Co-Opetition and the Firm’s Information Environment

Abstract

Some firms in the technology sector choose to cooperate with competitors (“co-opetition”) in standard setting organizations (SSOs). These SSOs create technology standards that facilitate rapid market penetration of new technologies such as Wi-Fi, Bluetooth, and 4G. Active participation in the standard setting process requires the exchange of proprietary information with competitors. Although the goal of such information sharing is to further a technology or a product market, firms potentially receive an additional benefit from access to competitor and industry information. We examine whether contributing to SSO committees enhances a firm’s information set and allows managers to better predict future sales. We find that the centrality of a firm’s location within the network of SSO collaborators is positively related to the accuracy of the firm’s sales forecasts. This relation is stronger when firms exchange more information with direct competitors and with larger firms, when forecasting is more difficult ex ante, and when firms forecast over longer horizons. Our findings show that collaborating with competitors in the product market provides an important additional benefit of improving the manager’s information set. This paper was accepted by David Simchi-Levi, accounting. Funding: This work was supported by the Wharton School, Institut Européen d’Administration des Affaires, the Institut Européen d’Administration des Affaires-Wharton Alliance, and the Mack Institute for Innovation Management. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2021.03152 .