Co-opetition Strategies: Alliance Formation, Value Creation, and Value Capture

Abstract

This paper studies how firms' productivity outside the alliance (outside option), resource complementarity (synergy effect) and the cost of resource allocation influence their common value creation and value capture strategies in the co-opetition alliance, and further affect alliance formation and termination decisions. We develop a three-stage game-theoretic model and find that first, although the improvement of outside option encourages a firm to allocate more resources on common value capture, it would result in less bargaining power in the alliance due to its partner's escalated value capture efforts as a response. Second, as the outside option improves, the strong firm tends to allocate more resources for common value creation, while the weak firm tends to