When does coopetition affect price unfairness perception? The roles of market structure and innovation

Abstract

<jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>This study aims to examine the critical role of types of coopetition (upstream/downstream), market structure (concentrated/competitive) and innovation (low vs high degree of innovation) that can affect the way consumers perceive the resulting price (un)fairness of new offerings.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>Three between-subjects experiments involving different participant populations and product categories were conducted to test the research hypotheses.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The valence of the effect of types of coopetition (upstream/downstream) on price fairness is conditional on the market structure and the degree of innovation associated with the new product offering. Downstream (as opposed to upstream) coopetition is much more detrimental to perceptions of price fairness in a concentrated market than in a competitive and fragmented market. However, within a competitive market, downstream coopetition may lead to greater price fairness perception than upstream coopetition when the new product offering is highly innovative.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Research limitations/implications</jats:title> <jats:p>The current study uses lab experiments with fictitious scenarios and focuses on two moderating variables: market structure and innovation perceptions. Future research may use field experiments and explore additional moderating variables that may annihilate the negative effect of downstream coopetition on price fairness perception, especially in a concentrated market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Practical implications</jats:title> <jats:p>In concentrated markets, firms should opt for upstream rather than downstream coopetition to limit the negative effect the announcement of coopetition has on price fairness evaluation. However, within a competitive market, when the new product offering resulting from coopetition is associated with a high perceived degree of innovation, firms should opt for downstream rather than upstream coopetition because of its positive impact on price fairness evaluation.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>To the best of authors’ knowledge, this study is the first to demonstrate that new product development from coopetition has important implications for the perception of price fairness, leading to positive or negative effects depending on market structure and the degree of innovation of the new product offering. It then explores the conditions under which types of coopetition (upstream/downstream) might backfire.</jats:p> </jats:sec>

Unmasking conflict in vertical coopetition

“…First, conflicts tend to be related to products and tasks, which can be related to shares of margin and price negotiations as presented by Wilhelm (2018). As prior research has been lacking studies exploring the effects of coopetition on prices fairness (Sabri et al, 2020), our study shows that coopetition increases the knowledge of price fairness of both relationship parties, and in our case study, was found to be one of the issues increasing competitive activities. This is somewhat different in comparison with prior findings of studies of vertical coopetition, showing that perceived fairness is important for the duration of the relationship between the firms (Soppe et al, 2014).…”

“…As far as types of conflicts are concerned, Wilhelm (2018) argues that tensions typical of vertical coopetition are related to the degree of vertical integration and to shares of margins and price negotiations. In addition, price fairness is identified as a critical determinant of customer satisfaction and sales, which are key metrics for measuring coopetition effectiveness (Crick, 2019;Sabri et al, 2020). Our findings show that the nature of conflicts in vertical coopetition varies and develop over time and that episodes of conflict are related to each other.…”

“…Dorn et al (2016) stress that most coopetition research focuses on the inter-firm level, whereas research on the intra-firm level is scarce. Coopetition is an inter-firm level phenomena, but it has effects on other levels as well; for network, intra-firm and even for individual level (Hani and Dagnino, 2020;Rajala and Tidström, 2017;Sabri et al, 2020). Therefore, it is important to study coopetition as a multilevel phenomenon occurring on different levels of analysis (Hani and Dagnino, 2020).…”

“…A study by Pellegrin-Boucher et al (2013) shows that vertical coopetition usually starts with long-term vertical collaboration between the firms, that suddenly also becomes competition because of competitive action taken by one of the firms. Coopetition naturally involves a tension of two opposing logics, namely, cooperation and competition, which may lead to conflicts (Gnyawali et al, 2016;Le Roy and Fernandez, 2015;Sabri et al, 2020;Tidström, 2018). Conflicts in business relationships have attracted scholars from the traditional buyersupplier relationship viewpoint (Shahzad et al, 2020) and coopetitive relationship view (Tidström, 2018).…”

Competing and cooperating globally: how firms’ multimarket contact relates to joint price elevation in coopetition networks

“…Based on the AMC perspective and transaction cost theory, our study makes three advances. First, when a focal firm is aware of low requirements and efficiency benefits from joint price elevation, the firm can prevent negative client perceptions of B2B cooperative actions (Sabri et al, 2020). Second, there is low risk to interfirm motivation for cooperative joint actions which decreases environment uncertainty.…”