Management of tension in coopetition between small and medium-sized firms

Business conditions in international markets are undergoing rapid change. Such conditions are challenging and bring pressure to bear on firms, especially small- and medium-sized firms (SMEs), to rethink their strategies. However, changing conditions also give rise to opportunities. Coopetition is a relevant strategic choice for SMEs to meet the challenges and capture the opportunities in international markets. The fundamental logic in coopetition builds on the fact that the partners collectively create value but individually exploit it. Balancing cooperation with competition is important, since previously friendly colleagues can revert to hostile enemies, if the balancing act fails. Research proposes separation and integration as options for managing tension in coopetition. The integration of a contradictory logic of interaction is possible for a firm to embrace but difficult for individuals. In SMEs, strategic decision making is concentrated to a few key persons, in many cases to the entrepreneur only, which implies he or she should simultaneously play the role of partner and competitor. In multinational firms, it is possible to separate the cooperative and competitive activities through different subsidiaries, markets, divisions, business units, projects and key responsible managers, which is hardly the case in SMEs. The main purpose of this chapter is to elaborate on the management, nature and sources of inherent tension in coopetition between SMEs, in order to advance recommendations to SMEs management and also deduce policy implications.