DIRECT COOPETITION

DIRECT COOPETITION

A case study research into conditions, complications and

solutions in creating direct coopetition between

competitive health care providers

Faculty of Management and Organization

Msc Business Administration, specialization Change Management

Sieb Janssen Studentnumber: 1579274 Vuurdoornstraat 9c 8924 AT Leeuwarden tel.: +31(0)6 42297611 e-mail: Siebjanssen@gmx.net Supervisor/ university B.J.M. Emans H. Broekhuis

Acknowledgment: helpful comments on earlier drafts of this thesis were given by my supervisors B.J.M. Emans and H. Broekhuis. I especially thank all the respondents of various organizations for cooperating and providing all the information necessary for writing this Master Thesis.

Master Thesis

Sieb Janssen

Sieb is a Msc Business Administration student of Change Management at the University of Groningen. He also holds a Bachelor degree in Public Manage-ment and in ManageManage-ment and Organization.

DIRECT COOPETITION

A case study research into conditions, complications and

solutions in creating direct coopetition between

competitive health care providers

SUMMARY

This article deals with the emergence of direct coopetition between health care providers. In it direct coopetition stands for a situation in which competitive organizations cooperate with each other in one and the same competitive activity. By exploring three case studies in which direct coopetition takes place this article examines if, and under what conditions direct coopetition can take place and what complications direct coopetition creates. The article also examines if solutions derived from social dilemma literature can promote mutual cooperation between competitors.

The case studies in this article reveal that direct coopetition is possible, but only under the conditions that partners work complementary in order to reduce conflicting interests to the minimum, that the market offers enough potential turnover for both partners and that organizations take coopetition into account in their competitive efforts to acquire their partners’ clients.

Also several solutions which can be helpful in promoting mutual cooperation are presented, namely increasing the gains of the cooperation, minimizing fear and greed and disclosing information about the behavior and intentions of partners.

INTRODUCTION

Within the health care sector rules and regulations are constantly changing. Demands for increasing transparency, accountability and freedom of choice for patients make health care providers more aware of increasing competition in their services. Organizations within this sector constantly have to react and adapt to new situations as a result of these changes. Sometimes these changes seem to lead to a paradox which is complicated to deal with in practice, and which is also new for management literature. This article deals with the emergence of direct coopetition within the health care sector, which is an excellent example of such a paradox because it concerns the combination of two seemingly contradicting subjects, namely competition and cooperation. Due to changing regulations, health care providers are increasingly forced to compete with their collaborators. This simultaneous occurrence of competition and cooperation is called coopetition (Bengtsson & Kock, 1996). Coopetition creates several complications, especially when cooperation and competition concern one and the same activity, which is called direct coopetition in this article. Despite the fact that administrators make organizations adopt direct coopetition, it has not already been examined if and how direct coopetition is possible. Therefore the goal of this article is to examine this specific change by analyzing if direct coopetition is a viable formula and what conditions must be fulfilled to make direct coopetition work.

Coopetition in the literature

For many health care providers the emergence of direct coopetition is a strategic issue, therefore it is useful to turn to strategic management literature to analyze the concept of coopetition. From the beginning strategic management literature mainly paid attention to the competitive (e.g. Barney, 1986; Porter, 1980) and collaborative paradigms (e.g., Hamel, Doz & Prahalad, 1989; Kanter, 1994) as two separate phenomena. But at some point these two concepts began to mingle. Hill (1990) for instance argued that businesses should enhance their competitiveness by cooperating with other organizations. Another example comes from Hamel (1991), who claims that competition plays a role in collaboration because firms should compete with other collaborating firms for competencies generated through strategic alliances.

Different concepts of coopetition

Various studies were conducted on the topic of mutual cooperation and competition, but different authors used different concepts to analyze coopetition. Some authors used a very broad view in which they examined firms which compete with rivals while they simultaneously cooperate with other firms (e.g., Lado, Boyd & Hanlon, 1997; Perlmutter & Heenan, 1986). Others focus on coopetition within organizations, between organizational units which share knowledge among each other but also compete with each other to gain resources and competences that are embedded in intra-organizational networks (e.g., Luo, Slotegraaf & Pan, 2006; Tsai, 2002). But the most basic form of coopetition, on which this article will focus, is when organizations are simultaneously involved in both cooperative and competitive relationships with each other (e.g., Hunt, 1996).

competition is used. Here competitors are defined as “actors that produce and market the same products” (Bengtsson & Kock, 2000:415). Using this definition, coopetition is said to take place when a firm is simultaneously involved in both cooperative and competitive interactions with the same competitor in the same product area.

Separation of competition and cooperation

In the literature about coopetition Bengtsson & Kock (1996) made an important limitation to the use of coopetition. They claim that it is impossible to compete and cooperate on the same activity. Therefore it is argued that there must be a clear division of competitive and cooperative activities so as to make a coopetitive relationship possible (Tsai, 2002; Hamel et al., 1989).

Also in several other articles is claimed that cooperation and competition cannot be combined within one and the same activity (Bengtsson & Kock, 1996; Hamel et al., 1989). This because competition is built on the assumption that individuals act to maximize their own interests, which are often in conflict with the interests of others. The precondition for cooperation is that individuals participate in collective actions to achieve common goals, in which they must be satisfied with giving up a share of profit to maintain the relationship. This shows that the competitive and cooperative logic are in conflict with each other and must therefore be separated in order to make a coopetitive relation work (Bengtsson & Kock, 1996; 2000). Bengtsson & Kock (2000) also claim that it is not possible to both cooperate and compete using the same unique resource within one and the same activity, and that therefore coopetitive firms need to have unique resources for competition and other unique resources which enhance cooperation.

Limitation of earlier studies

Earlier studies on coopetition all focused on coopetitive situations in which there was a clear division between cooperative and competitive activities. According to Bengtsson & Kock (1996), who have conducted an empirical study on coopetitive relationships, these two are in actual practice separated in one of two ways. The first is a division of competitive and cooperative activities within the value chain or on functional aspects, for example competitors who cooperate on R&D of new basic materials, but compete on the production and marketing of end products. The second way competitive and cooperative activities are divided is through different business units or product areas, for example competitors who compete in certain markets or product areas, but cooperate in others. But as described above, health care providers are confronted with situations where cooperative and competitive activities cannot be separated.

Another limitation of earlier studies is that these studies primarily focus on organizations which have chosen to cooperate with their competitors because of the advantages which can be obtained through coopetition (e.g., Bengtsson & Kock, 1996; Luo et al., 2006). Examples of these advantages are for instance complementing and enhancing each other (Lei and Slocom, 1992; Mason, 1993), reduction of costs and risks (Flanagan, 1993) and the possibility of transferring technology, knowledge and capabilities (Hamel et al., 1989). But earlier studies did not focus on situations in which organizations are involuntary confronted with coopetition.

Cause for and focus of this article

cooperate on competitive activities which are not separated from each other. Then coopetition has to be managed within one and the same activity, which according to prior literature on coopetition is not possible. This kind of coopetition in which competitive organizations cooperate on competitive activities will in this article also be called ‘direct coopetition’. In the health care sector this kind of direct coopetition occurs increasingly. Health care providers are more and more being pushed by legislation to compete with former collaborators, but also to make collaborative agreements with direct competitors.

This article will focus on situations in which competitive organizations cooperate on activities in which they also compete with each other, and it will try to find out if, and how, this particular type of coopetitive situations can be managed. This will be done by studying different health care providers who are involved in direct coopetition.

THEORETICAL FOUNDATION FOR ANALYZING COOPETITION

In order to analyze if and how competitive organizations can cooperate with each other and examine what conditions must be fulfilled to make direct coopetition work, a foundation is needed to base the analysis on.

Such a foundation can be found in strategic management literature, because in it a lot has been written about how to make cooperation happen and about factors contributing to successful cooperation. In various articles it has, among other things, been analyzed what conditions have to be fulfilled in order to make cooperation work. These initial conditions can be used to find out if in direct coopetition these conditions can also be fulfilled, and thus if cooperation on competitive activities is possible. Using this conditions will also clarify if direct coopetition causes any complications in fulfilling the initial conditions because organizations have to cooperate with a direct competitor.

From the literature on cooperation a long list of the initial conditions for cooperation can be distilled. However, a lot of these seemingly different conditions are related to a few similar principles, therefore this list can be summarized into six initial conditions, which need to be fulfilled in order to create cooperation.

1. Need

There must be a certain need for cooperation. Harrigan & Newman (1990) explain in their article that a need to cooperate is one of the fundamental bases of interorganizational cooperation. According to them there has to be a certain necessity, urgency or dependency which makes cooperation necessary. This need can originate from within the organization, as for instance a matter of necessity for the operations or aspirations of the firm (Harrigan & Newman, 1990), but can also be mandated by for instance government laws or regulations (Hall et al., 1977). This need leads to a certain degree of interdependence between organizations, which must be accepted and appreciated by the stakeholders in order to make cooperation possible (Gray, 1985).

2. Benefits / win-win

to give something in return for something received” (Ring & Van de Ven, 1992: 489). Cooperation therefore depends on the creation of a win-win situation for all participants (Gray, 1985; Perlmutter & Heenan, 1986).

3. Complementary

In order to make cooperation possible, participants must complement each other by contributing something distinctive to the cooperation (Perlmutter & Heenan 1986; Hamel et al., 1989). Participants have to offer complementary skills or capabilities to each other in order to bring them together (Bleeke & Ernst 1991). Complementary activities can then be combined in order to achieve shared goals (Buono, 1997).

4. Consensus

With respect to cooperation between different organizations, all of them must be willing to contribute and therefore support the goals and actions of cooperation (Ring & Van de Ven, 1992). Therefore cooperation has to be based upon consensus about the issue which brings companies together and about the goals and actions of cooperation. (Gray, 1985). In this, an equal division of power plays an important role. According to Bleeke and Ernst (1991) alliances between strong and weak companies rarely work. When one partner has a majority stake, it tends to dominate decision making and put its own interests above those of its partners, which can impair their willingness to cooperate. It is important that all stakeholders can influence direction setting (Gray, 1985), and that cooperation is based on mutual agreed outcomes (Buono, 1997).

5. Trust

Cooperating organizations must be able to trust each other, because trust is fundamental within a cooperative relationship (Smith, Carroll & Ashford, 1995; Varamäki & Vesalainen, 2003). Trust can be seen as the confidence in another’s goodwill (Dore, 1983; Ring & Van de Ven, 1992). When cooperating, you have to trust your partner not to take advantage of the cooperation. In this, trust can replace legal governance systems (Smith et al. 1995). In order to create trust it is important to know your partner and their reputation (Boltona, Katok & Ockenfels, 2005) and to be clear and open about each other’s expectations, interests, strategies, goals and intentions in cooperating (Foti, 2004).

6. Cultural fit

According to Buono (1997) there has to be chemistry/cultural fit between cooperating organizations. He claims it is important that organizations who cooperate have a cultural fit like for instance an underlying belief in alliances or commitment to customer service. Perlmutter and Heenan (1986) even claim that chemistry is the most important factor in the sustainability of an alliance. According to Kanter (1994) and Ariño and de la Torre (1998) this also goes for the executives who have to build and maintain the cooperation, because their relationship also determines cooperative success, and a good personal rapport between executives creates goodwill to draw on later if tensions develop.

These six initial conditions for the creation of cooperation will be used as foundation to analyze if cooperation on competitive activities is possible. This leads to the first research question:

Choices of party 2 Cooperation Defection Cooperation R=2 R=2 T=3 S=0 Choices of party 1 Defection S=0 T=3 P=1 P=1

Note: figures below\above the diagonal refer to the payoff of party 1\party 2 R = Reward for mutual cooperation

P = Punishment for mutual defection T = Temptation to defect payoff S = Sucker’s payoff

Solutions for the creation of coopetition

Answering the first research question will clarify if it is possible to fulfill the initial conditions for cooperation within direct coopetition and also if there are any complications in fulfilling these conditions. If complications occur, solutions are needed which promote mutual cooperation between competitors. Possible solutions which can promote mutual cooperation are given in social dilemma literature.

Solutions from social dilemmas

The paradox of coopetition relates to tensions inherent in social dilemma situations. Social dilemmas are situations in which there is a kind of paradox between the decision to cooperate and the decision not to cooperate (which is called defection) (Komorita & Parks, 1994). Social dilemmas can be defined by two simple properties: (1) each party receives a higher payoff for a defecting choice than for a cooperative choice, but (2) all parties are worse off when all defect than when all cooperate (Dawes, 1980). A graphical illustration of such a dilemma can be found in figure 1.

This figure represents an example of a social dilemma in which two parties, party 1 and party 2, have the choice to cooperate or defect. This situation can result in four different outcomes, illustrated by the four different boxes. If both parties choose to cooperate they will both get a reward for mutual cooperation of 2 points. If party 1 defects and party 2 cooperates, party 1 gets the temptation to defect payoff of 3 points while party 2 receives the sucker’s payoff of 0 point. If both parties choose to defect they will get a punishment for mutual defection of 1 point.

Figure 1: General prisoner’s dilemma (based on: Komorita & Parks 1994)

Within the creation of coopetition there is a similar conflict between the motive of individual organizations to maximize personal (selfish) interests and the motive to maximize collective interests. For the collective purpose mutual cooperation would be the optimal solution. However, for the individual organizations there is a temptation to defect or exploit the other party in their own interest (e.g., bargain for a larger share of the benefits or exploit their partners’ vulnerability). But, if all organizations would choose to exploit the cooperation, they will all be worse off than if they had all chosen to cooperate (Komorita & Parks 1994).

1. Increasing the gains of cooperating

Mutual cooperation can be promoted by increasing the potential gains of cooperation or by making the punishment for defection more severe. This will increase motivation of parties to choose for cooperation (Axelrod, 1984; Kollock, 1998; Komorita & Parks, 1994; Zeng & Chen, 2003).

2. Minimizing fear and greed

Mutual cooperation can be obstructed by fear for what Komorita and Parks call the sucker’s payoff. Parties often become overprotective of their contributions to the alliance, for fear of those contributions being exploited by other partners to use against them. Therefore minimizing this fear for vulnerability can reduce the resistance to cooperation. Another way to do this is by trying to minimize the temptation to defect. This temptation to defect is caused by greed to compete for a larger portion of the benefits, and can tried to be reduced by bringing down the gains of defection by one of the partners (Komorita & Parks, 1994; Zeng & Chen, 2003).

3. Sanctions

The voluntary nature of the dilemma can be altered by compelling parties to contribute, by means of a sanctioning system. Such a system consists of some form of punishment for defection and abuse of cooperation (Kollock, 1998; Komorita & Parks, 1994).

4. External authority

Cooperation can be imposed by an external authority. If this authority already has official power over the participants, it can enforce cooperation and can set the conditions under which cooperation must take place. Otherwise participants have to establish an authority by giving up some part of their personal freedom to an authority in return for some measure of social order (Kollock, 1998).

5. Information about the behavior and intentions of partners

Having information about the partners’ behavior and intentions will influence the decision to cooperate or defect. Therefore communicating with each other is essential. If you think the other partners will cooperate and not exploit the cooperation, the chances of creating mutual cooperation are higher. Trust also plays an important role in this. If partners trust each other, chances of mutual cooperation are higher (Axelrod, 1984; Kollock, 1998; Komorita & Parks, 1994).

6. Expectation of future reliances

If participants expect to be dependent of the other partner in future projects or other initiatives outside the cooperation, they are likely to be more cooperative than when they do not expect to cooperate again. Therefore organizations can try to influence these future reliances by for instance establishing long term goals, in order to promote mutual cooperation (Axelrod, 1984; Komorita & Parks, 1994; Zeng & Chen, 2003).

In theory, these solutions can help to promote cooperation between competitors. This article will also examine to what degree these solutions can help to overcome possible problematic conditions in creating coopetition in practice. This leads to the second research question:

RESEARCH METHOD

In order to answer the research questions, this article will examine three case studies in which direct coopetition took place. These case studies will be analyzed through interviews conducted with all parties concerned to obtain information about the fulfillment of the initial conditions for cooperation and about the solutions from social dilemma literature.

The three specific cases are chosen because they all involve a situation in which competitive health care providers needed or tried to cooperate on one and the same competitive activity. Therefore all three cases can be seen as a typical example of direct coopetition.

Case 1. Through new legislation the clear borders between primary and secondary health care are disappearing. A result is that physiotherapist clinics and the physiotherapists in various residential and nursing homes, belonging to an organization called ComfortCare*, do not just work complementary anymore, but have started to compete with each other. This situation causes tensions between the parties concerned, which have to be resolved in order to prevent conflicts and keep cooperation viable.

Case 2. Supreme Eldercare∗ _{and Heritage Homecare}∗_{, two health care providers in the north}

of the Netherlands, started a coopetitive effort in expanding their market to another city, using a joint team in order to share the costs and risks. In this case the coopetition was not sustained.

Case 3. After the Dutch government opened the home care market, the Eastcare Group∗_{, a}

healthcare provider which owns residential homes for the elderly, started to compete with another home care provider called Medichoice Homecare∗ _{in serving the}

residents. The Eastcare Group has the official obligation to provide first aid to their residents, also when they are clients of their competitor. Therefore employees of the two competing organizations regularly have to cooperate.

Data collection

For the three case studies interviews were conducted with all the stakeholders involved in the coopetition. In the first case physiotherapists from five private clinics and from ComfortCare were interviewed, along with two managers of ComfortCare and a financial expert of the insurance company. In the second case the managers of the two competing health care organizations which started a coopetitive initiative were interviewed. In the third case, two operational employees from competing health care organizations were interviewed, along with a team manager and the location manager of the residence concerned.

The interviews for each case were conducted using the same questionnaire. In this questionnaire respondents were first asked for background information about their case in order to make clear what caused the coopetition. After that, the respondents were asked about their experiences in cooperating with their competitors with respect to the six initial conditions for cooperation. About every condition it was asked if it had been or could be fulfilled. The respondents were also asked if the solutions from social dilemma literature could have been of use in promoting mutual cooperation in their situation. The interviews were not recorded and because of confidentiality people were assured that the answers would be published anonymously.

*

Data analysis

In the analysis of the interviews an approach was used which is advocated by Yin (1984) and Eisenhardt (1989) in order to analyze the outcomes of the cases and compare them with each other. According to Eisenhardt (1989) it is important to both conduct a ‘within’ and ‘cross’ case analysis.

In the ‘within’ case analysis material contained in each case was described in detail in order to become familiar within each case as a stand alone entity. In this analysis the different experiences and opinions of the respondents of each case concerning the fulfillment of the initial conditions and the use of solutions offered in social dilemma literature were compared with each other and similar answers and lines of reasoning were combined to point out the views of the respondents.

In the ‘cross’ case analysis central data of each case was contrasted with other cases to analyze similarities and differences in the fulfillment of the initial conditions and the use of the solutions offered in social dilemma literature. This lead to several conclusions on direct coopetition in general and on the use of the different solutions in situations in which direct coopetition takes place. With the information gathered in the data analysis the research questions could be answered.

RESULTS

In this section the results of the interviews will be presented. These results are separated in two parts, each focusing on one of the research questions.

The first part will focus on the results concerning the fulfillment of the initial conditions in direct coopetition. These results will be presented per case. Each case will first be introduced by providing some background information about what caused the coopetition.

The second part will focus on the results concerning the solutions from social dilemma literature. Because the interview results concerning these solutions were very similar for all three cases, these solutions will be presented integrally.

Part 1: Fulfillment of the initial conditions in direct coopetition Case 1

The first case concerns a health care provider in the north of the Netherlands, called ComfortCare∗_{, which originated from a merger of several nursing and residential homes for}

the elderly. Because of changing regulations ComfortCare started to compete with several private physiotherapy clinics with which they also had a cooperative relationship. Before this article goes into the fulfillment of the initial conditions it is necessary to first provide some background information about this case.

Background information

All the respondents were first questioned about the cooperation between ComfortCare and the physiotherapists, and all agreed about what caused the arising coopetition.

ComfortCare offers various care and support services to their clients within and also outside their own facilities. These services are offered by their own employees, but also through cooperation with other health care providers like for instance private physiotherapists. The division between the services provided by ComfortCare itself and the services provided by other suppliers is not only a matter of specialism but also depends on the way the service is financed. Formerly, the physiotherapists of ComfortCare provided al the secondary health

care for clients living in a nursing home, which was financed through the AWBZ (the collective national health insurance policy). Private physiotherapist clinics near the residential homes of ComfortCare provided all the primary health care for clients of ComfortCare living in their own home, which was financed through regular health insurance. In this way the services of ComfortCare and the private physiotherapists used to complement each other. They cooperated by sharing information about the treatment of each others’ clients and by referring clients to each other.

Now, because of a new policy and government legislation, the clear borders between primary and secondary health care are disappearing. The government stimulates elderly people to keep living in their own homes for as long as possible and wants to reduce the amount of people living in nursing homes. Therefore, the government created the possibility for organizations like ComfortCare to also offer their services outside their own facilities. Because of this, the physiotherapists of ComfortCare also started to offer their services to people in their own homes. Simultaneously the private physiotherapist clinics see the opportunity to offer secondary health care to the clients of ComfortCare. Through this development the previously separate markets of the physiotherapists are now mingling with each other which leads to a coopetitive relationship between ComfortCare and the private physiotherapists.

Fulfillment of the initial conditions

In the interviews the six initial conditions for the creation of cooperation were discussed and the respondents were asked to what degree each condition could be fulfilled in coopetition between ComfortCare and the private clinics.

In their answers all respondents shared the opinion that the conditions can only be fulfilled if both parties start to work complementary in order to reduce conflicting interests to the minimum. Therefore working complementary is according to the respondents a pre-condition which has to be realized in order to fulfill the other conditions and make coopetition possible. How both organizations can make their services complementary in order to fulfill the initial conditions will be dealt with in the next paragraph, first will be shown what happens if this pre-condition is not fulfilled.

All agreed that if the physiotherapists from ComfortCare and the physiotherapists of the private clinics do not make agreements with each other about the division of the market and really start to compete with each other, this will harm the cooperation between the parties and with that also the quality of their services. This becomes clear when one analyses this situation using the initial conditions for cooperation. The respondents were asked to what degree the initial conditions can be fulfilled if ComfortCare and the private clinics start to compete with each other and no longer work complementary. According to them, this will negatively affect the fulfillment of four of the other five conditions:

- Need: This condition can be fulfilled. Both ComfortCare and the private clinics acknowledge their interdependence because they serve each others’ clients and therefore need to cooperate by sharing information about their treatments. The need for cooperation therefore mainly concerns the quality of service delivered to the clients. Thus, when parties start to compete with each other they still need to cooperate to maintain the quality of care.

- Consensus: All physiotherapists acknowledged that they would see an expansion of the other parties’ services in their market as a hostile act. The relation between ComfortCare and the private clinics would then no longer be based on consensus because parties would not support each others’ actions anymore. Therefore this condition cannot be fulfilled anymore.

- Trust: Competing for each others’ clients would reduce the trust partners have in each other, which will according to the respondents frustrate cooperation. Therefore this condition will be hard to fulfill.

- Cultural fit: According to the respondents, not longer working complementary will probably create conflicts and therefore negatively affect the relationship between the cooperating employees of both organizations, which is vital for successful cooperation. It was mentioned several times that it is very hard to cooperate with a person on one occasion if you also have to compete with that person on another occasion.

This shows that if partners start to compete with each other, the initial conditions can no longer be fulfilled which will frustrate the necessary cooperation. The respondents agree that this will negatively affect all parties involved and that this has to be prevented. ComfortCare and the physiotherapists are dependent on each other because they serve each others’ clients and therefore both value a good cooperative relationship.

Two views on how to make working complementary possible

All respondents agreed that competition between ComfortCare and the private clinics will negatively affect the cooperation and with that also the quality of the rendered services. Therefore they say it is necessary to remove conflicting interests within the cooperation in order to keep up the cooperative relationship between organizations. This should be done by fulfilling the precondition of working complementary, so the other conditions can also be fulfilled. In answering the questions on how to make this possible, two opposing views emerged.

Working complementary through division of the market

Several respondents, representing two private clinics for physiotherapy and the physiotherapists of ComfortCare, claim it is possible to organize coopetition in such a way that conflicting interests do not frustrate cooperation. According to them coopetition in this case can be made possible if the market is divided in such a way that both parties serve a different part of the market in order to make their services complement each other again. Then both parties will no longer compete with each other within the cooperative activity and conflicting interest can be reduced to the minimum. How to divide the market precisely has to be negotiated between the parties involved, but according to them, the best solution is if each party focuses on its own specialism.

The physiotherapists supporting this view claim that in organizing coopetition this way, all the other initial conditions for cooperation can also be fulfilled.

- Need: There is still some need to cooperate because quite a few physiotherapy clients of the private clinics live in one of the ComfortCare residents and receive various care and nursing services of ComfortCare. Information about the treatment of these clients need to be shared between the employees of ComfortCare and the physiotherapists.

- Benefits / win-win: This way of coopetition can result in a win-win situation for all participants. Uncertainty and a lack of clarity about responsibilities and what to expect from each other is taken away. More effective communication can be made possible and clients can be served by the best provider. Because the division of the clients largely stays the same as it used to be, neither of the parties have to lose a part of their clients and turnover in referring to each other. Moreover, according to these respondents it is more a question of dividing the growing market, because of the aging population.

- Consensus: If, according to these respondents, all parties focus on their own specialism, it will be possible to reach a consensus on where one market ends and the others begins, and how to divide remaining clients. It will then also be possible to reach a consensus on the other issues concerning cooperation.

- Trust: If conflicting interests are overcome by a division of the market, partners can be open and honest with each other and build a trusting relationship. Because the market is divided each partner can further enhance its own specialism, strengthen its own position and reduce the fear that the other partner is encroaching on its market.

- Cultural fit: The intention to do what is best for the clients by referring on specialism and sharing information is, according to the respondents, a good foundation for cultural fit.

Working complementary through outsourcing

Despite the fact that the physiotherapists of ComfortCare and several private clinics see opportunities for coopetition between ComfortCare and the private clinics, other clinics are not willing to go along with this. In the interviews respondents representing three other clinics pointed out that they do not see the division of the market as a solution to make partners work complementary in this case.

They think the initial conditions for creating cooperation cannot be fulfilled by dividing the market because this does not create a win-win situation, which blocks the possibility for a consensus. They claim that therefore coopetition will not be possible, which means both parties can either start to compete with each other at the expense of the cooperation, or keep cooperating in which one of the parties must stop competing for physiotherapy clients in order to remove conflicting interests. They suggest that ComfortCare should outsource all the physiotherapy to the private clinics and that their physiotherapists work in the private clinics to help with their knowledge and experience of complex pathology treatment. According to these respondents the pre-condition of working complementary can be fulfilled in this way, and therefore also the other initial conditions for the creation of cooperation.

- Need: There is still some need to cooperate because ComfortCare must share information with the private clinics if one of their clients needs physiotherapy, and the private clinics need to share information about the physiotherapy treatment they give to clients of ComfortCare.

- Benefits / win-win: According to these respondents this situation will lead to a win-win situation for all parties. ComfortCare can keep using the services of the private physiotherapy clinics to complement their own services. Moreover they can contract physiotherapy for cut-rate prices. The private clinics gain extra clients in the cooperation. In cooperating both parties can also refer clients to each other.

- Consensus: Because conflicting interests are removed by outsourcing all physiotherapy completely from ComfortCare to the private physiotherapy clinics, it is also possible to create consensus about how to complement each other.

- Trust: By removing competing interests it is easier to be clear and open about expectations, interests, strategies, goals and intentions in cooperating. Also conflicts caused by conflicting interests are prevented.

- Cultural fit: In working this way, respondents do not expect boundaries concerning cultural fit which could hinder cooperation.

Two executive managers of ComfortCare were also asked on their views on this matter. They also support the view of making partners work complementary by outsourcing physiotherapy completely to the private physiotherapy clinics, although they had a few other reasons for this than mentioned above by the private clinics.

They first emphasized the importance of a good cooperation between their organization and the private clinics because of their complementary services, the information exchange concerning the treatment of clients and the fact that both parties can refer clients to each other. Besides this a few of the private clinics use the facilities of ComfortCare, which also generates extra income. Therefore disrupted cooperation with the private physiotherapy clinics would be harmful for ComfortCare as a whole. For this reason they do not want to take the risk of putting the cooperation at stake through competition. They support the view that the only way to make coopetition work is by reducing the conflicting interests to the minimum by making both organizations complement each other again.

According to them the only sustainable solution is to remove the conflicting interests completely, making it a question of cooperation only, instead of coopetition. This could be accomplished in the same way as advocated by the three clinics mentioned above: by outsourcing all physiotherapy to the private clinics, and by doing so taking over the physiotherapists of ComfortCare to gain the necessary knowledge and experience for treating all their clients. In this way organizations would start to work complementary again and the other five conditions for the creation of coopetition could be fulfilled in the same way as described above.

Case 2

The second case concerns Supreme Eldercare∗ and Heritage Homecare∗, which are two competing home care providers in the north of the Netherlands who have tried, but failed, to create a coopetitive project. The two managers of both organizations who were responsible for the creation of this coopetitive project were interviewed. They both gave similar answers on the questions how the coopetition developed and shared the same views on what caused the coopetition to collapse.

Background information

Both organizations wanted to expand their markets by providing health care in a city where they were not as yet providing any services. In a few other areas they were already involved in some small cooperative efforts with each other. They wanted to expand this cooperation to seize the opportunity to expand their markets and share the costs and risks involved in this effort. They wanted to create a joint team consisting of employees from both organizations which would try to enter the new market and win new clients. After a year, when a sufficient market share had been obtained, the cooperation would end and both organizations would split the amount of profits and new clients equally.

According to the respondents this attempt could be seen as a test-case to find out if the two competitors could expand their cooperation to larger projects. Because both organizations offer the same products to the same clients this cooperation can be seen as a typically coopetitive effort.

Unfortunately the coopetition could not be sustained. On operational level all necessary arrangements were agreed upon; a location was hired, a coordinator appointed and practical matters arranged. Despite this, the coopetition did come to an end because the partners could not agree upon the more strategic issues. The main problem which made the coopetition collapse was the name to use for the promotion of the new team. Both organizations wanted to expand their market and gain brand awareness. Neither of them was willing to work under the name of the other organization, and both wanted to use their own name. The creation of a third name would cost too much and would gain neither of the partners brand awareness. The two organizations did not manage to work this out, and because of that both decided to quit the coopetition.

Fulfillment of the initial conditions

The respondents of this case noticed that several of the initial conditions could not be fulfilled.

- Need: This condition could not be fulfilled because partners were not dependent of each other and there was no direct need for the coopetition. Because of this both organizations could easily decide to quit the coopetition.

- Benefits / win-win: This condition could be fulfilled because both organizations would share the costs and risks of the new project, and they would gain experience in coopetitive projects with each other.

- Complementary: The organizations did not work complementary on this project because both provided the same kinds of resources and with these resources focused on the same market. This especially became a problem in the struggle to choose which name to use for the promotion of the new team because they both had the same strategy to gain brand awareness with their own name, while they could only choose one name.

- Consensus: In the first instance all practical matters could be agreed upon without problems, but this condition could not be fulfilled on a more strategic issue like choosing a brand name.

- Trust: Both organizations had already been working together on other small projects and wanted to use this project as a trust building exercise. Neither organization would become so vulnerable that this would be a reason for not cooperating, therefore this condition could be fulfilled.

- Cultural fit: Also this condition could be fulfilled because both organizations felt that they were growing towards each other and the two managers responsible got along very well.

In this case the initial conditions necessary for cooperation could not all be fulfilled and the coopetition could not be sustained. Despite the fact that operational matters could be arranged without problems, it did not seem possible to work complementary on a strategic issue i.e. the brand name. Neither of the organizations was willing to give in on this subject. Instead of a win-win, it became an either-or situation on which no consensus could be reached.

In this case can also be seen that working complementary is a pre-condition to make coopetition possible. In this case both competitors had the same strategy of gaining brand awareness for their own organization. These strategies were conflicting and could not be made complementary. If within a coopetitive activity the strategies of competitors are incompatible and cannot be aligned to complement each other, sooner or later conflicting interests will drive them apart. In this case both organizations could approach each other on operational level, but this is not enough to sustain the coopetition because complementing each other on strategic level is also necessary.

Case 3

The third case involves two competing healthcare providers, of whom the operational employees occasionally have to cooperate. To find out how their competitive relation affects the cooperation between their employees, two managers and two operational employees were interviewed. They all shared the same view about this.

Background information

In a residential home for the elderly in the north of the Netherlands, several health care providers serve the residents. Most of the residents are clients of the EastCare Group∗_{, who}

own the residential home, but others receive health care from Medichoice Homecare∗, a main competitor. Because employees from both organizations work in the same area they are regularly involved with each other. They sometimes even serve the same clients. This is mainly caused by the fact that some of the clients of Medichoice Homecare make use of the 24-hour alarm service of the EastCare Group, because their employees are always nearby and the employees of their own provider sometimes have to travel up to fifteen minutes before

they can be of service. Besides this, the EastCare Group has the official obligation to provide first aid to their residents, also if these residents are clients of their competitor. Because of this employees from both competing organizations are to some extent dependent on each other and have to work together. Therefore this is also a typical situation of direct coopetition. This situation is fairly new because it originated several years ago, when the Dutch government opened the home care market to stimulate competition between health care providers as a part of their policy to introduce free market health care. Health care providers like the EastCare group could previously only provide intramural care in their nursing homes. Now they could also start to compete with organizations like Medichoice Homecare by starting to provide home care in their residential homes and in clients’ own homes. According to the organizations involved this led to intense competition in the residential home between the Medichoice Homecare and the EastCare Group. Respondents of both organizations admitted that this competition resulted in tensions between the employees from both organizations who worked in the same residential home, which frustrated cooperation and information sharing. Respondents from each organization mainly blamed the other organization for causing these tensions.

Fulfillment of the initial conditions

As described in the background information about this case, the cooperation between the employees of the two health care providers suffered under the fact that they started to compete with each other. According to the respondents this was caused by the fact that the two organizations did no longer work complementary anymore. They now both offered the same services and focused on the same market. Therefore also other initial conditions for cooperation were not satisfied any longer:

- Need: Both organizations acknowledged that there is a clear need to cooperate because on an operational level the two organizations are dependent of each other. Employees are dependent on communication about mutual clients or clients who switch between providers in order to guarantee the quality of health care. Therefore this condition could be fulfilled.

- Benefits / win-win: Both organizations were worse of in the new situation because the lack of communication influenced the quality of their services. The respondents also pointed out that tensions between employees ruin the working atmosphere and job satisfaction, which affects the clients and causes absence through illness. - Consensus: There was no consensus between both organizations about how they could

cooperate.

- Trust: Competing efforts of both organizations led to tensions between the employees which had a very negative effect their trust in each other.

- Cultural fit: These tensions also had a negative effect on the cultural fit between the organizations. Employees of both organizations started to act as competitors of each other in stead of collaborators, which caused tensions between the employees of the organizations.

Working complementary

Both organizations acknowledged the need to cooperate and wanted to end the tensions which were caused by the competition. Therefore both organizations agreed to regularly meet in order to discuss clients, solve issues and build a good relationship. In order to end the tensions they also needed to reduce competition between employees from either organization by trying to make them work complementary again. This lead to a dilemma because it is not possible to completely take away competition from the work floor because the employees also serve as the ambassadors of the organizations. Therefore they are also responsible for gaining more clients.

Even though it was not possible to make the employees work entirely complementary, both organizations managed to reduce the tensions by minimizing competition as much as possible. According to the employees from both organizations coopetition in this case can be made possible if competing for clients is done in a fair and open way and if the main focus of the employees is the interests of the clients. They say employees should compete with each other by delivering the best care and service and without slandering or denigrating each other. Sharing information for the benefit of each others’ clients is also a part of delivering optimal service. In such an atmosphere they say it is also possible to hand over clients to each other if the other can provide better service.

The employees also acknowledged that the attitude of the department managers of both organizations plays an important role in making such a coopetitive environment possible. They have to show and promote the right behavior and have to be able to build a constructive relationship with each other, which focuses on solving problems.

All the interviewed employees were of the opinion that a really fierce competition between the organizations should take place in other areas in the organizations and must not directly involve the employees who have to cooperate with the competitor. Otherwise this will frustrate the cooperation both organizations are dependent on.

In organizing coopetition between Medicare and the EastCare Group in this way, all respondents believe that the initial conditions for cooperation can be fulfilled. Despite the fact that the organizations do not work totally complementary, competition between cooperating employees is reduced to the minimum. This is achieved by not letting these employees compete for each others’ clients, unless both organizations agree that it would be in the clients’ best interests to switch providers. Then it is also possible to meet the other conditions for cooperation.

- Need: Both organizations can accept the need to share information with each other and work together in the same working area and for mutual clients. - Benefits / win-win: Both organizations benefit from a good cooperative relationship

because it works through in the working atmosphere and job satisfaction and so increases the quality of their services.

- Consensus: Employees from both organizations have shown that in their regular meetings they were able to reach consensus about issues concerning cooperation.

- Trust: The regular meetings helped to rebuild trust between the cooperating employees from both organizations.

concerns the way organizations compete with each other. If one party deceives the other party this can also harm the cooperative relationship.

Part 2: Solutions from social dilemmas

The part will focus on the results of the interviews concerning the solutions from social dilemma literature. In the interviews with the different organizations involved in the cases it has also been discussed if the solutions from social dilemma literature can help support mutual cooperation between competitors. It was remarkable that all respondents had the same views on to what extent the solutions are useful to manage coopetitive situations. Therefore these outcomes will now be presented integrally.

First it has to be mentioned that according to the respondents the solutions will only be useful after the main issue has been solved, namely removing conflicting interests by starting to work complementary. They claim that the solutions will not be of any use in creating mutual cooperation when partners compete for the same clients within the same cooperative activity. All respondents have said that coopetition in such a situation is condemned to fail, as has been described in the three cases. Therefore the solutions do not represent the main solution to make coopetition possible, but, it was argued, some can be helpful in creating coopetition. 1. Increasing the gains of cooperating

The respondents acknowledged that increasing the gains of the coopetition will also increase the motivation for coopetition. Therefore it is not surprising that this is considered as a useful way to promote mutual cooperation. The interviews did not bring forward concrete solutions to increase the gains of cooperating because these depend on the specific situation in which cooperation has to be created.

2. Minimizing fear and greed

Despite the fact that the fear of being vulnerable to the greed or bad intentions of the competitive partner did not play a large role in the three cases, the respondents acknowledged that minimizing fear and greed can play a certain role in reducing resistance towards coopetition. Therefore they agreed that in theory this solution can promote mutual cooperation. But they also admitted that it is difficult to find concrete ways to minimize greed and fear in practice. They claim that structural solutions like for instance isolating activities or using gatekeepers are not an option because they will hinder effective cooperation. They said that in practice the most realistic way to minimize vulnerability to the greed or bad intentions of the competitive partner is informing your employees of possible risks and telling them to be careful with what they say. Also building a trusting relationship with your competitor can reduce the fair for greed of your partner.

3. Sanctions

All respondents agreed that the implementation of a sanctioning system to punish defection and abuse of cooperation will not promote mutual cooperation between competitors. Although coopetition is sometimes mandated by legislation or mutual dependency, organizations still act on a voluntary basis and do not want to be compelled to contribute. Especially not by their competitor, not to mention giving them the power to execute sanctions.

Another argument which was mentioned by several respondents against implementing a sanctioning system is that such a system will need a monitoring and controlling system which is expensive and above all almost impossible to implement between competitors.

4. External authority

None of the respondents saw appointing or creating an external authority to promote mutual cooperation as a positive solution. They all said that such an external authority to enforce and monitor coopetition will more easily obstruct coopetition and create resistance instead of promoting mutual cooperation between competitors. None of the organizations would be willing to give up a part of their autonomy in appointing such an authority. It was also mentioned that an authority can force cooperation but not a good cooperative relationship, which is essential for coopetition.

5. Information about the behavior and intentions of partners

According to the respondents this solution is not only helpful but even necessary for creating coopetition. This because it is related to building trust, which has already been described as one of the initial condition for the creation of cooperation. Information about the behavior and intentions of partners will increase the confidence that the competitor will not exploit the situation in their own interests and at the expense of their partners, and will therefore promote mutual cooperation. The most essential way to promote this is for partners to be clear and open about their interests and intentions in cooperating. Respondents also emphasized that it is very important to keep partners informed during the coopetition, especially when activities which affect the cooperation change. For instance, some private physiotherapists from case one became upset when they noticed that physiotherapists from ComfortCare started to serve clients at their homes. They did not know the intentions of ComfortCare and saw this as a competitive act. Such situations can easily impair trust and frustrate the coopetition.

6. Expectation of future reliances

Respondents agreed that being dependent on each other in initiatives outside the coopetition or in future projects will influence the decision whether or not to defect in a coopetitive situation, but claimed that it is hard to influence these future reliances. The interviews did not provide concrete ways to influence the expectations of future reliances in such a way that mutual cooperation could be promoted in the three cases. Therefore this solutions can in theory be perceived as a possible way to promote mutual cooperation but is hard to realize in practice.

CONCLUSIONS

In a cross case analysis of the results of the three case studies a couple of principles concerning coopetition can be derived.

1. Coopetition on competitive activities will not work if these activities are not divided in such a way that conflicting interests are removed.

2. In direct coopetition partners must be able to reach a consensus on how to divide the market in such a way that within the cooperative activities the competitors can work complementary.

As case one shows, conflicting interests can be removed by dividing the market of the cooperative activity between the two competitors. The physiotherapists of ComfortCare and several private clinics claim that the best way to divide the market is a division by specialism. But case one also shows that organizations should not think too easily about creating such a division, because reaching a consensus does not always seem possible. Some physiotherapists from case one do not believe a clear division can be made in the physiotherapy market, as a result of which a consensus between these parties and ComfortCare will hardly be possible. 3. Direct coopetition will fail if the market in which partners cooperate does not offer

enough potential turnover for both partners.

Case one also reveals that coopetition can only take place when the market is big enough for both competitors. If this is not the case, both partners will start to compete for the same clients in order to survive, which will frustrate the cooperative efforts. This has been shown by the private physiotherapy clinics which want to serve the clients of the physiotherapists from ComfortCare in order to stay financially healthy. They are not willing to go along with dividing the market because they claim their market is not big enough for both organizations. This in contrast with the other private clinics which perceived their market as a growing market and have no problems at all sharing with the physiotherapists from ComfortCare. 4. Direct coopetition will also have to influence the way organizations compete with each

other.

As especially case three shows, organizations involved in coopetition will have to take their mutual dependency into account in the manner in which they compete with each other. Fierce competition should not directly involve the employees who have to cooperate with the competitor because it has proved to be tricky to fight a fierce competitive battle with someone at one time of the day, and then later in the day having to cooperate with the same person. Competitive efforts between cooperating employees must therefore be reduced to the minimum and be done in a fair and open way.

Answering the research questions

The physiotherapists of case one who were in favor of coopetition and the already existing coopetition in case three reveals that coopetition within one and the same competitive activity is possible. This in contradiction to what has been previously argued in literature on coopetition. However, the cases also show that coopetition can only be achieved under specific conditions and that it can be a difficult task to organize coopetition in such a way that these conditions can be fulfilled.

The cases also revealed that the solutions derived from social dilemma literature do not represent a main solution to make coopetition possible. Although some of them can be helpful in promoting mutual cooperation, these solutions can only be realized after conflicting interests have been removed by making partners work complementary.

DISCUSSION

The results of this article have shown that direct coopetition can only be realized in situations were competitors can make their cooperative activities complement each other. Otherwise it will be almost impossible to create a situation in which direct coopetition is not frustrated by conflicting interests. Therefore it will not be possible for organizations to implement direct coopetition in situations in which the market cannot be divided or allocated in such a way that the pre-condition of complementary is fulfilled.

The conclusions which were drawn from the case studies in this article are not a manual for the creation of coopetition, but do give some insights in the necessary conditions and offer a few solutions to manage coopetition. The cases show that coopetition on one and the same competitive activity is possible, but also that it is difficult to accomplish. Organizations do not RQ1. To what degree can the initial conditions for the creation of cooperation be fulfilled

in situations of direct coopetition?

Within direct coopetition these conditions can be fulfilled if:

• partners can reach a consensus on how to divide or allocate the market in such a way that within the cooperative activities the competitors work complementary.

• the market in which competitors cooperate offers enough potential turnover for both partners.

• organizations take coopetition into account in their competitive efforts to acquire their partners’ clients.

RQ2. To what degree can the solutions from social dilemma literature promote mutual cooperation between competitors within a coopetitive relationship?

• Increasing the gains of cooperation will also increase the motivation of organizations for coopetition, and is therefore considered as a useful way to promote mutual cooperation.

• Minimizing fear and greed can reduce resistance towards coopetition and can therefore promote mutual cooperation, although it is hard to accomplish through structural solutions. Informing your employees of possible risks and building a trusting relationship are the most realistic ways to minimize fear and vulnerability to greed. • Introducing a sanctioning system to punish defection and abuse of cooperation will not

promote mutual cooperation. No organization is willing to give their competitor the possibility to execute sanctions. Necessary monitoring and controlling within such a system will also be difficult to implement between competitors.

• An external authority would impede the organizations’ autonomy, which they won’t agree with. Also, such an authority can force cooperation but not a good cooperative relationship, which is essential for coopetition.

• Information about the behavior and intentions of partners will increase the confidence that the competitor will not exploit the situation in their own interests and at the expense of their partners, and will therefore promote mutual cooperation. This can be promoted by being clear and open about interests and intentions in cooperating and by keeping partners informed about issues affecting coopetition.

often find themselves in the luxurious position in which conditions like enough potential turnover for both partners or a clear way to divide the market are present. Especially in the health care sector the government is increasingly putting pressure on organizations to save money and work more efficiently. This pressure also affects already existing coopetition, because the regularly changing rules and financial policies can easily influence the conditions of coopetition, like for instance the negotiated win-win situation. Changes in these conditions can end coopetition in an instant. These considerations give reason to be skeptical about the sustainability of coopetitive constructions, and raise the question if completely removing the competitive activities from the coopetition by outsourcing could be a better solution. These considerations must therefore also be taken into account in efforts to create a coopetitive situation.

It can be questioned if the outcomes of the interviews of this article are valid enough to base the conclusions of this article on. Were the interviewed respondents enough involved in the subject of direct coopetition in order to say something meaningful about it, and were the answers they gave reliable? Several arguments can be given why these results can considered to be valid. First, all involved parties in the direct coopetition in the three cases were involved in the data collection. Second, of these parties the employees responsible for the cooperation were interviewed, who were highly informed and who got their answers right out of their own daily experience. Third, before conducting the interviews was mentioned that the results would be published anonymously, therefore the need of the respondents to make their situation look better or different than it really is has most probably not played a role. Fourth, the answers of the different parties within each case study were very similar and did not contradict each other, which makes their stories seem right. A final argument is that some of the outcomes of this article were not expected which shows that this research was not just conducted to confirm the expectations around the subject of direct coopetition and that respondents were not encouraged to steer the interviews in a certain direction. These arguments show that this research has not been conducted deficiently and give reason to assume that the respondents were honest. Therefore we can only take the outcomes of the interviews and results of this article very seriously.

In this article six initial conditions for the creation of cooperation were used to analyze the differences between cooperation and coopetition. Although they have proven to be very useful in offering focus for analyzing the different cases, they could also have limited the scope of this research. This also goes for the solutions derived from social dilemma literature. Undoubtedly there are also several other ways and solutions to promote mutual cooperation between competitors which have not been investigated in this article; further research on coopetition could therefore broaden our understanding of coopetition by choosing other premises.

This article mainly focused on how organizations should cooperate with their competitors within coopetition. Another interesting subject arising from this is how an organization should compete within coopetition. This article has shown that an unfair way of competing will most probably harm cooperation. But partners in coopetition still need to compete with each other. Further research could therefore investigate what can be perceived as a fair way to compete within coopetition.