Cui Bono? A Portfolio Theory of Value Creation in Coopetition

Coopetition research lacks theories to describe and explain value creation in coopetitive relationships. To fill this gap the paper develops a portfolio theory of coopetition, i.e. the simultaneous cooperation and competition of firms. Drawing on modern portfolio theory from finance, the paper shows how cooperation can reduce the amount of capital required to generate a given return, creating additional value for the competing firms. Based on the portfolio theory of coopetition three drivers of value creation in coopetition are identified: the individual returns of the firms, a competition-cooperation coefficient reflecting potential value creation, and the relative weight of the firms in the collaborative endeavour. The paper analyses the trade-offs and opportunity costs of these drivers and discusses under which conditions the full value potential of coopetition can be realised. The study contributes to coopetition research by providing a new theoretization and quantification of value creation in coopetition implying that managers and policy makers need to carefully optimize the balance between competition and cooperation, align incentives and goals among coopetitors, and put in place governance mechanisms to ensure trust and fairness in coopetitive arrangements