Abstract
A growing literature explores the phenomenon of simultaneous cooperating and competing firms. Mostly in strategic management, this literature primarily focused upon large firms. The dynamics of coopetition in small firms, including new and micro-firms, however, remains under-explored raising questions about how they both engage with and manage this complex paradoxical relationship. Shifting the focus in coopetition research to small firms is vital as despite many noted benefits, evidence suggests that liabilities of newness and smallness affect engagement in cooperative relationships. Due to the specificities of small firms, it remains unlikely that the knowledge derived from their larger counterparts will adequately reflect the drivers and mechanisms of small firm coopetition. How does coopetition unfold in the small firm sector? How do challenges and specificities of small firms influence principles and mechanisms identified by the literature on large firm coopetition? To analyse such issues, in this annual review article, we evaluate the emerging body of research on small firm coopetition. Connecting coopetition strategy with small firms and entrepreneurship, we provide a comprehensive review of this emerging literature drawing from which, we then formulate future research needs and directions.
Keywords
Introduction
Since the early 2000s, there has been a significant increase in research on coopetition strategies resulting in a rapidly developing body of literature (Czakon et al., 2014; Gernsheimer et al., 2021). However, coopetition research has primarily focused on simultaneous cooperation and competition between large firms (Bengtsson et al., 2010; Gnyawali and Park, 2011). Shifting the focus to the small firm sector, in which we include micro and new firms, is, therefore, of vital importance given that such ventures constitute the majority of firm stock in most economies (Gherhes et al., 2016; Lehtinen et al., 2021; Rodrigues et al., 2022) and dominate many sectors, such as tourism (Reinl and Kelliher, 2014), creative industries (Mueller and Abecassis-Moedas, 2017) or handicraft (Tiwari and Korneliussen, 2018).
The dynamics of coopetition in diverse firm contexts have, so far, been somewhat neglected despite recent calls for a better understanding of how small firms engage in and manage such a paradoxical relationship (Corbo et al., 2023; Gernsheimer et al., 2021; Meena et al., 2023). There are numerous illustrations of how coopetition extends beyond large firms. Craft breweries collaborate to enhance performance by sharing recipes and best practices (Kraus et al., 2019). Wineries federate competitors and form collective structures, establish common brands and set new standards to promote and protect their cluster (Granata et al., 2018). Charities cooperate by sharing resources such as equipment and staff, as well as working together to raise funds (Crick and Crick, 2020). Even within the informal economy, it has been found that small firms embrace coopetition practices to jointly navigate challenging business environments (Darbi and Knott, 2023). But how does coopetition unfold in the small business sector? How do challenges and specificities of small firms related to resource scarcity (Black, 2021; Dobbs and Hamilton, 2007; Khan et al., 2020; Shafi, 2021), owner-centred culture (Granata et al., 2018; Kelliher and Reinl, 2009; Lussier and Sonfield, 2015), strategy informality and decision-making (Liberman-Yaconi et al., 2010; Rodrigues et al., 2022), informality (Darbi and Knott, 2023), networking and social capital (Hermel and Khayat, 2011; Teller et al., 2016) influence principles and mechanisms identified by the literature of large firm coopetition? For example, finding the right balance between cooperation and coopetition (Letcher et al., 2021; Virtanen and Kock, 2022), controlling risk through formalisation (Bengtsson and Kock, 2014; Bouncken et al., 2016), separation of tasks (Le Roy and Fernandez, 2015) and dealing with paradoxical tensions (Rai et al., 2022; Raza-Ullah et al., 2014).
In the light of these specificities, it is unlikely that the body of knowledge on large firms will be fully appropriate to capture the drivers and mechanisms necessary for a better understanding of small firm coopetition (Granata et al., 2018). One of the most vital aspects to take into consideration in this debate relates to the individual level of analysis given that the importance of the entrepreneur, in the guise of the owner-manager, increases inversely with decreasing firm size (Granata et al., 2018; Lussier and Sonfield, 2015). For example, while in larger organisations the firm’s strategy reflects the cognitive models of its top management team (Gavetti, 2005; Wiersema and Bantel, 1992), in new and small firms, strategic decision-making – including the activation of coopetitive relationships to access resources – is the sole responsibility of the entrepreneur or owner-manager (Bornhäll et al., 2016; Fernández-Esquinas et al., 2017; Kearney et al., 2019). These distinctive features must be acknowledged to understand how small firm coopetition operates. However, while the differences between small and large firms are well established (Chiambaretto et al., 2020; Gast et al., 2018; Meena et al., 2023), a comprehensive overview of the emerging literature on coopetition strategies in the small business context is lacking. Addressing this gap, we take stock of the body of emerging research and identify drivers and mechanisms intrinsic to the initiation process, the execution principles and the outcomes of small firm coopetition. Combining the literature on coopetition with small business and entrepreneurship, we provide a review of this emerging literature and formulate future research needs and directions.
Evolution and recent trends in coopetition research
A historical large firm focus
Coopetition is defined as the relationship between two or more firms that engage in cooperation and competition simultaneously (Dowling et al., 1996) and has received increasing attention over recent decades. This paradoxical economic behaviour has received significant attention, illustrated by the growing body of coopetition literature (Chiambaretto et al., 2019; Czakon et al., 2014; Gernsheimer et al., 2021). Historically, research has primarily focused on larger firms (Bengtsson et al., 2010; Morris et al., 2007). Reflecting the generic growth of the research field, several literature reviews on coopetition have been published to organise knowledge and formulate directions for future research.
Bouncken et al. (2015) reviewed the literature with a focus on coopetition as a strategy, its management, related benefits and risks proposing several future research topics. These included the need to extend the elaboration of coopetition to the broader context of entrepreneurship, viz. small and medium-sized enterprises (SMEs), start-ups and family firms. Bengtsson and Raza-Ullah (2016), exploring multiple levels of analysis, developed a conceptual dynamic coopetition model by combining elements of two schools of thought (actor and activity) with the drivers (external, relation-specific, internal), processes (dynamics, complexities, challenges) and outcomes (innovation, knowledge-related, economic performance, maintenance of relationships) framework of coopetition. Future research areas relate to the use of multiple levels of analysis, the need for more conceptual clarity and extending methodological approaches (operationalisation of key concepts, relationship perspectives, longitudinal studies, etc.).
Dorn et al. (2016) organised the literature across levels (inter-firm, intra-firm and network) and along a phase model of coopetition (antecedents, initiation, managing/shaping, evaluation) resulting in a synthesising framework and avenues for new research into the nature of the relationship, its governance and management, outputs, actor and environmental characteristics. Acknowledging the expansion of the research field since 2015, Gernsheimer et al. (2021) connected present and past coopetition research building an integrated view of evidence over five dimensions: antecedents, executing coopetition, interaction, outcomes and levels of coopetition. Three trends of emerging interest are identified (dimensions of innovation, interaction and outcomes). In their systematic literature review on coopetition, Meena et al. (2023) employed a theory-context-characteristics-methodology approach. Drawing on an analysis of 144 articles, 13 prospective research inquiries are identified, amongst one on the need to investigate how small firms can strategically utilise coopetition in relationships with larger rivals. Corbo et al. (2023) discern trends and future research trajectories with a specific view on innovation.
Given the predominantly large firm focus (Bengtsson et al., 2010; Corbo et al., 2023; Soppe et al., 2014), a more inclusive research agenda is necessary emphasising the need to include a more diverse spectrum of firms, including small, young and micro-firms as the relevance of coopetition in these contexts has already been highlighted (Lechner et al., 2006; Soppe et al., 2014).
Shifting the lens to small firm coopetition
The rationale offered for the adoption of coopetition strategies by small, entrepreneurial (Bengtsson and Johansson, 2014; Soppe et al., 2014) and micro-firms (Granata et al., 2018) is mainly related to liabilities of smallness and newness. These firms often face resource constraints, limited market presence and heightened risks, making it challenging to compete effectively on their own. By engaging in coopetition, small and young firms can pool resources, share knowledge and enhance their market positioning thus, mitigating some of the inherent disadvantages of their size and age. Shifting the focus to small entrepreneurial firms is also vital given their economic significance (Volery and Mazzarol, 2015). For example, in 2023, it was estimated that 24.4 million SMEs existed in the European Union, comprising of approximately 99.8% of all active firms and producing about 52% of total value added (European Commission, 2023). Therefore, focusing on this sector is necessary for constructing a more holistic understanding of the phenomenon (Granata et al., 2018).
In this regard, the study of Bengtsson and Johansson (2014), published in the International Small Business Journal, is notable as one of the earliest investigations into small firm coopetition emphasising specific capabilities that such firms must develop to master the risky and potentially damaging features of coopetition with large and more powerful organisations. Since then, the literature analysing small firm coopetition has been slowly but steadily developing (Bouncken et al., 2015; Gernsheimer et al., 2021). Research has started to explore how such firms benefit from coopetition while protecting themselves against potential negative consequences (Darbi and Knott, 2023). For instance, Granata et al. (2018) find that coopetition amongst small firms involves some principles observed in large firms, such as formalisation and separation, but primarily depends on individual-level determinants, such as the ability of entrepreneurs to ‘internalise’ the coopetition paradox. Consequently, it remains uncertain whether simply transferring knowledge about coopetition from large to small firms would fully capture the mechanisms and advance our understanding. Indeed, since the 1990s, scholars have supported the view that small firms cannot simply be viewed as miniature versions of large firms (Julien, 1993; Welsh and White, 1981) as they have particular traits, behaviours and characteristics (Dobbs and Hamilton, 2007; Vandaie and Zaheer, 2014).
Entrepreneurship and small business research identified several specific attributes worthy of consideration in this respect. Small firms are competitively vulnerable being highly susceptible to economic and demand fluctuations and other related uncertainties in the external business landscape (Karadag, 2015; Yang et al., 2019). In this context, conditions are hazardous, given a lower market presence, the speed of technological advancement, rising research and development costs and competitive pressures (Gnyawali and Park, 2009). Thus, small firms experience size-related challenges in operations (Gherhes et al., 2016), innovation (Faherty and Stephens, 2016; Fernández-Esquinas et al., 2017) and firm survival (Boyer and Blazy, 2014; Bressan et al., 2023; Hallam et al., 2018; Srhoj et al., 2021). Although small firms are recognised as essential creators of employment, economic growth and innovation, their operations and innovation endeavours are often under-resourced and financially constrained (Bornhäll et al., 2016; Dambiski Gomes de Carvalho et al., 2020; Pu et al., 2021). They rarely possess a large and diverse stock of complementary resources and knowledge (Bengtsson and Johansson, 2014); Gnyawali and Park, 2009) affecting their performance and innovation capability (Leiponen and Helfat, 2010; Rosenbusch et al., 2011).
These resource constraints typically stem from the inherent liabilities of smallness (Baum et al., 2000) and newness (Stinchcombe, 1965) associated with small and new firms leading to a greater likelihood of activating interfirm relationships to access needed resources. Small firms also differ from their large counterparts in terms of their propensity for informality in relationships with family and employees (Kotey and Folker, 2007; Nadin and Cassell, 2007) leading to more unconventional human resource strategies and management styles that differ from the standardised HR approach evident in large firms (Nyamubarwa and Chipunza, 2019). At the same time, small firms face the problem of attracting, retaining and training qualified personnel (Black, 2021; Kitching and Marlow, 2013; Panagiotakopoulos, 2011). Networking approaches and capacity are also likely to be constrained by firm size as are stocks of social capital (Agyapong et al., 2017; Mueller and Jungwirth, 2022). Informal networks, professional associations, colleagues and friends are important personal information sources (Hersleth et al., 2023; Yachin, 2021) and strong-tie relationships are often preferred to moderate cooperation with other firms (Jaouen and Gundolf, 2009). Another notable feature of small firms is their owner-centred culture (Kearney et al., 2019; Lussier and Sonfield, 2015). This translates into a less rigid, sophisticated and complex management style (Rastrollo-Horrillo, 2021; Rodrigues et al., 2022) with the entrepreneur in the central role being responsible for both operations and strategic decision-making (Bornhäll et al., 2016; Fernández-Esquinas et al., 2017). Characteristics of such owner-manager centrality are intuitive, ongoing and often informal procedures or strategies, management processes and organisation of work and tasks (Liberman-Yaconi et al., 2010; Russo and Tencati, 2009).
Overall, we observe that scholarly interest in small firm and family firm coopetition is increasing (Gernsheimer et al., 2021) and has been identified as an important direction for future research (Bouncken et al., 2015; Corbo et al., 2023; Meena et al., 2023). Nevertheless, despite this burgeoning interest, we still lack a comprehensive overview of the evolving literature in this domain. Consequently, there is a compelling need to take stock of existing knowledge and a new overview is required to investigate distinctive features and consequences of coopetition in the small business sector.
Methods
We adopted a literature review approach (Tranfield et al., 2003) in which we embed future research needs and directions. To define our scope, we searched for publications in peer-reviewed journals in seven electronic databases, eliminating books, book chapters and other non-refereed publications (Ordanini et al., 2008; Podsakoff et al., 2005). We included articles published (accessible online) until 31 December 2023 that explicitly addressed the topic of coopetition in small firms, using different keyword combinations in the title, keywords, or abstract (Table 1).
Inclusion criteria of the systematic literature review on small firm coopetition.
This initial search resulted in 689 publications, eliminating duplicates we reduced the sample to 445. Similar to earlier, more general systematic literature reviews on coopetition (Bouncken et al., 2015; Gernsheimer et al., 2021), we used journal quality criteria to ensure methodological rigour in the selection approach (Gnyawali and Song, 2016). Therefore, we considered only articles in business and management listed by the international journal ranking Academic Journal Guide (AJG) from the Chartered Association of Business Schools ranked second and above. Next, a content criterion was implemented and all publications that did not meet this criterion according to their titles and abstracts were excluded. As a result, we obtained a final sample of 90 articles on small firm coopetition. We examined our sample by clustering text segments from all articles into relevant, meaningful themes and insights using NVivo 1.6.2 (Lumivero, Denver, US). This allowed us to identify the general development of the literature and converging themes. The content analysis in our sample adheres to a phase model encompassing the three stages of coopetition: initiation, execution and outcomes (Bengtsson and Raza-Ullah, 2016; Dorn et al., 2016; Gernsheimer et al., 2021). Through the adoption of this approach, our study highlights the specific elements and dynamics intrinsic to the initiation processes, the execution principles and the ultimate outcomes specific to coopetition in small firms.
A burgeoning interest in research on small firm coopetition
Initial analyses of coopetition in the small firm context appeared in the early 2000s (Gnyawali and Park, 2009; Lechner and Leyronas, 2009; Lechner et al., 2006; Quintana-Garcia and Benavides-Velasco, 2004). Yet, the exploration of coopetition within small firms has remained notably under-explored until 2016, constituting a mere 11 articles (12% of the total sample). In the following years, the frequency of analyses of coopetition within small firms has witnessed a rapid expansion (Figure 1).
Chronological evolution of publications on coopetition in small firms (N = 90).
The majority of articles in this review were published in general strategic management journals (Table 2) with five journals totalling more than half of the publications: Industrial Marketing Management (N = 19, 21%); Review of Managerial Science (N = 8, 9%); Journal of Business and Industrial Marketing (N = 8, 9%); Journal of Business Research (N = 7, 8%); Long Range Planning (N = 5, 6%). Interestingly, only four small business management and entrepreneurship journals feature amongst the most publishing journals: International Journal of Entrepreneurial Behaviour and Research (N = 4, 4%); International Small Business Journal (N = 3, 3%); Journal of Small Business Management (N = 2, 2%); Journal of Small Business and Enterprise Development (N = 2, 2%). The majority have been published in rank 3 (N = 54, 60%) and 2 journals (N = 27, 30%) and only 10% (N = 9) appeared in the highest ranked journals.
Leading journals and number of publications per journal.
As observed, in earlier literature (Bouncken et al., 2015; Gernsheimer et al., 2021), qualitative methods are a preferred choice (N = 39, 43%), quantitative approaches are increasingly used over time but represented a notably lower prevalence (N = 33, 37%). Only 10% (N = 9) of the contributions opted for a mixed-method approach facilitating theory development and testing through the combination of qualitative and quantitative methods (Misangyi and Acharya, 2014). Regarding the categorisation of the firm types under scrutiny, our analysis reveals a predominant focus on firms generically categorised as SMEs, with 36 publications (40%). Start-ups, entrepreneurial and new firms featured in 17 publications (19%), followed closely by small firms with 14 publications (16%) and micro-firms in only 4 (4%). Family firms were studied only once, the same as business networks (both about 1%). Notably, eight publications (9%) addressed the nuanced dynamics of coopetition between small and large firms. The remaining nine publications (10%) either did not explicitly specify the studied firm type or adopted a conceptual or review approach. Overall, we note a lack of clarity in the definitions used to delineate the firm types; they often appear ambiguous and subject to variation across studies. Table 3 provides examples of definitions used to define SMEs, small firms, entrepreneurial firms, start-ups and micro-firms.
Examples of small firm definitions.
The analysis of the distribution of publications across industries (Table 4) shows two interesting findings. First, we observe a dominance of multi-industry focus (N = 25, 27%), indicating significant attention to coopetition dynamics across multiple sectors. Second, research on small firm coopetition spans over a wide range of industries (publications with a single-industry focus studied 22 different sectors).
Industry sectors in small firm coopetition research.
The characteristics of small firm coopetition
Following previous studies (Bengtsson and Raza-Ullah, 2016; Dorn et al., 2016; Gernsheimer et al., 2021), we organise our findings around a phase model encompassing the three crucial stages of coopetition. Figure 2 of this section summarises the specific elements and dynamics intrinsic to the initiation processes, the execution principles and the ultimate outcomes specific to small firm coopetition.
Overview of the specificities of small firm coopetition.
Initiation processes and mechanisms
We describe in the following initiation processes and mechanisms considered particularly relevant in small firm coopetition. Although it is difficult to draw a clear-cut line between internal and external drivers of coopetition, it is essential to note that coopetition may be driven by different factors. This includes internal firm characteristics related to liabilities of smallness and newness, and external technology and market developments.
Internal drivers related to liabilities of smallness and newness
Small firms engaging in coopetition are typically driven by their pursuit to overcome barriers negatively affecting innovation, performance and economic survival (Flanagan et al., 2018; Hora et al., 2018). Largely owing to size-related constraints in internal resources, for example, human (Chiambaretto et al., 2020) and financial resources (Bouncken et al., 2020; Galloway et al., 2021), small firms seek to combine distinct but complementary resources, capabilities and knowledge to gain advantage from competitor knowledge (Chiambaretto et al., 2020). These sharing processes enable benefits from (un)intentional learning or knowledge spillovers in small (Quintana-Garcia and Benavides-Velasco, 2004) and newly established firms (Klammer et al., 2023; Yang and Zhang, 2022). Moreover, coopetition can be the only strategic option for small firms, especially when no other non-competing business partners are willing to cooperate with them or have the valuable resources they need (Soppe et al., 2014). Therefore, this limitation of alternative options makes coopetition an essential strategy for these firms to overcome resource constraints and enhance their competitive position.
Competitors might be even more valuable business partners than non-competing firms as ‘the best partner [. . .] is sometimes one of its strong competitors’ (Gnyawali and Park, 2009, p. 312). Indeed, competitors oftentimes operate in the same industry and market contexts, facing the same or very similar market opportunities and threats, leading to a high degree of resource complementary (Chiambaretto et al., 2020; Gnyawali and Park, 2009) that increases the potential for synergies (Chiambaretto et al., 2020) and may help coopetitors improve their competitive position. Working with competitors allows firms to collectively manage and distribute the costs and risks of technology development (Bengtsson et al., 2020; Bouncken and Kraus, 2013; Chiambaretto et al., 2020). This is expected to be more important for small firms in the light of size-related limitations in resource utilisation (Kraus et al., 2019). Consequently, small firms gain cost efficiency over the value chain (Czakon and Czernek-Marszałek, 2021; Ramjaun et al., 2024) with particular importance in industries where research and development costs are high (Bouncken and Kraus, 2013; Quintana-Garcia and Benavides-Velasco, 2004).
External drivers related to technology and market development
Many small firms operate in highly specialised, complex and rapidly developing domains (Bengtsson and Johansson, 2014), which require access to strategic knowledge and expertise. In these contexts, such firms are particularly motivated to acquire expertise from their coopetitors to reach more effective and efficient co-development of innovative new products and services (Bagherzadeh et al., 2022; Kraus et al., 2019). Another advantage for small firms is the reduction in the time required for technology and innovation development (Gnyawali and Park, 2009). Through coopetitive efforts, and the integration of complementary technologies, small firms acquire and build knowledge that they would not have been able to develop internally (Bagherzadeh et al., 2022; Baglieri et al., 2016). This helps them to compete thereby, protecting and reinforcing their market position (Gnyawali and Park, 2009).
A single small firm will not have the same commercial force as a large organisation due to insufficiently diverse and cross-cultural market-related resources, lack of reputation and competencies for independent product or service commercialisation (Hora et al., 2018; Lacam and Salvetat, 2017). Coopetition helps strengthen their competitive market position (Jooss et al., 2023), joint bargaining power (Gnyawali and Park, 2009), as well as sales operations, product branding and marketing endeavours (Kraus et al., 2019). Therefore, small firms seek to benefit from their competitor’s commercialisation networks, reputation and market experience (Hora et al., 2018; Pattinson et al., 2018) to reduce the product or service time-to-market (Chiambaretto et al., 2020). In the same vein, coopetition in branding and marketing activities also leads to improved brand equity (Lindström and Polsa, 2016). This creates the necessary resource base for small firms to expand into new (Bengtsson et al., 2020; Pattinson et al., 2018) or even international markets (Crick and Crick, 2022; Vanyushyn et al., 2018). However, while small firms are often more susceptible to environmental fluctuations and despite the influence of these external factors that encourage small-firm coopetition, research outcomes remain inconclusive: some studies suggest that while the environment does play a role, it may not be the primary factor driving coopetition (Czakon and Czernek, 2016; Della Corte and Aria, 2016; Kallmuenzer et al., 2021).
The role of congruence, proximity and trust
Goal congruence, characterised by the sharing of similar and compatible objectives, enhances the likelihood of small firms to engage in coopetition (Ramjaun et al., 2024). This alignment fosters the development of common ground and a sense of interdependence, ultimately amplifying the willingness to invest time, effort and resources into the relationship. Notably, the mutual interest and comprehension of how coopetition operates and its objectives appear to carry greater significance for smaller firms than for their large counterparts (Blanka and Traunmüller, 2020; Hora et al., 2018).
The degree of geographical proximity constitutes a pivotal determinant for successful initiation (Lacam and Salvetat, 2017; Lindström and Polsa, 2016). Small and new firms are more inclined to cooperate with geographically close rivals (Lasch et al., 2013; Lindström and Polsa, 2016). Geographically close cooperations are not only easier and less costly but such proximity also facilitates the identification of opportunities and eases the search for partners (Lacam and Salvetat, 2017). Where larger distances are involved, micro-firms in particular encounter considerable challenges in initiating coopetition (Garri, 2021). Proximity is not only about geographic issues (Albert-Cromarias et al., 2022), but it also encompasses cognitive and social dimensions (Blanka and Traunmüller, 2020; Boehme et al., 2021). Small and micro-firms tend to initiate contact with like-minded enterprises with whom they are familiar (Czernek and Czakon, 2016; Garri, 2021). Investigating small craft breweries, for example, Kraus et al. (2019) find that sympathy and interpersonal ties played a significant role in the decision to engage in coopetition. Small firms build coopetitive relationships based on having a shared vision with not only complementary, but also trusted partners (Crick and Crick, 2021a), often called ‘friends’ (Czakon et al., 2020; Garri, 2021). The strong sense of friendship and community in small firm coopetition lowers the degree of perceived competitive intensity and inter-firm tensions (Crick and Crick, 2021a). As such, trust is a vital factor in the small firm context (Cortese et al., 2021; Czernek and Czakon, 2016; Garri, 2021). Inter-personal mechanisms such as trust, reputation, social ties and cognitive orientation are facilitators in the initiation phase forming examples of the importance of individual-level dimensions within the small firm sector (Granata et al., 2018).
Execution principles
Execution principles encompass the utilisation of formal and informal control mechanisms, the separation of cooperative and competitive activities, the integration of the coopetition paradox and the role of socio-emotional ties in addressing cognitive tensions.
The role of formal and informal control mechanisms in balancing benefits and risks
The sharing and integration of complementary resources, capabilities and knowledge lies at the heart of coopetition and yields unprecedented knowledge and learning opportunities (Bengtsson and Johansson, 2014; Hora et al., 2018). At the same time, coopetition entails potential risks such as knowledge leakage and opportunistic behaviour (Bouncken and Kraus, 2013; Gast et al., 2019), which may disproportionally affect small firms compared to their larger, established partners (Crick and Crick, 2021a). For small firms, protecting core technologies and knowledge from unintentional leakages may be particularly challenging as long-term survival depends on their technology and innovation; they may also risk of losing control, flexibility and freedom as they become progressively dependent on their larger rivals (Gnyawali and Park, 2009). To reap the benefits of coopetition, small firms need to protect core knowledge from their rivals, carefully manage the inherent sharing mechanisms and implement protective measures (Gast et al., 2019). Coopetitive processes, therefore, and coopetition management, need to be formalised between small and large partners (Granata et al., 2018; Lechner et al., 2006). In addition, to avoid potential conflicts, the former are encouraged to employ formalised control mechanisms such as confidentiality agreements, non-disclosure agreements, privacy policies or verbal contracts (Gast et al., 2019; Hora et al., 2018). These mechanisms determine the sharing of resources, management of property, shared obligations and property rights (Tidström et al., 2018). Collective sanctions against opportunistic behaviour can be included in agreements (Tomlinson and Fai, 2013). In addition, information security systems are used to manage access to vital information (Gast et al., 2019).
At the aggregate level, particularly in the case of micro-firms, coopetition ecosystems with a formalised organisational structure aim to collectively safeguard shared interests while preserving the firm’s distinct competitive edge (Granata et al., 2018). Small firms also apply informal coordination mechanisms, including monitoring processes and ongoing information exchange and discussions (Bouncken et al., 2016; Planko et al., 2019; Tidström et al., 2018). In return, these informal control mechanisms strengthen trust and social ties (Gast et al., 2019).
External separation of cooperative and competitive activities
In small firms, the physical and structural separation of cooperative and competitive activities presents difficulties for internal implementation (Lechner et al., 2016). Consequently, separation often occurs outside the firm to minimise personal contact and communication between competitor employees (Gast et al., 2019; Granata et al., 2018; Lechner et al., 2016). Solutions to separate activities outside the firm include the formation of collective structures, as, for instance, unions such as the Pic Saint Loup winegrowers in the South of France (Granata et al., 2018), or collective brands such as that of Champagne (Spielmann and Williams, 2016).
Integration of the coopetition paradox: The vital involvement of the owner-manager and third-parties
Having fewer internal protection mechanisms, dealing with the coopetitive paradox is a particular challenge; it can be a source of conflict and a catalyst of tension (Cortese et al., 2021). Research recommends combining the separation of cooperative and competitive activities with the integration of the coopetition paradox at the individual level (Fernandez et al., 2014). The integration of the coopetition paradox in small firms is complex but fundamental. In this context, the position and attitude of the owner-manager are crucial as coopetition dynamics depend on the capacity of entrepreneurs to reconcile the paradoxical nature of simultaneously cooperating and competing (Granata et al., 2018).
Entrepreneur orientation and experience influence the firm’s propensity to proactively engage in coopetition (Czakon et al., 2020; Galloway et al., 2021). Given their central role, owner-managers are generally responsible for creating the right conditions by balancing conflict to spread a coopetitive mindset (Bengtsson et al., 2020; Garri, 2021). If owner-managers have previous experience with coopetition, they need to draw on such experience to ensure that such a strategy is well understood and communicated to employees involved in external relationships (Bouncken et al., 2020). Owner-managers, however, often lack the required time and human resources for effective coopetition management. With those constraints, the involvement of independent, moderating third parties can offer a solution (Boehme et al., 2021; Jakobsen, 2020). As intermediaries or neutral coordinators, these moderating third parties can serve as brokers, who assist in screening and selecting possible partners, and reduce tensions related to uncertainty and suspicion, while enhancing trust and goal congruence (Blanka and Traunmüller, 2020; Jakobsen, 2020). They can also act as regulators of market demand, distributed in homogeneous ways amongst coopetition ecosystem members (Boehme et al., 2021).
Socio-emotional ties as success factors in dealing with cognitive tensions
As for the initiation stage, cognitive tensions are common in small firm coopetition as they attach particular importance to socio-emotional proximity with partners. Coopetitive actions must be embedded in a social atmosphere involving mutuality and regular information exchanges to prevent opportunism (Bouncken et al., 2016). Trust, commitment and mutual benefits are requirements if small firm coopetition is to function properly (Kraus et al., 2019). The strengths and quality of the socio-emotional relationships small firms have with their partners are in managing tensions (Blanka and Traunmüller, 2020). Successful management of such tensions depends on cognitive proximity between coopetitors and sharing a similar mindset based on trust, harmony and friendly exchanges (Gast et al., 2019; Kraus et al., 2019). Increased communication, interpersonal exchange and social ties based on fairness and transparency are particularly important in small and new firm contexts (Lechner et al., 2016).
Outcomes
Finally, we outline the potential outcomes of small firm coopetition on both the firm and the industry level.
Cost structure, competitive market positioning and innovation performance
Through coopetition, small firms enhance their performance, build sustainable competitive advantage (Della Corte and Aria, 2016), gain economic benefits and obtain economies of scale while strengthening their negotiating power, purchasing and sales conditions (Kallmuenzer et al., 2021). Coopetition fosters customer confidence, driving interest and demand, ultimately positively influencing sales (Crick and Crick, 2021b; Garri, 2021). Regarding competitive market positioning, unlike large firms, small and particularly young firms often lack the necessary resources to develop extensive internal production and commercialisation infrastructure and well-organised supply chains (Hora et al., 2018; Ramjaun et al., 2024). Coopetition facilitates access to new markets, improves logistics, and marketing strands, and diversifies distribution channels (Ramjaun et al., 2024), resulting in time and cost efficiencies (Hora et al., 2018). Through collaboration with competitors on a global scale, small firms can effectively access larger and international markets (Crick and Crick, 2021c; Crick and Crick, 2022; Garri, 2021; Vanyushyn et al., 2018).
Innovation is one of the key outcomes of small firm coopetition (Bouncken et al., 2016). The sharing, integration and combination of capabilities address innovation challenges in resource-constrained small (Lechner et al., 2016) and new firm contexts (Flanagan et al., 2018; Hora et al., 2018). Innovation in small firms is not limited to incremental strategies; Bouncken and Kraus (2013), for example, show that coopetition positively influences radical innovation when small firms integrate partner knowledge (Bouncken et al., 2018; Vanyushyn et al., 2018), resulting in the development of entire product lines and higher levels of technological diversity (Garri, 2021; Kraus et al., 2019).
Innovation standards and market structures
Coopetition spurs strategies at the aggregate level and helps to develop the industry and build a better reputation in the marketplace with industry partners, suppliers and customers. By fostering a more cohesive competitive environment, small firm coopetition promotes overall market awareness and reputation, profitability and industry growth (Garri, 2021; McGrath et al., 2019). Providing resources for small firms to improve product novelty and quality, coopetition benefits the whole industry by enhancing quality while also strengthening reputation and credibility (Garri, 2021). Coopetition benefits spread from the firm level to other economic actors through the dissemination of such gains to the whole industry (Della Corte and Aria, 2016; Garri, 2021). Joint actions between small competitors permit them to leverage resources and collectively promote and enhance the attractiveness of territories and clusters. Studies from the wine industry show how small-firm coopetition helps to strengthen entry barriers and production standards resulting in better product quality and brand protection (Granata et al., 2018; Spielmann and Williams, 2016).
Towards a small business view in coopetition research
Small firms experience liabilities of smallness (Baum et al., 2000) and newness (Stinchcombe, 1965) which relate to their size and market share meaning that coopetition does not operate in the same way as in large firms. Different challenges arising during the coopetition process mean they are likely to make different decisions than those of the latter category. Thus, there is an obvious need to approach our understanding of coopetition differently in the context of small firms by considering their specificities.
Integrating firm size and age diversity into coopetition research
As is acknowledged, the small firm sector is not homogeneous, it comprises a diverse range of ventures spanning a range of sizes, ages and sectors each with its own organisational characteristics and challenges (Granata et al., 2018; Jaouen and Lasch, 2015). A variety of diverse firms (and definitions) have been examined in terms of their coopetition activities such as SMEs (Gast et al., 2019; Lacam and Salvetat, 2017), start-ups (Flanagan et al., 2018; Hora et al., 2018), entrepreneurial firms (Kauppinen and Escamilla-Fajardo, 2023; McGrath et al., 2019), micro-firms (Garri, 2021; Granata et al., 2018), family firms (Crick and Crick, 2021a), small (business) entrepreneurs (Galloway et al., 2021) and smaller-sized businesses/small firms (Czakon and Czernek-Marszałek, 2021; Darbi and Knott, 2023). Taking our sample of 90 articles as an illustration, we observe that small firm coopetition occurs in different contexts and firm constellations: 40% of the coopetition studies studied SMEs, 19% start-ups or entrepreneurial, new firms, 16% small firms, 4% micro-firms, 1% family firms and 1% business networks. Finally, 9% of the studies examined coopetition between small and large firms while 10% did not define the studied firm type or adopted a conceptual or review approach. Therefore, a small business view should distinguish between different size structures, taking into account the liability of smallness (Baum et al., 2000) and different age structures, considering the liability of newness (Stinchcombe, 1965) structures typical for the heterogeneous nature of what the literature commonly refers to as SMEs. Making these distinctions and considering the specificities of small firms is a necessary condition for a better understanding of coopetition in different constellations: asymmetrically, when SMES or new firms interact with large firms, and symmetrically, when small firms of more or less similar size engage in coopetition. Each of these contexts and constellations presents particular challenges and opportunities.
How does coopetition unfold in asymmetrical and symmetrical constellations?
Exploring the concept of cooperation-focused coopetition between small firms
Prior research in the context of large firms suggests that coopetition can be either cooperation or competition-dominant (Eriksson, 2008). Small firms often approach coopetition with an open mindset proactively embracing coopetition in a collegial manner (Kraus et al., 2019) with like-minded partners with whom they are already familiar (Czernek and Czakon, 2016; Lindström and Polsa, 2016). In small firms trust, cooperative behaviours and close geographic and social proximity drive the cooperative dynamics of coopetition (Darbi and Knott, 2016). In practice, small firms rely on their competitors as advisors for peer assistance (Galloway et al., 2021) to co-create new opportunities (Bengtsson and Johansson, 2014), technological innovations and added value (Bouncken and Kraus, 2013; Granata et al., 2016; Gnyawali and Park, 2009). They cooperatively exchange support, advice and expertise to drive innovation and technological development (Kraus et al., 2019; Quintana-Garcia and Benavides-Velasco, 2004).
Although small firm coopetition is typically more cooperation-dominant, cooperative and competitive behaviours may intersect at some point. In the tourism sector, for example, small firms form local networks to collaboratively design marketing campaigns, exchange knowledge and collectively fund the costs of promoting their destinations (Cortese et al., 2021; Czakon and Czernek-Marszałek, 2021). At the same time, they engage in fierce competition for the limited holiday budgets of tourists (Chim-Miki and Batista-Canino, 2017). Overall, the cooperating but rival small firms typically do not perceive their interactions as competitive but rather as cooperative dimensions of their relationship (Kraus et al., 2019). Under such conditions, coopetition between small firms can be described as cooperation-focused coopetition, with a high level of cooperation and limited competition (Akpinar and Vincze, 2016).
Exploring the concept of protection-focused coopetition between small and large firms
Very few studies explore the dynamics in asymmetric settings, for example, coopetition between small and large firms (Chiambaretto et al., 2020; Gernsheimer et al., 2024; Tidström et al., 2018), or between start-ups and large firms/incumbents (Blanka and Traunmüller, 2020; Hora et al., 2018; Klammer et al., 2023; Lacam and Salvetat, 2017). This is surprising because small firms increasingly partner with large established firms as each possesses much-needed complementary resources and knowledge that the other partner lacks (Bengtsson and Johansson, 2014; Chiambaretto et al., 2020). The literature suggests that in coopetition with heterogenous asymmetric firms, learning opportunities are more important (Lechner et al., 2016). Large established firms have access to the substantial financial assets necessary to pursue innovation but often lack specialised technological capabilities to develop radical innovations (Hora et al., 2018). Conversely, small firms are typically more flexible, agile and innovative, but their internal resource restrictions make it difficult to obtain additional financial capital, register patents, innovate to gain a stronger market position (Chiambaretto et al., 2020). Therefore, asymmetric coopetition can serve as a strategic escape route for small firms to address their inherent liabilities and for large firms to accelerate innovation. Despite these complementarities, perils of small-large firm coopetition arise from power imbalances (Bengtsson and Johansson, 2014; Tidström et al., 2018). This results in higher levels of risk, including opportunism, hidden priorities and imitation (Hora et al., 2018; Tidström et al., 2018), making small-large firm coopetition more complex and challenging compared to relationships between small firms of similar sizes (Lechner et al., 2016). Disadvantaging the small partner, large firms may leverage their power to exploit jointly developed expertise for their own gain (Bouncken and Kraus, 2013). In such a scenario, small firms disclose their most valuable, innovative knowledge to their larger, more powerful competitor (Gast et al., 2019). While the latter has the knowledge to safeguard their sensitive information using formal control mechanisms, routines and procedures (Chiambaretto et al., 2020), the former often lack this capacity and may struggle to use these tools effectively, thereby exposing themselves to knowledge theft (Gast et al., 2019). Effective management of the coopetition process and the application of coopetition management principles, portfolio capabilities and control mechanisms is thus, crucial to prevent the loss of resources, capabilities or knowledge to the stronger partner (Bengtsson and Johansson, 2014).
In the light of these insights, coopetition between small and large firms can be described as rather ‘protection-focused’. This term reflects the mutual goal of asymmetrically sized (and aged) parties, wherein both the small and large firms aim to protect their most valuable knowledge and expertise while simultaneously cooperating with their competing counterpart.
Exploring the concept of mindset-focused coopetition in new and micro-firms
Given the characteristics of new and micro-firms, where often entrepreneurs have a central role in decision-making and strategic planning (Kearney et al., 2019), coopetition is managed differently. In new and micro-firms, liabilities of newness and smallness (Baum et al., 2000; Bengtsson and Johansson, 2014; Stinchcombe, 1965) are more evident, and therefore, the importance of coopetition is of potentially higher strategic importance. While in large organisations the stakes of coopetition can be limited through a more decentralised structure and functioning allowing for organisational separation of the cooperative and competitive side of coopetition, in a small firm and owner-centric context, management of coopetition depends in essence on the entrepreneur or owner-manager (Granata et al., 2018).
As the central individual responsible for deciding with whom to cooperate, and how to manage and control tensions (Garri, 2021), entrepreneurs play a vital role in coopetition initiation and management (Kraus et al., 2019). Prior research on micro-firm coopetition emphasises the importance of managing the coopetitive relationship not only at the firm level but also by addressing individual-level factors. This is crucial because the management of coopetition in such settings depends heavily upon individual-level determinants (Granata et al., 2018). At the individual level, entrepreneurs of new or micro-firms have to deal with the distinct challenge to cope with the paradoxical duality of cooperation and competition (McGrath et al., 2019). To do so, they must develop a coopetitive mindset, accompanied by relational capabilities and routines including openness, communication, coordination and trust (Garri, 2021; Granata et al., 2018). This implies a cognitive exercise of alternating between cooperative and competitive dimensions (Granata et al., 2018). Therefore, they need to understand and ‘internalise’ the coopetition paradox and its inherent tensions (Le Roy and Fernandez, 2015; Fernandez et al., 2014). Therefore, coopetition in new or micro-firm contexts could be described as ‘mindset-focused’.
Looking forward: future research areas of small firm coopetition
Based on the structure and content of the developing research on coopetition within the small business sector, as well as the major trends highlighted in this literature, we propose several areas for further investigation.
More diversity in contextualising small firm coopetition
In particular, new and micro-firm contexts are relatively under-explored while more diversity in contextualising coopetition is needed to recognise size and age specificities that may influence coopetition in different ways. The extant literature primarily focuses on the examination of symmetric coopetition between firms of the same size and/or characteristics (Bengtsson and Johansson, 2014; Granata et al., 2016) or coopetition amongst nascent firms (Flanagan et al., 2018). It is acknowledged that asymmetric coopetition is a managerial challenge to cope with opportunism, undesirable knowledge spillovers and potentially divergent interests (Baglieri et al., 2016; Hora et al., 2018; Tidström et al., 2018). However, examples from specific industries are informative regarding the potential for asymmetric relationships. For example, in the biopharmaceutical industry, coopetition between small biotechnology firms and large pharmaceutical groups has led to higher levels of technological diversity than cooperation between the same type of firms (Baglieri et al., 2016). Future research exploring the differences between symmetric and asymmetric coopetition is needed to develop a more comprehensive understanding of the mechanisms and dynamics of coopetition in different firm types and to further explore when and how coopetition takes a cooperation, protection or mindset-focused form.
Investigating the specificities of small firms and their consequences for coopetition
Future research also needs to focus on whether the specificities of small firms are valid for all small firm types, including newly established ventures and micro-firms, and whether coopetition unfolds similarly or differently in these contexts. This has the potential to open new avenues of research investigating the specificities of firm size and its impact on the mechanisms of coopetition. To date, much of the prevailing evidence integrates small firms into research samples without fully acknowledging their specific and diverse characteristics as theoretical variables that could potentially influence the findings of such work. To cite a few examples, this includes investigations into the behavioural antecedents of coopetition (Czakon et al., 2020), how coopetitors balance knowledge sharing and protection (Gast et al., 2019), how small firms foster cohesion and cooperation amongst themselves to compete with large incumbents (Mathias et al., 2018), or how interactional and procedural practices help in managing the inherent tensions of coopetition (Tidström et al., 2018). Coopetition is not only industry-specific but also influenced by context (Czakon et al., 2020) and such aspects should also be acknowledged in both the theoretical framework and the methodology of studies.
Future research questions
Connecting coopetition strategy with the small firm and entrepreneurship literature, we identify potential research questions aimed at broadening the contextual scope and integrating the distinctive attributes of small firms. Ordered according to the three stages of coopetition, where small, new or micro-firms are involved, areas for future research could encompass:
Initiation processes and mechanisms
What factors influence the formation of asymmetric or symmetric coopetition?
How do firm agility and flexibility enable or hinder coopetition formation?
What role do trust, and distrust, play in enabling or hindering coopetition formation?
What role does organisational culture play in shaping small firm coopetition dynamics, particularly in comparison to large counterparts?
Execution principles
How do firm agility and flexibility enable or hinder coopetition management?
What role do trust, and distrust, play in enabling or hindering small firm coopetition management?
How does the management of symmetric and asymmetric coopetition differ across countries/economies?
How does the risk of opportunistic behaviour manifest in symmetric and asymmetric coopetition, and what strategies are employed to manage this risk in these distinct contexts?
How do micro-firms navigate the balance between knowledge sharing and protection in coopetitive relationships, considering their very small size and related lack of influence and experience?
How do different ownership structures, such as family-owned versus non-family-owned firms, influence the management of coopetition amongst small firms?
Outcomes
What are the different outcomes of small firm coopetition (including non-monetary, such as satisfaction and entrepreneurial well-being)?
How do small firm specificities influence the outcomes of coopetition?
How does small firm coopetition influence different types of innovation?
How do the outcomes of asymmetric and symmetric coopetition differ across firm sizes?
How do different ownership structures, such as family-owned versus non-family-owned firms influence the outcomes of small firm coopetition?
Do family-owned firms seek different outcomes of coopetition in comparison to non-family-owned firms?
Conclusion
While the research on coopetition has seen a significant rise in recent decades, we observe that our understanding of coopetition and its underlying mechanisms stems primarily from insights obtained in large organisations (Bengtsson et al., 2010; Corbo et al., 2023) resulting in a notable gap in analysing the dynamics of coopetition within alternative contexts, such as the small firm sector and entrepreneurship. Recognising the importance of understanding coopetition amongst such firms, our review highlights the need to shift attention towards investigating how these entities engage in, and manage coopetitive relationships. Given the distinct challenges and specificities faced by small, micro and new firms, it is imperative to explore whether and how the principles and mechanisms identified in the literature on large firm coopetition translate to such firms. By taking stock of emerging research in new, micro and small firm coopetition and connecting it with entrepreneurship literature, our review emphasises the importance of further inquiry into this area. Moving forward, it is essential to identify and address the drivers, mechanisms and challenges that shape coopetition strategies in such firms, paving the way for a more comprehensive understanding of the phenomenon across diverse business contexts, including the concepts of cooperation, protection and mindset focused coopetition based on differences in firm size and age.
Footnotes
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship and/or publication of this article: Johanna Gast, Frank Lasch and Frédéric Le Roy are members of LabEx Entrepreneurship, funded by the French government (LabEx Entreprendre, ANR-10-Labex-11-01).
