Cooperation strategies when leading firms compete with small and medium-sized enterprises in a potentially competitive market

Abstract

Efficient cooperation, which has become common under rising economic globalization, is leading to new opportunities and challenges for enterprises choosing long-term competition strategies. Sharing resources with competitors is believed to weaken a firm's competitive edge. However, a potentially competitive market may change a firm's incentive to share resources strategically with rivals. Consequently, this study investigates two possible cooperation models between leading enterprises and small and medium-sized enterprises (SMEs) to examine the impact of sharing resources on a firm's strategy. This analysis shows that cooperation strategies benefit both the leading firm and the SME under certain conditions. Furthermore, this study demonstrates that the wholesale cooperation strategy is always more detrimental to the environment than the license cooperation strategy. Interestingly, although cooperation can help SMEs develop sustainably in most cases, industries with high resource costs may experience a situation in which SMEs benefit from competition, thus resisting cooperation and harming the leading enterprise. This study highlights the role of a potentially competitive market and provides managerial insights for stakeholders.