Runge S, Schwens C, Schulz M. 2022.

The invention performance implications of

coopetition: How technological, geographical, and product market overlaps shape
learning and competitive tension in R&D alliances. Strategic Management Journal 43:
266-294
1. Research Question
Previous literature

Coopetition (firms’ simultaneous engagement in cooperation and competition) in the

context of R&D alliance has bright side as well as dark side to firms (i.e., dual logics)
- Bright side: Competitors share similar technologies  offers learning opportunities
- Dark side: May increase the risk of knowledge misappropriation

How firms try to address such dual logics by ….

- … administrative governance controls
- … separating of cooperative and competitive activities
Scholars have begun to examine how similarities between partners in terms of
technology, geographical location, and market influence a firm’s invention performance.
 Market overlaps increase competitive tension within the alliance, but it also
increases learning because partners share commercial logics.
 Technological and geographical overlaps foster learning, but it also leads to
competitive tension because knowledge can spillover to the counterpart.
 (Gap 1) Literature has no consensus on the relationship between each type of
overlap and learning & competitive tension in an alliance
 (Gap 2) Product market overlap has not been considered.
 Industry relatedness

Research question

How each dimension of overlap shapes a firm’s learning and competitive tension in R&D
alliance?

The impact of [technological, geographical, product market overlaps between a firm

and its alliance partner] on [the firm’s invention performance]
- Technological, geographical, and product market similarity between the focal firm
and its coopetitor (R&D alliance partner as well as competitor) shapes
organizational learning and competitive tension.
-
 2. Theory & Hypothesis
Learning in alliance: Motivation, ability, and opportunities to learn
- R&D alliance: formal agreements between firms to cooperate in R&D
- Motivation to learn: the extent to which the firm is willing to devote time and
resources to learning from its partner
- Ability to learn: the firm’s capacity to absorb the partners’ knowledge
- Opportunity to learn: the extent to which the knowledge of the partner is novel to
the firm and offers valuable knowledge recombination opportunities
Competitive dynamics: Awareness, motivation, and capabilities to compete
- Awareness of a competitive relationship: the degree to which a firm is aware of its
partner’s potential for competitive actions
- Motivation to compete: a firm’s willingness to exert efforts to maximize its own
interest at the expense of its partner
- Capability to compete: a firm’s ability to exploit misappropriated knowledge and to
its repertoire to undertake competitive actions against its partner

Technological overlap Geographical overlap Product market overlap

Definition The degree of similarity in
the technological
knowledge domains of a
pair of firms
Learning Motivation, Ability,
Opportunities ↑
Competition Awareness, Capability ↑
The degree of physical
proximity between the
headquarters of a pair of
firms
Motivation, Ability,
Opportunities ↑
Awareness, Capability ↑
The degree of similarity
between the product
markets of a pair of firms
Motivation, Ability ↑
Opportunities ↓
- The partner’s market
knowledge for the firm is
less novel.
Awareness, Capability ↑

Motivation↓ Motivation↓ Motivation ↑

- Similar in resource
markets (i.e.,
interdependencies) tend to
be less direct and visible.
Hypotheses H1. Technological overlap
regarding between a firm and its
direct partner in an R&D alliance is
effects positively related to the
firm’s invention
performance.
- Closer in distance allows
frequent interactions, which
may lead to reduce in
motivation to compete.
H2. Geographical overlap
between a firm and its
partner in an R&D alliance is
positively related to the
firm’s invention
performance.
- Acting competitively may
improve the firm’s market
position over its partner
and thereby increase its
revenues.
H3. Product market overlap
between a firm and its
partner in an R&D alliance is
negatively related to the
firm’s invention
performance.
Hypotheses Product market overlap Product market overlap
regarding magnifies Motivation, Ability magnifies Motivation, Ability
moderating
effects ↑, but Opportunities↓ ↑, but Opportunities↓

Awareness, Capability, Awareness, Capability,

Motivation ↑ Motivation ↑

H4. This positive relationship H5. This positive relationship

is negatively moderated by is negatively moderated by
product market overlap product market overlap
between a firm and its between a firm and its
partner in an R&D alliance. partner in an R&D alliance.

※Key argument: Product market overlap is the only factor that increases the firm’s
motivation to compete in R&D alliance.
 Product market overlap may lead the firm to exploit knowledge
misappropriation opportunities in the alliance instead of pursuing common
objectives.

3. Methodology
Sample
215 R&D alliances formed by 94 U.S. pharmaceutical firms between 1996 and 2013
- Primary operations in SIC codes: 2834, 2836
- Active in intra-industry R&D alliances and patenting
- Starting year (1996) and U.S.: due to data availability
- End year (2013): adequate time after alliance formation for inventions to be
patented
Data source
SDC platinum database: identify R&D alliances
- Ambiguous cases: validated using the LexisNexis database, U.S. SEC 10-K filings
PATSTAT
Firms’ product markets
Compustat
- Missing data were complemented by using SEC 10-K filings
Variables
Dependent variable: invention performance
- Sum of a firm’s value-weighted patents over the alliance’s duration
 Alliance’s duration: 4-year windows (common assumption in literature), 1-year
lag after alliance announcement
 Value-weighted: a weighted index considering the number of claims, forward
citations of a patent within 5 years of application, backward citations of a
patent

Independent variables
Technological overlap (similarity of the firms’ technological profiles)
- Each firm’s distribution of all patents across technology class

Geographical overlap
- Using zip code of the firms’ headquarters…

- D: distance in miles
- i: firm; j: partner; r: radius of the earth; lat: latitude; long: longitude

Product market overlap

- Hoberg & Phillips (2010)
 Computer-aided text analysis of firms’ product descriptions in SEC 10-K filings

Control variables
- Firm level: firm size (ln(1+total assets); firm age (ln(1+a firm’s years since
incorporation); firm R&D expenditures (in billions of U.S. dollars); firm alliance
experience (number of alliances a firm had formed in the 5 years preceding the
alliance); firm prior ties (number of prior alliances with the partner)
- Firm relative scale (firm’s assets / partner’s assets); firm past performance (ROA),
firm financial slack ((current assets – inventory) / current liabilities); market
pressure (HHI of peer firms’ revenues); firm vertical relatedness; firm geographical
dispersion (number of U.S. states where a firm has business activities)
 - Alliance level: alliance scope (whether a focal alliance includes manufacturing
and/or marketing in addition to R&D); alliance partner geographical dispersion;
equity joint venture (whether the focal alliance is organized as joint venture)
- Firm and year fixed effects, business similarity dummy (biotech X pharma)

Model
Unit of analysis: each focal firm alliance
Negative binomial regression model

4. Result
All hypotheses were supported except for Hypothesis 2 (Geographical overlap ~
invention performance)

Robustness check
- Alternative measures of patent value
- Inverted U-shaped association between technological (market) overlap and
invention performance  no support
- Run regressions with uncentered measures of independent variables
- Excluding outliers (cutoff: top and bottom 2.5%)
- Interaction between technological- and geographical-overlap  no support
- Three-way interaction effect

5. Discussion
Critic
- This paper assumes that firms sharing same primary SIC codes are in competitive
relationship with each other. However, I think it is better to narrow down the scope
of competitors (such as firms whose patents’ therapeutic classes are highly
overlapped) because not all pharmaceutical firms may regard others as
competitors.
>> (Duyster et al., 2020) “…we identified competitors by tracking publicly traded
firms that had at least one patent class overlapping with those of the focal firm in the
past five years”
>> confusing part: increase in technological- and/or market overlap itself implies
that partners in R&D alliance are more likely to be in a competitive relationship
Additional idea
- R&D alliance partner change
 (Jain & Mitchell, 2022) The impact of scientist specialization on R&D
productivity and impact, moderating role of team member change
 According to Jain & Mitchell (2022), less change in collaborator within a
team enables the effective division of labor, whereas frequent change
disrupts existing coordinated activities. Applying Jain & Mitchell (2022)’s
logic to this paper (though Jain & Mitchell was collaborator change in
inventor team), what if there occurs firm’s R&D alliance partner change?
Would it be any dynamics, or change in learning and competitive tension
over time depending on the change in alliance partners?

Knowledge misappropriation
- Authors of this paper argue that increase in competitive tension in alliance
relationship makes partners to become less transparent in knowledge sharing,
which in turn leads to decrease in invention performance of the firm.
- However, it may be possible that the focal firm may create complementary or
process technology for the partner, which may receive few forward citations. If we d