Is Management Tension Always Negative? Coopetition Logics and (Un)Productive Tensions

Is Management Tension Always Negative? Coopetition Logics and (Un)Productive Tensions in New Marketplaces

OR

Coopetition Logics and (Un)Productive Tensions in New Marketplaces : Insights from the Contactless Payment Card Project

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Are New Market-Creating Tensions Always Negative? Coopetition Logics and (Un)Productive Tensions in the Contactless Payment Card Project[MP1]

Authors:

Dr. Inci TORAL-MANSON

University of Birmingham, Business School, Edgbaston, Birmingham, B15 2TT, UK email: tel: +44 121 414 4848

Professor Mark PALMER

Queen’s University Management School, Queen’s University Belfast, Riddel Hall, Stranmillis Road, Belfast, Northern Ireland, BT9 5EE . UK email: tel:

Dr. Ronan DE KERVENOEL

Sabanci University, School of Management, Orhanli, Tuzla, 34956 Istanbul Turkey and Aston Business School, UK Email:

* For communication purposes please use this address

Is Management Tension Always Negative? Coopetition Logics and (Un)Productive Tensions in New Marketplaces

OR

Coopetition Logics and (Un)Productive Tensions in New Marketplaces : Insights from the Contactless Payment Card Project

OR

Are New Market Creating Tensions Always Negative? Coopetition Logics and (Un)Productive Tensions in the Contactless Payment Card Project

Abstract

Prior work on coopetition highlights the unproductive risks of misappropriation between firms that simultaneously cooperate and compete. This paper provides insights into both productive and unproductive coopetitor tensions in the creation of new marketplaces. We theoretically discuss the characteristics and complexity of of new marketplaces and how thosespaces producecoopetitivetension. In addition, we conduct an in-depth case study of the contactless payment card project. In this, we describe the tensions related to this coopetitive project and identify three coopetition tension types – strategic, social and relational – which allow individuals to manage, transcend and integrate-bridge heterodoxlogics and their shifting salience within coopetition work. We then develop a two-dimensional coopetition tension framework explaining how coopetitor practice produces both productive and unproductive tension in relation to new marketplaces. The present study therefore represents a noteworthy academic contribution to theory and practice.

Key words: coopetition, tension, productive tension, unproductive tension, new industrial markets

1.Introduction

The increase in the number of firms entering into coopetitive practice has attracted a growing body of research [ Gnyawali2011650 tee2009industry ]. In coopetitive practice, firms – often large rivals – straddle multiple social domains whose actors collaborate, yet also impose different and often incompatible rules and expectations(Dagnino & Rocco, 2009; J. & Brandenburger, 1997)(Le Roy & Fernandez, 2015). For example, in the mobile payments industry, large rivals such as Visa and MasterCard cooperate to reduce fraudulent card transactions across the world, and develop standards together with financial institutions (e.g. HSBC and Barclaycards), As a result, firms leveraging coopetitive processes all confront the management challenge of incorporating, combining and managing contradictory and competing ‘logics’ to leverage the market opportunities.Here, logics (Thornton & Ocasio, 2008, p. 101) are defined, as a set of “socially constructed” forms of implicit or explicit practices, “values, beliefs, and rules” that actors use to organise their existence, activities and social exchanges.” Themanagement of coopetitive tensions is therefore a pervasive issue in coopetitive success and atheoretically important research area.

Reflecting this studies researching collaborations of competitors, studies haveemphasized instabilityin relation to the tensionassociated withpractices such as value co-creation, cooperation and competitiveness(Das & Teng, 2000; Koza & Lewin, 1998). This stems from the assumption that coopetition practice increases the risks of misappropriation (B.-J. R. Park et al., 2014; Ritala, 2012).

Despite studies showing that coopetitive tensions are multidimensional, most, if not all, conceptualisations of tension relate to different organisational levels (Chiambaretto & Dumez, 2016; Fernandez et al., 2014; Tidström, 2014), and to normative solutions in terms of formal and informal control mechanisms to manage, for dealing with, and overcoming, tension (REFS). Therefore whenever coopetition tension is discussed in the literature, for the most part, the pejorative is negative and it is often associated with unproductive coopetitionoutcomes (Bengtsson & Kock, 2000). However, this perspective ignores how coopetition tension might positively impact the management practices by encouraging creativity,technological innovation, business models and new market creation within simultaneous competitive andcollaborative situations. Indeed, few, if any, studies demonstrate the conceptual multidimensionality of coopetition (Isaksen & Ekvall, 2010; Perez-freije & Enkel, 2007). Thepresentresearchaimsto fill parts ofthisvoid.

Accordingly,theresearchquestiontoguide this article is:howdo market-creating tensions in enableandconstrain the process ofcoopetition. Specific research questions are concerned with:

•the positive and negative nature of the tensions arising from coopetition logics;

•and what function those tensions perform in the creation of new marketplaces.

We first address these questions by drawing primarily from an analysis of coopetitionlogics andthe dynamic tensions in new marketplaces - the mobile paymentsindustry. The mobile paymentsindustry offers a rich site for observing coopetitionwithhigh R&D costs, long termmarket ambiguitiesand technical uncertainties(Storbacka & Nenonen, 2011). Importantly, in mobile payments industry, new logics have yet to be established while at the same time requiring strong standards and interoperability to succeed (Lee & Paruchuri, 2008). In this study we applied data triangulation through three datacollection procedures(i) thirty in-depth interviews,(ii) forty-six online data post sources i.e. blogs in two countries and (iii) observations at threefield business conference sites. Addressing the research aim and questions, we provide amultidimensional way of understanding how coopetition logics produce both productive and unproductive tensions.

This study makes three contributions to discussions of coopetition. First, this study identifies three coopetition tension types – strategic, social and relational – which allow individuals to manage competing logics and their shifting salience within coopetition work.In doing so, we provide a deeper understanding of the nature of coopetition tension and how that is experienced. Second, this study providesinsights into how competing logics of tension coexist (Raza-Ullah et al., 2013). This analysis extends our understanding beyond the more visible signs of instabilityand conflict, which might cause the termination of cooperation or the exit of key players, towards an understanding of the ongoing discomfort resulting from active coopetition endeavour, whereby logics producecomplex andmultidimensional tensions. Therefore the study also builds on and extends the work on the strategic responses to competing logics, demonstrating how the management of tension enables the maintenance of coopetitionlogics with multiple social domains and referent audiences(Friedland & Alford, 1991; Purdy & Gray, 2009).

Third, this study develops a greater understanding of the significance and nuances of coopetition tension in new markets. In particular, we conceptualize a two-dimensional coopetition tensions logic: productive and unproductive. This builds on the recent work on tension within the coopetition field(Fang et al., 2011; Raza-Ullah et al., 2013), conflict in management studies[ coad2014two Gardet2011 ], and expands on the idea that tension allows firms to experiment and innovate (Levitt et al., 1999)by seeking and using bothproductive and unproductive tension affects.We extend the recent thinkingon managing (Tidstrӧm, 2013), and balancing (B.-J. R. Park et al., 2014)coopetition tension providing insights into how coopetition tensions can be integrated to ensure that firms appropriate the ‘best of both worlds’ logics.

This article proceeds as follows.Theoretical insights are outlined on the logics of coopetition tensions and cooperations in new markets. Following an overview of the methodology adopted and the study findings, we discuss managerial implications to existing research. The article concludes with the limitations and future research suggestions.

2.Literature Perspectives

Before we discuss the nature of competing logics in new markets and how tension is aproperty of coopetition, we begin by briefly reviewing the characteristics of coopetition. This provides a basis for understanding how such practices are an integral part of the new markets.

2.1.Characteristics of Coopetition and New Markets

In recent work on coopetitive practice it has been shown that there are specific characteristicsof this activity[ Gnyawali2011650 tee2009industry ].Research shows how coopetitive practice is increasingly important for particular industrial contexts including; Small and Medium-Sized Enterprises (SMEs), which face numerous challenges such as rising R&D costs, high risk and uncertainty in technological development, as well as a lack of resources to pursue large-scale innovation projects (BarNir Smith, 2002; Gnyawali & Park, 2011); information communication technologies, with challenges such as shortening of product development cycles, market standardization and enhanced technological products and services (Gnyawali & Park, 2011); and in transformative industry-wide market driving agendas, in which markets are driven by a cohort of driving firms (including giants), to challenge taken for granted logics for the whole industry, in order to bring about positive impacts including innovation, business models, industry standards as well as creating new markets (Chen et al., 2012; Doganova & Karnøe, 2015; Gnyawali & Park, 2011; Reid et al., 2014; Tuominen et al., 2004). These industry characteristics enhance the need to cooperate with competitors in industrial markets.

This is particularly the case with new markets. New markets are characterised by technological diversity (risk mitigation), typically knowledge intensive (skill and capabilities), and cover global markets (economies of scale) (Anderson & Gatignon, 2005; Gnyawali & Park, 2009). New markets are the outcome of complex market adjustments and innovations that relate to creative activities that are directly related to intense communication and information flows (Ritala et al., 2014). These practices cannot happen in isolation, however, they require considerable adjustments towards leveraging diffused networked resources (Santos & Eisenhardt, 2009). Indeed, while the development of new markets may be driven by a single dominant firm, most often it entails a collective pursuit, wherein firms can jointly and collectively coordinate the changes they cause in a given market. As pointed out by Ritala et al. (2014), new markets require social offerings where positive network externalities, compatibility, and interoperability play a role.

Here, multipleupstream actorsare empowered, informed and willing to build new market norms, develop new technologies and practices, particularly when dominant firms are involved.For example, several financial large financial institutions and technology firms formed the NFC Forum several years prior to any deployment and operationalisation of mobile payments technologies (Sanders, 2008). The organization of coopetition therefore requires a great variety of social work and accomplishments across time. Therefore, drastic market and technological transformationgenerate instability, producing tensions amongactors, values, and actions of firms, groups and industries(Dagnino & Rocco, 2009; Fernandez et al., 2014).Studies show that half of coopetitive activities end in unplanned dissolution (Inkpen, 2000; Padula & Dagnino, 2007).Highlightingchallenges, such as imbalanced expectations (Tarun Khanna, 1998), and instabilities caused by self-interest (Borys & Jemison, 1989).

The social nature of coopetition practice is also explored in management literature (Humphreys, 2010). That is, few firms can go it alone and therefore a broad group of firms must form and shape or influence the perceived value, nature, and techniques for carrying out a particular activity (e.g. standards, norms and established institutionalised practices). In coopetition practice, then, meaning is negotiated, produced and shared through participation in social practices (e.g. conferences, forums, workshops, meetings, site visits), as shared ways of thinking (e.g. best practice, new business models) and doing things to develop a new industrial market. Alongside shared meaning, however, new logics, vested interests, emotional states, values and power relations develop (Soekijad & de Joode, 2009, p. 152), constellating around particular market expectations, goals, motives and desires (Bouncken & Kraus, 2013). However, a firm’s competitive environment cannot be characterized as an ‘industry’ until new dominant logics emerge, comprising a range of rule-based, normativeandculturallogics shapingthepossibledifferentialpremisesof coopetitive strategies.

2.2.Logicsof Coopetition

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To allowfora more nuancedapproachtothe way that coopetition strategies in new markets produce tension, thisresearchdrawsinspirationfrominstitutionaltheoriesaddressingthelogics governing interactions ininstitutionalfields(Friedland & Alford, 1991;Thornton & Ocasio, 2008). That is, coopetition work in new markets encouragescompetitors to straddle multiple social domains– markets, communities, institutions, firms and management culture– whose actors impose different and often incompatible rules, expectations, templates, or competing ‘logics’. Logics are defined as a social domain’s ‘organizing principles’ (Friedland & Alford, 1991, p. 248)or ‘rules of the game’ (Thornton & Ocasio, 2008, p. 112). Traditionally, scholars have been particularly attracted by the macro logic, as one of the corner stones of society(Thornton, 2004). However, inrecent years,studies have shifted towards also addressing how logicsarecarriedintomicro-interactionsbyindividual humanactors,ofteninsituationwithco-existing, potentially contradictory logics(Thornton andOcasio,2008). These logics are embedded in,for example, the value chain rules of exchange such as families(Jansson et al., 2007) or in guanxi traditions and systems in emerging markets(Zhuang et al., 2010). This work brings out logics as both explicit and implicit property of managementpractices. These studies also show that adherence to such logics is enforced by mechanisms that associate their violation with the social cost of legitimacy losses(Friedland & Alford, 1991; Ocasio & Thornton, 1999), failure and exit(Zhuang et al., 2010). Whensuchinteractions and strategies are shaped bydifferent,potentiallyconflictinglogics,theycan be analyzed asbeinginastateof heterodoxy, according to Bourdieu (1990). This impliesthatthelogics upon which market creating interactionisbasedbecomeobjectsofreflection, negotiation and tension thatmayeventuallyleadtoabreakdownof interaction andcommunication(Bourdieu, 1990). Whenever firms engage within and across a diverse array of industries, communities, institutions and firms in coopetition,play ‘in two or more games at the same time’. In those circumstances,firms may loseconfidence with one referent audience as expectations of another are met(Purdy & Gray, 2009), or while attempting tocombine incommensurable structures and practices(Tracey et al., 2011). Such apparent contradictions, incompatibilities and competing logics have largely been reported in the literatures as the determinant ofinstabilityand/or conflict(Gill & Butler, 2003; Krishnan et al., 2006), or as managers confronting higher levels of tension(Das & Teng, 2000; S. H. Park & Ungson, 2001).

Competing logics have been portrayed as particularly difficult to reconcile, because of their respective antithetical emphases. However, not all coopetition arrangements are characterized by conflict or overt ‘antagonisms in the organizational arrangements required by institutional referents’ (Pache & Santos, 2010, p. 457).Friedland & Alford (1991, p. 250)explained that coexisting logics can be ‘mutually dependent, yet also contradictory’. Studies have indicated that firms do try to manage and stabilize exchanges between actors through interaction ofcompetinglogics, thusformingmoreappropriate logics (Alvarez & Barney, 2007; Fligstein & Sweet, 2002). Shared orcomplementarylogicsarelikelytooperateonthe level of doxa. According to Bourdieu (1990),doxa can be defined as a situation in which logics are tacitly taken for granted thereby giving rise to mutual consent about the premises for social interaction (Bourdieu,1990). In this regard, the institutional cultural and normative conventions governing coopetition action are seldom discussed or constituted as an object of intense reflexive negotiation by co-opetitors. Rather than viewing the logics underlying co-opetition as merely constituting possible negative impediments to be resolved, the conception of doxa permits us to understand its multidimensionality and how collaboration in market creating activity can happen, without necessarily resolving possible competing norms, and without extensive negotiation or formalization in written agreements (Bourdieu, 1990). Although the theoretical distinction between contradictory heterodoxical and‘negotiated’ logics and shared doxa of shared taken for granted knowledge logics, provides the means understanding the social basis on which an institution can be constructed, it does not however provide detailed models of how tension functions. This requires an understanding of tension is both discussed in the co-opetition literature and in management research more generally.

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2.3.Coopetition Tension

Early researchers in the field of co-opetition focused on the drivers of coopetition (Doz et al., 2000; Koza & Lewin, 1999) and the motives underpinning coopetition (Hamel, 1991; T. Khanna et al., 1998). More recent work focuses on the dynamics and destabilizing nature of coopetitive relationships(Dagnino & Rocco, 2009; Gnyawali & Madhavan, 2001).Over the last decade, however, there has been an increased attention to the dynamics of coopetition, in part focusing on the destabilizing nature of coopetition and related opportunistic behaviours, but also on incorporating more explicitly the role of tension. As Gnyawali & Park (2011, p. 652), note “coopetitive relationships are unstable which cause high level of tension for firms.” For instance, some studies show that tension is found to cause rivalry and opportunistic behaviours among coopetitive firms (Jones et al., 1998; Sakakibara, 1997). This research work builds on the co-opetition paradox. As Bengtsson and Kock (2014: 182) explain coopetition is, “a paradoxical relationship between two or more actors simultaneously involved in cooperative and competitive interactions, regardless of whether their relationship is horizontal or vertical”.In these works, tension has been highlighted as a particularly significant element of coopetitive relationship dynamics(Mudambi & Swift, 2009). This research shows that the combination of collaborative and competitive behaviorscontributes to the emergence of tensions at various levels, including inter-organizational, intra-organizational and inter-individual levels (Bengtsson & Kock, 2000; Czakon, 2010; Fernandez et al., 2014;Le Roy & Fernandez, 2015; Luo, Slotegraaf, & Pan, 2006; Padula & Dagnino, 2007).

By and large, these studies investigate coopetitive tensions as a whole[ le2015managing mariani2007coopetition ], or examine the specific managerial each type of tension (REF), or ‘how to’ manage tensions in positing that separation (Bengtsson & Kock, 2000;Herzog, 2010; Poole & Van de Ven, 1989) – whether that be functional, temporal or spatial - and integration, encouragesindividuals to transcend paradoxes (Chen, 2008; Farjoun, 2010; Luo et al., 2006; Oliver, 2004).

What connects these studies of tension is that most, if not all, conceptualisations are multidimensional, although that is mainly seen in terms of different organisational levels (Chiambaretto & Dumez, 2016; Fernandez et al., 2014). In another way, conceptualisations offer normative solutions – whether that being formal and informal control mechanisms – to manage, for deal with, and overcome, tension (REFS). Therefore whenever coopetition tension is discussed in the literature, the pejorative is negative and it is often associated with unproductive coopetition outcomes (Bengtsson & Kock, 2000). However, it is important to note that tension by its nature is not aimed at stabilities or instabilities and does not have any explicit or implicit purpose, as outlined by Rond & Bouchikhi (2004, p. 66): “… tensions that arise from the inter play of these forces are neither intrinsically functional nor dysfunctional nor naturally geared towards stability or instability...”. Indeed, not all coopetitions end in dissolutions; many prosper under the conditions of coopetition tensions. [MP2]