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 preparing to invest more than €9 billion over the next three years to develop innovations. This colossal investment reaffirms France's desire to preserve 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 budget of the European Space Agency (ESA).
National and European sovereignty in space matters requires, in particular, the development of a European geolocation system. It is important for France and Europe to limit their dependence on American GPS technology. That is why the Galileo project was launched in the late 1990s with a total budget of €13 billion. To develop this cutting-edge technology, the best expertise from European companies was mobilized. The three main European industrial giants, Airbus Defense and Space, Thales Alenia Space, and OHB, formed an alliance. Our latest research focuses on this large-scale project.
Coopetition is not without risk
In management science, this phenomenon of cooperation between competitors is known as coopetition. Many companies choose to cooperate with their competitors in order to develop more innovations. Examples include video game publisher Ubisoft, which pools marketing costs to run joint campaigns; ski resorts, which collaborate to overcome technological challenges; and winegrowers in the Auvergne region, who work together 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 coopetition 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 trying to capture as many benefits as possible.
Furthermore, these risks of opportunism in coopetition relationships increase with the number of competitors involved. Indeed, when there are several competitors, they can also form coalitions. Competitors may join forces in a subgroup to try to gain power 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 reused beyond the scope of the agreement by one or more competitors seeking to strengthen their own competitive advantage at the expense of others. Due to the presence of multiple competitors, it can therefore be difficult to know who to trust and with whom to safely share knowledge.
These major risks translate into tensions within collaborative projects between competitors. These tensions can transform a potentially win-win coopetition relationship into a win-lose or even, in extreme cases, a lose-lose relationship. If these tensions are not managed, they can lead to the destruction of value for all companies involved in the collaboration.
Major dilemma
In our research on the Galileo case, 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 knowledge to remain competitive in other markets.
If the three players refuse to share their knowledge or limit 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 defend their own competitive advantage. Through Galileo, companies therefore risk seeing their competitive advantage diminish in the long term.
Aware of these risks, Airbus Defense and Space, Thales Alenia Space, and OHB were tempted to limit knowledge sharing to a minimum. But by making this choice, they are putting Galileo at risk. The project may fail because of this lack of knowledge sharing between competing manufacturers.
It therefore seems essential to find solutions to manage these tensions between knowledge sharing and protection within innovation projects involving several competitors. In this research, we have therefore sought to understand how to enable sufficient knowledge sharing to develop the technology, while preserving the core competencies of each manufacturer.
ESA, a means of strengthening trust
In collaborations between two competitors, it is common to create joint project teams to develop innovations. However, our work shows that it is too difficult for three competitors to freely share their knowledge in a joint team without any formal protection. They therefore preferred to set up a pyramid-shaped project team governed by a third party:the ESA.
The ESA will promote the centralization of knowledge flows shared by the partners. In other words, the three partner-competitors do not share knowledge directly with each other, but 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 still present, as it is shared by the industrial partners with the ESA.
This formal structure enabled manufacturers to build trust. After some time, this trust enabled Airbus Defense and Space, Thales Alenia Space, and OHB to agree to share additional knowledge, but only in pairs, never in threes. In this way, each company limits the risk of opportunism and protects itself from the risk of coalition. It retains control over the nature of the knowledge shared and the choice of the actor with whom this knowledge is shared.
This original project structure, led by the ESA, enabled European manufacturers to develop the first satellites for the Galileo system and to consider Galileo a success. To succeed in a project of this scale, the knowledge of all European manufacturers is necessary. The involvement of a third party, coupled with an appropriate project structure, allows the development of the trust necessary for sharing the required knowledge.
Galileo can now be considered a success, with 26 out of 30 satellites already operational and successfully launched. It would now be interesting to continue studying it in order to understand the evolution of coopetition relationships and to monitor the technological challenges facing companies in the space sector.
Today, the state of knowledge allows us to know how to successfully carry out an innovation project between two competitors. However, the development of radical innovations requires more and more knowledge and therefore the involvement of more and more competitors. It is not possible to manage a multiple coopetition project in the same way as a coopetition project between two competitors. In the European space industry, adapting to this specific configuration could enable the launch of projects even more ambitious than Galileo, with several European competitors. It therefore seems essential to continue investigating this phenomenon in order to identify the keys to success.
Audrey Rouyre, Assistant Professor in Strategic Management, Montpellier Business School and Anne-Sophie Fernandez, Senior Lecturer in Strategy, University of Montpellier
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