Vertical vs horizontal coopetition and the market performance of product innovation: An empirical study of the video game industry

Abstract

The aim of this research is to study the impact of coopetition on the market performance of product innovation. Previous research suggests, on the one hand, that coopetition is a powerful strategy for innovation but, on the other hand, that coopetition creates opportunism risk. Therefore, the impact of coopetition on innovation depends on external and internal conditions. This impact also differs according to the radicalness of the focal innovation. Past studies have identified many different factors that influence the impact of coopetition on innovation. However, they have not taken into account the different types of coopetition. To fill this gap, here, 1) we introduce a key distinction between the two main types of coopetition, i.e., vertical vs horizontal coopetition and 2) we distinguish between the impacts of these two types of coopetition on the market performance of two types of innovation, i.e., incremental vs radical innovation. We build a set of four hypotheses and test them on a sample of 763 new products in the video game industry. The results show that 1) horizontal coopetition has a positive impact on the market performance of radical and incremental innovation, 2) horizontal coopetition has a greater impact on the market performance of radical innovation 3) vertical coopetition has no impact on the market performance of innovation, and 4) the null impact of vertical coopetition is true for both radical and incremental innovation.