Staying alive: Coopetition and competitor oriented behaviour from a pre- to post COVID-19 pandemic era

Highlights

• Objectives changed between a focus on profit, to survival, to profit, pre- to post COVID-19.

• Competitor oriented behaviour helped owners to select and manage coopetition partners.

• Owners transformed operational capabilities into higher level capabilities.

• Strategic flexibility enabled owners to pivot aspects of their business models.

Abstract

This study's objective is to investigate the extent to which coopetition (collaboration with rivals) and competitor-oriented practices (knowledge of and acting upon competitors' strengths and weaknesses) helped facilitate the development of owners' capabilities over the pre- through to the immediate post pandemic (COVID-19) period. A retrospective, longitudinal instrumental case study features the under-researched 3-year timescale up to the end of ‘lockdowns’ across most countries. Interviews (and secondary data collection) took place with owners of 40 Canadian restaurants associated with different cuisines and possessing respective weak and strong network ties in a single city. New findings highlight how coopetition and competitor-oriented practices facilitated the development and/or enhancement of ‘psychological contracts.’ In turn, knowledge of with whom to engage in coopetition activities and the extent of involvement, helped owners to avoid failure, maintain family employment, and sustain other local businesses. Additionally, strategic flexibility enabled owners to pivot aspects of their business models, develop foresight, plus resilience. Unique insights contribute to theory and practice, highlighting that coopetition and competitor-oriented practices changed during the evolving conditions of COVID-19. Owners rapidly transformed certain ‘operational’ capabilities into those of a higher level (namely, capabilities of a ‘threshold’ and potentially ‘dynamic’ nature) to meet changing objectives.

Introduction

This study is positioned in the cross-disciplinary body of knowledge at the marketing/entrepreneurship interface. The objective is to investigate the extent to which coopetition and competitor-oriented practices helped facilitate the development of owners' capabilities over the pre- through to the immediate post pandemic (COVID-19) period. Clarifying that timescale is important due to changing practices over the COVID-19 period, including the country-context under investigation (StatCan, 2023). Additionally, because the impact on some firms may continue for a period after the end of lockdowns (Foss, 2021). This investigation features a retrospective, longitudinal instrumental case study involving the under-researched 3-year timescale up to the end of lockdowns across most countries. This research is important and timely, since as Amankwah-Amoah et al. (2021, p. 184) point out “future studies could explore how firms adapt and scale up their business models when faced with extreme external shocks.” The context features restaurants in a single Canadian city, where the term ‘external shock’ signifies the changing environmental circumstances such as legislation during the pre- to immediate post COVID-19 period. That is, owners operating in the light of high uncertainty, like closing in-house dining, allowing patio dining, re-opening, and re-closing, etc. (for example, StatCan, 2023).

Although a body of knowledge exists regarding the importance of decision-makers' capabilities (Eisenhardt and Martin, 2000; Teece, 2018; Teece, Pisano, and Shuen, 1997; Zahra, Sapienza, and Davidsson, 2006), owners' capability development in the face of extreme shocks remains under-researched (Behl et al., 2023). In fact, there is evidence to suggest that certain decision-makers may not possess the capabilities needed to help them to survive extreme environment shocks via employing an individualistic business model; hence, some engage in a collaborative business model using coopetition partners (Crick and Crick, 2020). Even so, the extent to which owners employ competitor-oriented practices (as per Narver and Slater, 1990) during an extreme environmental shock remains unclear. This is pertinent because earlier literature in more stable contexts identifies that not all competitors are the same and risk/reward considerations exist in their selection (Chiambaretto, Bengtsson, Fernandez, and Näsholm, 2020; Yan, Dong, and Faems, 2020).

Consequently, this retrospective, longitudinal instrumental case study (Hassett and Paavilainen-Mäntymäki, 2013; Stake, 1995) helps unpack the complexity surrounding coopetition and competitor-oriented practices regarding the development of capabilities when decision-makers are faced with external shocks. That is, as opposed to earlier cluster-based studies featuring practices in more stable environments (Felzensztein, Gimmon, and Deans, 2018; Geldes, Felzensztein, Turkina, and Durand, 2015; Granata, Lasch, Le Roy, and Dana, 2018). Specifically, it investigates how these business-to-business (B2B) practices enabled owners to build capabilities. In turn, how these capabilities helped decision-makers facilitate pivoting facets of their respective business models (as per Osterwalder and Pigneur, 2010; Saebi, Lien, and Foss, 2017) during the period under investigation. Furthermore, the study offers insights into how these activities helped owners with profit-oriented performance objectives immediately prior to COVID-19, move to address survival-oriented goals during the pandemic, and then return to pursuing profit-oriented objectives after lockdowns ended.

In respect of key concepts, first, a widely cited definition of coopetition features the work of Bengtsson & Kock (2014, p. 180) who view this as “a paradoxical relationship between two or more actors, regardless of whether they are involved in horizontal or vertical relationships, simultaneously in cooperative and competitive interactions”. Nevertheless, recognition exists that there should be a mutually beneficial purpose like value-creation between the parties involved as an outcome (Crick, 2019; Czakon and Czernek-Marszałek, 2021; Czakon, Klimas, and Mariani, 2020; Gnyawali and Charleton, 2018; Kraus, Klimas, Gast, and Stephan, 2019). Consequently, ‘performance’ as an outcome can be measured in objective and subjective ways across contexts, such as against owners' goals vis-à-vis issues like growth, innovation, profit, or even survival (Bouncken and Fredrich, 2012; Estrada and Dong, 2020; Gnyawali and Park, 2009; Le Roy and Czakon, 2016; Park, Srivastava, and Gnyawali, 2014; Ritala, 2012). Second, the influence of a ‘competitor orientation’ is investigated, that Narver & Slater (1990, p. 21) view as when “a seller understands the short-term strengths, weaknesses, long-term capabilities, and strategies of both the key current and the key potential competitors.” However, certain prior studies are implicit and others explicit about the role of a competitor orientation regarding inter-firm collaborative activities and the effect on owners' performance objectives (Crick, Crick, and Tebbett, 2020; Czakon and Czernek-Marszałek, 2021; Felzensztein et al., 2018; Galloway, Kuhn, and Collins-Williams, 2021; Geldes et al., 2015; Granata et al., 2018). As such, in contributing to knowledge, it is important and timely to bring these core concepts together in terms of this retrospective, longitudinal instrumental case study. Specifically, to help explain decision-makers' perceptions towards evolving behaviour regarding capability development in the context of the pre- to immediate post COVID-19 pandemic period.

Businesses fail for a variety of reasons and so the notions of pivoting aspects of business models, being persistent, and building resilience to environmental pressures, are already widely recognised (Conz and Magnani, 2020; Czakon, Hajdas, and Radomska, 2023; Klimas, Czakon, Kraus, Kailer, and Maalaoui, 2021; Lamine, Mian, and Fayolle, 2014; Osterwalder and Pigneur, 2010). In terms of a contemporary and extreme environment shock, the COVID-19 pandemic resulted in many business failures, alongside owners pivoting aspects of their business models in particular ways to facilitate survival and/or enhance performance (Amankwah-Amoah, 2020; Amankwah-Amoah, Khan, Wood, and Knight, 2021; Arslan, Kamara, Zahoor, Rani, and Khan, 2022).

This environmental shock created a high degree of uncertainty and the need for decision-makers to develop capabilities to allow them to address objectives and implement appropriate strategies (Cortez and Johnston, 2020; Hughes, Morgan, Hodgkinson, Kouropalatis, and Lindgreen, 2020; Matthews, Rutherford, Edmondson, and Matthews, 2022; Ozanne, Chowdhury, Prayag, and Mollenkopf, 2022; Rapaccini, Saccani, Kowalkowski, Paiola, and Adrodegari, 2020; Sheth, 2020). To illustrate, Hughes et al. (2020) mention the notion of improvisation readiness; hence, decision-makers are likely to benefit from exhibiting the capability of being strategically flexible and able to improvise. That is, so they can evolve facets of their business models in various ways. Depending on the nature of the sector under investigation, value-added activities identified in prior research that might feature in business models include engaging in open innovation, design thinking, digitalisation, among other considerations (Amankwah-Amoah, Khan, Wood, and Knight, 2021; Cankurtaran and Beverland, 2020; Chesbrough, 2020). Nevertheless, inherent in such studies is the apparent underlying assumption that owners either personally possess the capability to evolve facets of their business models or can enhance limitations by engaging in B2B network relationships.

As a pertinent single example, during the time the pandemic was underway, Crick and Crick (2020) provided a series of illustrations from secondary data sources of firms across sectors and countries that had engaged in coopetition as a B2B strategy. They argued that when faced with severe environmental shocks (with a focus on the COVID-19 pandemic), under-resourced owners might enhance capabilities and performance outcomes, or at least minimise the risks of failure, by collaborating with rivals as opposed to employing an individualistic business model.

This instrumental case study provides unique insights building on an established body of B2B research involving the potential performance-enhancing role of coopetition (Bengtsson and Kock, 1999, Bengtsson and Kock, 2000; Pattinson, Nicholson, and Lindgreen, 2018; Velu, 2016). The term ‘potential’ is important because effective management of coopetition activities is a core consideration like via building trust with complementary partners (Czakon and Czernek, 2016; Czernek, Czakon, and Marszałek, 2017; Kostis and Näsholm, 2020). However, as previously alluded to, although exceptions exist such as Crick and Crick (2020), the existing body of knowledge typically features coopetition operating in the context of relatively stable environments (see reviews such as Bouncken, Gast, Kraus, and Bogers, 2015; Bengtsson and Raza-Ullah, 2016; Dorn, Schweiger, and Albers, 2016; Gernsheimer, Kanbach, and Gast, 2021; Meena, Dhir, and Sushil, 2023). This is compared to the under-researched extreme environmental uncertainty resulting from external shocks and illustrated by the global COVID-19 pandemic crisis, or indeed, its immediate aftermath following the end of major lockdowns.

Furthermore, also as previously mentioned, some existing studies are more implicit as opposed to explicit about the role of a competitor orientation and especially in relatively stable cluster-based research (Felzensztein et al., 2018; Geldes et al., 2015; Granata et al., 2018). To illustrate, Crick et al. (2020) in a study of the New Zealand wine sector, note this is especially important where firms are in a close regional proximity, since various decision-makers are potentially more likely to know others' strengths and weaknesses. Hence, exhibiting a high competitor orientation is likely to enhance the outcomes for those owners engaged in coopetition. A further illustration is provided by Czakon and Czernek-Marszałek (2021) in the context of the Polish tourism sector, where decision-makers identify their competitors and develop a detailed understanding of key issues pertinent to the operation of inter-firm collaborative relationships. Such considerations lead to the research question addressed in this investigation as follows.

RQ: How do coopetition activities and a competitor orientation enhance owners' capabilities in firms engaged in locally based B2B networks over the period of a major external shock (focusing on the COVID-19 pandemic)?

In terms of contributing to knowledge, first, unique insights arise regarding owners being likely to benefit from possessing an ability to transform ‘operational’ capabilities into higher level capabilities to meet changing objectives (Johnson, Whittington, Scholes, Angwin, and Regner, 2014; Teece et al., 1997; Weerawardena, Sullivan Mort, and Liesch, 2019). In particular, the development of a capability enabling strategic flexibility and readiness to improvise in respect of decision-making during the period of an external shock, typified by the evolving circumstances of COVID-19 (following Priem and Butler, 2001; Hughes et al., 2020).

Second, to help transform certain capabilities, new insights emerge to suggest that under-resourced owners may benefit from engaging in a collaborative as opposed to an individualistic business model (following Osterwalder and Pigneur, 2010; Saebi et al., 2017). New knowledge builds on prior work that has existed for some time associated with the potential importance of developing a coopetition-oriented mind-set or culture, adding value, together with effectively managing inter-firm collaborative relationships (Bouncken and Kraus, 2013; Brandenburger and Nalebuff, 1996; Czakon, Klimas, and Mariani, 2020; Czakon, Srivastava, Le Roy, and Gnyawali, 2020; Dahl, 2014; Klimas, 2016). However, retrospective, longitudinal insights feature the likely benefit to owners of developing a capability to enable them to effectively evolve coopetition activities during the pre- through to an immediate post pandemic environment (building on Crick and Crick, 2020). That is, as a risk mitigation strategy to help owners avoid business failure in the face of a severe external shock (as per Amankwah-Amoah, Khan, and Wood, 2021). New findings emerge regarding owners developing the capability to both select partners (existing and new) which they engage with, and to manage the extent of those activities. This is because not all competitors are the same and risk/reward considerations exist in their selection (see, Chiambaretto et al., 2020; Yan et al., 2020).

Third, in supplementing the second contribution, a key consideration becomes how are coopetition arrangements formed/maintained to enable them to operate effectively? New evidence emerges to highlight the likely benefit of owners developing a competitor orientation as a capability to facilitate effective inter-firm collaborative activities (building on Narver and Slater, 1990; Crick et al., 2020; Czakon and Czernek-Marszałek, 2021). New insights arise in respect of a competitor orientation helping to facilitate value-added benefits from the development of weak and especially strong network ties among coopetition partners in a ‘close’ proximity (building on Dana, Granata, Lasch, and Carnaby, 2013; Geldes et al., 2015; Granata et al., 2018, featuring cluster-based firms in more stable environmental conditions). For example, findings highlight the likely benefit of owners developing the capability to utilise social capital via network ties to form ‘psychological contracts’ (expanding Kingshott, 2006) in support of their changing objectives over the period of the retrospective, longitudinal instrumental case study. In fact, new light also arises in respect of owners' objectives being a function of governance considerations. Interestingly, business ownership is often rather implicit as opposed to explicit within some prior studies concerning whether there is family ownership (Niemelä, 2004; Roessl, 2005). As such, earlier related studies may under-represent decision-makers supporting family members' interests like maintaining employment rather than a focus on economic outputs like profit. Indeed, a capability of building social capital that may result from family network ties can help owners achieve their changing profit and survival goals; maintain the employment of family members; also, facilitate sustaining their local region (enhancing the co-existing logics argument of Reay, Jaskiewicz, and Hinings, 2015 that was in a stable environment).

In considering the contributions together, this study suggests that the ability to transform certain operational capabilities to higher order key capabilities can help owners. Specifically, to minimise risk, develop coping and pivoting strategies, foresight, and build resilience regarding operating in a dynamic environment, typified by the evolving COVID-19 period (building on Adomako, 2021; Klimas et al., 2021; Arslan et al., 2022; Marinković, Al-Tabbaa, Khan, and Wu, 2022). The next section will discuss the theoretical framework of this study.