (2013), we suggest that routines are the foundations of

executional capability and identify three critical elements of such

capability: the ability to develop the routines themselves, to implement

processes of constructing and assembling routines into capability, and

to utilize the routines and the capability. A rm's exposure to, and

prior experience in dealing with, complex organizational issues and

moreparticularly coopetitionrelationships are instrumental in develop-

ing and leveraging appropriate routines. Since successful and recent ex-

periences get encoded more than old and unsuccessful ones (Eggers &

Kaplan, 2013; Levinthal & March, 1993), recent experience in dealing

with paradoxical relationships will help in creating routines and

bundling them to turn them into capabilities. Illustrative routines in

inter-rm relationships include the process of identifying and screening

potential partners (Gulati, 1999), organizing and managing partner-

ships (Ireland, Hitt, & Vaidyanath, 2002), and creating and sharing

knowledge (Dyer & Singh, 1998). Leveraging involves timely utilization

of the routines for the right purpose, recombining old and new routines

to rene the capability, and exaptation (renement of routines created

elsewhere to suit the inter-rm situation) (Eggers & Kaplan, 2013).

Routines could be developed and used in a specic coopetition relation-

ship as well as in many coopetition relationships. They could be

developed in non-coopetition situations as well and modi

ed for thecoopetition context.

We suggest that strong executional capability enables the rm to

effectively manage complex inter-rm relationships and mitigate the

negative effects and enhance the positive effects of felt tension in

threeprimary ways:effectivemanagementof eachcoopetitionrelation-

ship, creating greater value from broader coopetition pursuits, and

leveraging gains from coopetition. We address each in turn below.

When therm has developed routines and processes to identify and

evaluate partners, i.e., due diligence routines, it becomes easier to

engage with partners that are facing complementary challenges and

needs. The mutual need and overlapping interests will help bring the

partners together for a common agenda and commit more relevant re-

sources to the relationship to realize high potentials gains. The focal

rm's ability to fully engage the coopetition partner (through knowl-

edge sharing and bonding) is likely to engender greater commitment

from the partner as well. Capable partners over time develop informal

rules of the game, which enhance mutual adjustments and players'

co-evolution as the situation changes. For example, as Samsung and

Sony realized potential gains from each other's capabilities and at the

same timesaw thepotential to shape theat panel TV industry, they in-

creased their commitment through additional investments and pursuit

of a newer generation of the LCD technology.

Second, as the rm engages in more coopetition relationships, it

could combine the routines developed from each tie and enhance its

coopetition capability and utilize that in subsequent relationships. The

greater the availability and usefulness of the routines, the more likely

it is that the rm will be able to manage current and potential tensions.

Finally, as the rm engages in multiple relationships and is able to

achieve mutual commitments and appropriate resource allocationsfrom multiple coopetition partners, it is able to realize greater gains

from these relationships. While rms with limited executional capabil-

ity would feel continued tension that could lead to a vicious cycle, rms

with strong capability would thrive in coopetition and realize the virtu-

ous cycle (Smith & Lewis, 2011). Finally, the focal rm's capabilities in

managing coopetition effectively are likely to help it in leveraging

coopetition outcomes more effectively than the partner could. Please

note that this particular point is not about “taking advantage of ” the

partner, but is about utilizing specic outcomes from a coopetition

relationship (new technological innovations for example) and using in-

ternal competencies to generate greater economies of scope internally.

As the rm's capabilities become stronger, its partners see the focal

rm as a more desirable partner, which in turn will provide the rm

with greater bargaining power to shape the relationship.The creation of routines and development of capability over time

make the rm more prepared and better able to handle coopetition re-

lationships by reducing the negative effects of tension and any chances

of critical behavioral failures (Gavetti, 2012). Therefore, when a rm's

executional capability is high, it is likely to minimize the negative stress

and conict and increase eustress (or positive stress) both internally

and in the coopetition relationship and generate greater returns from

coopetition. We therefore propose that:

Proposition 5. A rm'sexecutional capability is likely to positively moder-

ate the inverted-U shaped relationship betweenfelt tension and coopetition

performance such that as executional capability increases the positive

performance effect of felt tension will become more positive and the

negative effect will become less negative.



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4.3. Analytical capability increases executional capability

Our central argument in this proposition is that a better understand-

ing of the coopetition situation,including of the dualities and contradic-

tions and their effects, helps the rm to develop and use appropriate

executional capabilities that are relevant to the context. This effect oc-

curs through the processes of capability building and capability leverag-

ing as suggested by Eggers and Kaplan (2013). In terms of capability

building, clearer perceptions of the situation and awareness of differentoptions provide early signals regarding the nature of routines and pro-

cesses necessary to deal with a specic coopetition relationship as

well as in therm's broader approach to coopetition. Such understand-

ing will likely help drive the allocation of resources to effectively man-

age coopetition relationships. The earlier such understanding emerges,

the more time the rm has in order to deploy and rene its executional

capability. An understanding of the difference between dualities and

contradictions helps the rm to nd the right approaches for the differ-

ent drivers of felt tension and develop the most appropriate measures

for dealing with different issues of coopetition. In other words, the abil-

ity to foresee specic sources of felt tension increases the ability to de-

velop systems and processes to address effectively the sources and

their effects. For example, the more a rm understands an opportunity

and can frame it to induce partner effort (an example of analytic capa-

bility), themore likely that it canmotivate thepartner forextra commit-

ment and can utilize its routines to realize greater gains. Strong

analytical capability also provides a cognitive lens to interpret and com-

bine coopetition experiences into routines and rene them. Capability

leveraging involves making use of a capability for the right purpose,

recombining and renewing capabilities, and exaptation or use of a capa-

bility created for a different purpose (Eggers & Kaplan, 2013). Clearer

assessment of the coopetition situation will help determine which

kind of routines would be more effective in addressing the specic con-

tradictions involved in different coopetition relationships. This in turn

will channel the rm's efforts in utilizing existing capabilities, in

recombining current coopetition routines, and in identifying and

rening routines developed elsewhere that could be modied for

coopetition pursuits. Essentially, as Eggers and Kaplan (2013) suggest,

the cognitive component or the analytical capability helps to developand rene routines, combine various relevant routines to develop

strong capabilities, and leverage them. The analytical capability helps

to better understand the paradox, which is essential in order to develop

various ways to manage the paradox (Smith & Lewis, 2011). We

therefore propose that

Proposition 6. The greater the analytical capability of the focal rm, the

greater its executional capability.

While we discussed above the dominantcause-effectow (analytical

to executional), we acknowledge that executional capability is likely to

inuence analytical capability as well. A visionary view thatprompts ac-

ceptance of the need for coopetition, coupled with a sophisticated un-

derstanding of what it takes to succeed in coopetition, can stimulatethe rm to simultaneously develop strong capability both in analyzing

coopetition situations and in executing coopetition strategies. Further,

we should notethat analyticalcapability is a necessarybut not suf cient

condition for the development of executional capability because under-

standing a situation does not necessarily lead to action ( Gavetti, 2012).

Therefore, the standard ceteris paribus condition applies in all proposi-

tions developed above.

A natural question at this point would be how to empirically exam-

ine coopetition capabilities. Chen and Miller's (2015) recent multidi-

mensional framework, contrasting three prototypical views of

competitive dynamics—viz., rivalrous, competitive-cooperative, and

relational—offers one way to conceive of and examine coopetition-

specic capabilities. In a coopetition relationship, the aim is competitive

advantage rather than appropriation; the mode is to cooperate or co-

opt, rather than to attack or to retaliate. Most importantly, the toolkit

is political as well as economic; and the time horizon is intermediate

as against relatively short-term in a purely rivalrous relationship. In

coopetition, Chen and Miller (2015)suggest, there is an emphasis on in-

telligence, e.g., understanding the priorities of potential partners. Such a

perspective points to many specic examples of strategy skills that

going to coopetition capability. For instance, a strong competitive intel-

ligence systemendows the company with an accurate understanding of

the competitivelandscapeand speci

c partnerpro

les, thus providingagood starting point for more fruitful negotiations and more productive

partner selection and governancechoices. Similarly, a good understand-

ing of antitrust law and practice (e.g., Federal Trade Commission, 2000)

can help the company to assess howfar to take the cooperation without

running afoul of the law. Appropriate organization structures that iso-

late competitive and cooperative processes, so as to limit unintended

knowledge transfer (Hamel, Doz, & Prahalad, 1989), may be another el-

ement of coopetition capability.

5. Discussion and implications

This paper is motivated by both theoretical and managerial consid-

erations. The literature on paradox has grown substantially, and yet

we know little about paradoxes in inter-rm relationships, especially

those thatinvolve simultaneous pursuit of competition and cooperation

(Das & Teng, 2000; Gnyawali, He, & Madhavan, 2006; Gnyawali &

Madhavan, 2001). While coopetition “has become an integral part of

many companies'daily agenda” (Bengtsson& Kock, 2014: 180), suchre-

lationships are inherently challenging to manage (Gnyawali & Park,

2011; Padula & Dagnino, 2007), and managers lack guidance in under-

standing and managing such complex relationships. To ll these critical

gaps, we develop a theory of paradox in coopetition that builds on the

core elements of the literatures on paradox and on inter-rm

coopetition. Our theory identies key drivers of the paradox, explicates

the distinction between the antecedent conditions and felt tension and

explains their relationships, and discusses the critical role of paradox

management capability in handling the tension and in creating greater

gains from coopetition. Central to our theory is the premise that rms

vary in their felt tension and internal ability to understand and managethe many contradictions and dualities in coopetition. Although our

model is generally applicable in a wide variety of contexts involving

the simultaneous pursuit of competition and cooperation, it is most ap-

plicable in contexts involving intense forms of coopetition where two ri-

vals engage in a joint venture (such as Samsung and Sony).

Johnston and Selsky (2006) suggest three foci of the paradox litera-

ture: paradoxical state or condition, representation or construction of

paradox with a focus on tension, and management of paradox. Our con-

ceptual framework combines elements from these aspects in an attempt

to develop a theory of paradox in the novel context of coopetition. In

terms of the paradoxical condition, we identied important dualities

and contradictions and discussed their implications. We argued that

contradictions are forces that pull partners in opposite directions

while dualities are critical balancing acts fundamental in coopetition.We articulated two important aspects of tension—strain and

conict—that createcriticalchallenges andneed to be managed. We fur-

ther drew a conceptual distinction between the fundamental sources of

tension—the contradictions and dualities—and the felt tension experi-

enced by the rm.

Thethird aspectthat relates to our conceptual framework is the con-

struct of coopetition capability and its importance in managing the

coopetition paradox. The critical role of paradox managementcapability

is illustrated by F. Scott Fitzgerald's oft-quoted statement presented in

our epigraph: only the “rst-rate intelligence” has the ability to hold

two opposing ideas and still be able to function. Implicitly, all partners

face the same conditions, but some are able to cope better by

being able to understandand manage the tension generated by the fun-

damentally opposing forces. As an illustrative analogy, imagine a truck



10/12

attempting to cross two adjacent bridges on a country road; the truck

crosses one without incident but the other bridge buckles. Clearly, the

load imposed by the truck wasthe same in both cases, but the two brid-

ges varied in their capacity to bear the load. Thedistinction between an-

tecedent conditions and tension as noted earlier was crucial to the task

of identifying the building blocks of paradox management capability, in

that while the inherent dualities and contradictions—and their

associated potential tension—may be given, therm may be able to de-

velop its own ability to handlethese conditions. Firms with strong capa-bilities would be able to reliably and repeatedly understand the tension

and manage the tension level generated by a given set of dualities and

contradictions and therefore succeed in dealing with them.

Fernandez et al. (2014) illustrated how tension arises at multiple

levels and how tension is managed through separation and integration

at different levels. With a focus on the organizational level, we have

linked the construct of tension, coopetition capability, and coopetition

outcome. We explicitly illustrated how the development of the ability

to understand the paradox (analytical capability) and to deal with the

paradox (executional capability) help enhance coopetition outcomes

by maintaining tension at a moderate level. In the discussion of

coopetition capability, we have explained that the analytical capability

consists of a sharedmindset (cognitive framesand information process-

ing). Shared mindset could be developed by the senior managers (such

as the CEO and top management team) and other key employees who

directly deal with coopetition. Executional capability consists of rou-

tines,interface of routines andcognition, and useof theroutines in deal-

ing with coopetition. In Table 3, we provide illustrations of how such

capability can help enhance helpful aspects and minimize harmful as-

pects while dealing with coopetition and subsequently enhance

coopetition outcomes.

6. Contributions

Our paper builds on and contributes to three important streams of

literature: paradox, inter-rm relationships, and behavioral strategy.

In terms of contributions to the paradox literature, we identify a partic-

ular type of paradox—competition and cooperation—and dig deeper to

understand the nature of paradoxical conditions, how these conditionslead to paradoxical tensions, and how they impact outcomes. The con-

cepts of contradictions and dualities have been key dening features

of paradox (Lewis, 2000; Smith & Lewis, 2011), but little is known

about how they are similar or different and what gives rise to them in

the inter-rm context. With a focus on competition–cooperation, we

have provided a concrete basis to understand both contradictions and

dualities in the inter-rm context. We have stipulated that the contra-

dictions are partner-specic but dualities are inherent in the phenome-

non of coopetition. This distinction helps to understand the specic

characteristics of the competition–cooperation paradox at the inter-rm level, which has not been discussed before. This distinction is also

important to understand unique tensions stemming from contradic-

tions and dualities and manage the paradox. The clarication of such

paradoxes is especiallyrelevant to innovation through the juxtapositionof different concepts (Koestler, 1964).

While the literature has clearly stressed the existence of and chal-

lenges stemming from tension in inter-rm relationships (e.g. Das &

Teng, 2000), this central concept has remained ambiguous. Further,

much of the literature sees tension as negative (Das & Teng, 2000) and

searches for solutions to minimize tension (Bengtsson & Kock, 2000),

but the literature is often silent about how to manage it. Therein lie

two of our core contributions to the coopetition literature. First, we

clearly spell out the nature of tension by identifying its two constituent

elements (strain and conict), by explaining specic factors that lead to

such tension (dualities and contradictions), and by articulating how

tension impacts performance. Second, we offer a compelling explana-

tion of how tension can also be helpful by increasing alertness and

mindfulness and by questioning existing routines. We suggest that

efforts solely focused on reducing tension may not be fruitful because

some level of tension is necessary and productive. Instead, we call for

the development of capabilities that will help to understand better the

drivers, nature, and consequences of tension. Our development of the

constructs of analytical and executional capability provides an initial

basis to better understand, accept, and act upon tension.

We also contribute to the literature on behavioral strategy, speci-

cally on the role of cognition and capabilities. Our theory offers insights

on why and how behavioral failures occur in inter-organizational rela-tionships. We suggest that behavioral failures (Gavetti, 2012) could

occur at both low and high levels of tension, but for different reasons.

Low perceived tension limits alertness, consciousness, and understand-

ing of the complexity, whereas high tension leads to the use of existing

heuristics and routines and justication of their use. The former reects

a lack of readiness, and the latter reects a lack of willingness to ques-

tion the complexity of the situation. Further, our conceptualization of

the paradox management capabilities suggests ways to avoid behavior-

al failures at high levels of tension and effectively manage the moderate

to high levels of tension in order to generate superior outcomes. Firms

that consciously recognize the need for changing and/or creating rou-

tines to address thedemands from differentcontradictionsand dualities

and are effective in doing so would likely thrive in their co-opetitive re-

lationships. Incidentally, our discussionof the analytical capability helps

to address rationality bounds (limits to understanding) and of the

executional capability to address plasticity bounds (limits to action),

as articulated by Gavetti (2012).

7. Implications for future research

Future research could delve deeper into the coopetition paradox in

several important ways, and we illustrate a few of them here. First,

while we have theorized about the nature and effects of contradictions

and dualities, we have not explored the interrelationships between

them due to space constraints. It is possible that some contradictions

can make certain dualities more prominent or intense, and vice versa.

Identifying and exploring such prominentand mutually reinforcing ele-

ments would be important as they mayhave more critical consequences

on strain, conict, or even both. Future research could explore possiblemechanisms through which such mutually reinforcing effects might

occur. Second, the challenges and tension in inter-rm relationships

generallystart at the individual level andmanifest at the team and orga-

nizational levels. The capabilities for pursuing such relationships are

also likely to exist at multiple levels, andindividuals' skillscould interact

with the organization's routines to form organizational capabilities. Op-

portunities exist for organizational behavior researchers to investigate

systematically the psychological and emotional aspects of individual

and team strain and conict and for strategy scholars to explore further

the dualities and contradictions and their rm-level implications. Such

research could then be integrated through a dialog between the two

groups of scholars to develop a ner-grained understanding of these

important multi-level phenomena.

Third, with respect to the relationship between the analytical andexecutional capabilities, we focused on the positive effect of the former

on the latter, but it is also possible that the executional capability also

helps to augment theanalytical capability. Futureresearchcould further

unpack this relationship and examine conditions under which one

could be a cause for the other in both positive and negative ways. It

would be interesting to delve deeper into specic mechanisms through

which paradox management capabilities are developed and how path

dependence inuences the development of such capability. Forth, by

building on the foundation established in this paper, researchers could

also identify and examine other contingent or independent factors that

inuence the links discussed in this paper. For example, how does the

focalrm's felt tension and capability interact with those of its partners?

Research could also delve into the feedback effects of capabilities and

performance on the antecedent conditions (contradictions and



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dualities). The current model leaves open the possibility of incorporating

such dynamic effectsover time, butin theinterestof parsimony, we have

not developed these aspects here. Examination of such questions would

help to develop a more nuanced understanding of the nature and impli-

cations of these critical capabilities.

Fourth, a crucial implication of our model that shapes future

research is the implicit asymmetry between partners in a coopetition

relationship. Various aspects of asymmetry have been studied in the

broader literature on inter

rm collaboration —

e.g., learning races(Hamel, 1991), differential performance outcomes based on asymmet-

ric capabilities (Inkpen & Beamish, 1997), and superior stock perfor-

mance for rms with higher specic learning capability relative to

partners (Yang, Zheng, & Zaheer, 2015). Despite the weight of evidence

that asymmetries matter in partnership outcomes, coopetition re-

searchers are yet to focus on this promising topic. Thus, partners may

have differing levels of coopetition capability, as reected in greater or

lesser levels of felt tension. According to our model, the partner with

higher levels of analytical and executional capability will be able to

manage the sources of tension better, and will thus experience proper

levels of felt tension. That partner will then be able to not only fulll

its partnership role better, but also to focus on extracting private bene-

ts (Khanna et al., 1998) from the partnership. On the other hand, given

therightset of intentions, thestronger partner canalso help to strength-

en the cooperation—e.g., by being proactivein repairing therelationship

in the event of conict, or by helping the weaker partner to learn faster.

The locus of asymmetry can also have important consequences—e.g.,

asymmetry in analytical capability may have different implications

than asymmetry in executional capability. How asymmetry affects the

coopetition relationship is a promising research issue, including

nuances such as the conditions under which asymmetry can lead to

positive or negative outcomes.

Finally, empirical tests of the conceptual model (or its parts) could

be performed using a combination of methods. Previous empirical re-

search on tension is dominated by case studies focusing on the contra-

dictions inherent in coopetition; not on felt tension. Th

competition-cooperation conceptual frameworks

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