Coopetition: the key to French and European success in space

On Sunday, September 18, 2022, at the ^73rd International Astronomical Congress, French 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 determination to preserve its sovereignty in the space sector in a context of intense international competition.

Audrey Rouyre, Montpellier Business School and Anne-Sophie Fernandez, University of Montpellier

To maintain its competitiveness, France has understood perfectly well that European companies, while competing on certain markets, need to join forces and cooperate to innovate together. This is why France is one of the biggest contributors to the budget of the European Space Agency (ESA).

The development of a European geolocation system is essential to national and European space sovereignty. Indeed, it is important for France and Europe to limit their dependence on American GPS technology. This is why the Galileo project was launched at the end of the 1990s, with a total budget of 13 billion euros. To develop this cutting-edge technology, the best skills of European companies were 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.

Co-operation is not without risk

In management science, this phenomenon of cooperation between competitors is known as coopetition. Indeed, many companies choose to cooperate with their competitors to develop more innovations. For example: video game publisher Ubisoft, to pool marketing costs for a joint campaign; ski resorts, to take up technological challenges; or Auvergne winegrowers, 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 cooperative relationships, companies face many risks of opportunism. Let's not forget that partners are also competitors. They will therefore try to keep their investment in the project to a minimum, while trying to capture as much of the benefits as possible.

What's more, these risks of opportunism in coopetitive 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 sub-group to try to gain power over one or more competitors. As the number of competitors increases, identifying opportunistic behavior and the risk of cheating becomes more difficult for the companies involved.

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For example, the knowledge generated may be appropriated and then reused beyond the boundaries of the agreement by one or more competitors seeking to strengthen their own competitive advantage to the detriment of others. The presence of multiple competitors can make it difficult to know who to trust, and with whom to share knowledge safely.

These major risks translate into tensions within collaborative projects between competitors. These tensions can transform a potentially win-win cooperative relationship into a win-lose one, or even, at the extreme, a lose-lose one. If these tensions are not managed, they can lead to the destruction of value for all the 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 the new European technology, while protecting their core knowledge to maintain their competitiveness in other markets.

If the three players refuse to share their knowledge, or limit it too much, Galileo may never see the light of day. Conversely, by sharing too much, Airbus Defense and Space, Thales Alenia Space and OHB run the risk of transferring their key knowledge to a partner-competitor who can then re-use this knowledge outside the project to defend its own competitive advantage. Through Galileo, companies run the risk of seeing their competitive edge eroded in the long term.

Aware of these risks, Airbus Defense and Space, Thales Alenia Space and OHB have been tempted to keep knowledge sharing to a minimum. But in doing so, 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 for managing these tensions between knowledge sharing and protection within innovation projects involving several competitors. In this research, we have therefore tried to understand how to enable sufficient knowledge sharing to develop the technology, while preserving the core competencies of each industrial company.

ESA, a confidence-building tool

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. Instead, they set up a pyramid-shaped project team governed by a third party: theESA.

ESA will promote the centralization of knowledge flows shared by the partners. In other words, the three partner-competitors don't share knowledge directly with each other, but they do share the knowledge needed to develop Galileo with ESA. In this way, there is no direct transfer of knowledge between the competitors, but the knowledge needed to develop Galileo is present, since it is shared by the manufacturers with ESA.

This formal structure enabled the manufacturers to trust each other. After a while, this developed trust enabled Airbus Defense and Space, Thales Alenia Space and OHB to agree to share additional knowledge, but two by two, never three by 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 knowledge shared, and over the choice of player with whom this knowledge is shared.

This original project structure, supported by ESA, has enabled European manufacturers to develop the first satellites in the Galileo system, and to consider Galileo a success. To succeed in a project of this scale, the expertise of all European manufacturers is required. The involvement of a third-party player, coupled with an appropriate project structure, enables the development of the trust needed to share the necessary knowledge.

Galileo can now be considered a success, with 26 of the 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 follow the evolution of the technological challenges facing companies in the space sector.

Today, the state of knowledge allows us to know how to make a success of 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 may enable the launch of even more ambitious projects 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, HDR Lecturer in Strategy, University of Montpellier

This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.