Evolutionary or revolutionary business model innovation through coopetition? The role of dominance in network markets

Abstract

This paper examines how the level of dominance in firms affects when they engage in coopetition in order to innovate their business model. We present a longitudinal and in-depth single case study of the business model innovation decisions of investment banks in the US corporate bond trading market. We find that, in network markets, when firms choose to engage in coopetition in light of competitive threat it is done so in order to adopt a defensive or offensive strategy. The study shows that in network markets the less dominant firms tend to engage in coopetition to innovate their business model in an evolutionary manner before the dominant firms, as a defensive strategy to protect their existing business model. In contrast, the dominant firms tend to engage in coopetition to innovate their business model in a revolutionary manner after the less dominant firms, as an offensive strategy to alter radically their existing business model. We draw implications of coopetition in network markets for both theory and practice.