Rival firms make the best partners when developing new technology

Collaborating with rivals can be highly productive when companies are developing new cutting-edge technologies, research by NEOMA Business School finds.

Despite it seeming intuitive for firms to keep their toughest competitors at arm’s length, Professor Dina Ribbink (NEOMA), alongside Tingting Yan at Texas Tech’s Rawls College of Business and Hubert Pun at Western University’s Ivey Business School, finds that rivals can make the best allies in certain circumstances.

How Procurement Leaders Choose Collaboration Partners

The researchers examined which factors influence procurement managers’ decision-making when choosing who to co-develop new technology.

They identified three key criteria in the selection process from 17 in-depth interviews with experienced managers, and analysed how these factors are prioritised in decision-making by testing a sample group of 400 managers with a hypothetical scenario.

In the scenario, participants assumed the role of a procurement director for a leading US car manufacturer and had to choose who to partner with to develop a new propulsion system – either a competitor or a supplier.

The results showed that competitors are more likely to be selected if they have a strong foothold in the target market and if their products pose little risk of substituting those of the contracting firm. The degree of technological innovation was shown to be of little importance in procurement managers’ decision-making.

“A rival company with a strong market presence presents a more credible partner for collaborations when building new technologies. The reason is that these firms have already shown an ability to design, manufacture, and market innovative solutions successfully,” Professor Ribbink explains.

This research was published in the Journal of Operations Management and can be accessed online.