Coopetition: The Key to French and European Success in Space
On Sunday, September 18, 2022, during the73rd International Astronomy Congress, Prime Minister Élisabeth Borne announced that France was set to invest more than 9 billion euros over the next three years to develop innovations. This massive investment reaffirms France’s commitment to maintaining its sovereignty in the space sector amid intense international competition.
Audrey Rouyre, Montpellier Business School and Anne-Sophie Fernandez, University of Montpellier
To remain competitive, France has fully understood that European companies, although competitors in certain markets, must join forces and cooperate to innovate together. This is why France is one of the largest contributors to the European Space Agency (ESA) budget.
National and European sovereignty in the space sector depends, in particular, on the development of a European geolocation system. Indeed, it is important for France and Europe to reduce their dependence on American GPS technology. This is why the Galileo project was launched in the late 1990s with a total budget of 13 billion euros. To develop this cutting-edge technology, the best expertise from European companies was mobilized. The three leading European industrial giants—Airbus Defense and Space, Thales Alenia Space, and OHB—then formed an alliance. Our latest research focuses on this large-scale project.
Coopetition is not without risk
In management science, this phenomenon of cooperation among competitors is known as “coopetition.” Indeed, many companies choose to collaborate with their competitors to drive innovation. For example: video game publisher Ubisoft, to share marketing costs for a joint campaign; ski resorts, to tackle technological challenges; or winemakers in the Auvergne region, to raise awareness of their terroir.
Among the many potential benefits of coopetition is the development of radical innovations such as Galileo. However, cooperating with a competitor is not without risk. In coopetitive relationships, companies face numerous risks of opportunism. Let’s not forget that the partners are also competitors. They will therefore try to minimize their investment in the project while attempting to capture as much profit as possible.
Furthermore, these risks of opportunism in coopetitive relationships increase with the number of competitors involved. Indeed, when there are multiple competitors, they may also form coalitions. Competitors may join forces in a subgroup to try to gain the upper hand over one or more competitors. As the number of competitors increases, it becomes more difficult for the companies involved to identify such opportunistic behavior and the risks of cheating.
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For example, the knowledge generated may be appropriated and then reused beyond the scope of the agreement by one or more competitors seeking to strengthen their own competitive advantage at the expense of others. Because there are multiple competitors, it can therefore be difficult to know whom to trust and with whom to safely share knowledge.
These major risks lead to tensions within collaborative projects involving competitors. These tensions can transform a potentially win-win coopetition relationship into a win-lose relationship, or even, in extreme cases, a lose-lose situation. If these tensions are not managed, they can result in a loss of value for all companies involved in the collaboration.
A major dilemma
In our research on the Galileo project, we found that Airbus Defense and Space, Thales Alenia Space, and OHB faced a major dilemma: sharing their knowledge to develop new European technology while protecting their core know-how to maintain their competitiveness in other markets.
If the three companies refuse to share their knowledge or restrict sharing too much, Galileo may never see the light of day. Conversely, by sharing too much, Airbus Defense and Space, Thales Alenia Space, and OHB risk transferring their key knowledge to a partner-competitor, who could then reuse that knowledge outside the project to maintain its own competitive advantage. Through Galileo, the companies therefore risk seeing their competitive advantage eroded in the long term.
Aware of these risks, Airbus Defense and Space, Thales Alenia Space, and OHB were tempted to keep knowledge sharing to a minimum. But by making this choice, they are putting Galileo at risk. The project could fail because of this lack of knowledge sharing among competing manufacturers.
It therefore seems essential to find ways to manage these tensions between knowledge sharing and knowledge protection within innovation projects involving multiple competitors. In this study, we therefore sought to understand how to enable sufficient knowledge sharing to develop the technology, while preserving each company’s core competencies.
The ESA: A Way to Build Trust
In collaborations between two competitors, it is common to form joint project teams to develop innovations. However, our research shows that it is too difficult for three competitors to freely share their knowledge within a joint team without any formal safeguards. They therefore opted to establish a hierarchical project team governed by a third party:the ESA.
The ESA will facilitate the centralization of knowledge shared by the partners. In other words, the three competing partners do not share knowledge directly with one another, but they do share the knowledge necessary for the development of Galileo with the ESA. In this way, there is no direct transfer of knowledge between competitors, but the knowledge necessary for the development of Galileo is readily available since it is shared by the industry partners with the ESA.
This formal structure enabled the companies to build trust among themselves. After some time, this developed trust enabled Airbus Defense and Space, Thales Alenia Space, and OHB to agree to share additional knowledge, but only in pairs, never among all three. In this way, each company limits the risk of opportunism and guards against the risk of coalition. It retains control over the nature of the shared knowledge and over the choice of the partner with whom that knowledge is shared.
This innovative project structure, led by the ESA, enabled European industry to develop the first satellites for the Galileo system and to view Galileo as a success. To successfully carry out a project of this scale, the expertise of all European industry players is essential. The involvement of a third party, combined with an appropriate project structure, fosters the trust necessary for sharing the required knowledge.
Galileo can now be considered a success, as 26 of its 30 satellites are already operational and have been successfully launched. It would now be worthwhile to continue studying the program to understand how coopetitive relationships have evolved and to track the evolving technological challenges in the space sector that companies must address.
Today, current knowledge does indeed allow us to understand how to successfully carry out an innovation project between two competitors. However, the development of radical innovations requires an ever-increasing amount of knowledge and, consequently, the involvement of an ever-growing number of competitors. It is not possible to manage a multi-competitor coopetition project in the same way as a coopetition project between two competitors. In the European space industry, adapting to this specific configuration could make it possible to launch projects even more ambitious than Galileo, involving several European competitors. It therefore seems essential to continue investigating this phenomenon in order to identify the keys to success.
Audrey Rouyre, Assistant Professor of Strategic Management, Montpellier Business School and Anne-Sophie Fernandez, Associate Professor (HDR) in Strategy, University of Montpellier
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