Competition or collaboration? Circular Economy and Coopetition
In a world marked by increasing complexity, environmental urgency, and global interdependence, the way businesses interact with each other is undergoing a fundamental shift. The long-standing doctrine of pure competition is being challenged by a hybrid strategy: competition, which is a concept that combines cooperation and competition. For decades, firms have sought to outperform each other through sharper pricing, better marketing, and proprietary innovation.
But as sustainability challenges mount and resources become scarcer, even traditional rivals are beginning to collaborate. The question is no longer whether businesses should compete or cooperate. It’s about how they can do both, intelligently and sustainably.
Framing the Debate
Traditional business thinking, grounded in models like Michael Porter’s five forces, has long prioritized competition as the engine of innovation and efficiency. Rivalry, in this context, is considered essential to drive better products, lower costs, and increased consumer value. Yet, this view is being complicated by global environmental and social issues that no single company can solve alone. In this context, collaboration—even among direct competitors—has become not just strategic but necessary. Coopetition, which involves working with competitors to address shared challenges while still maintaining areas of rivalry, is emerging as a pragmatic middle ground. It allows firms to tackle systemic problems like waste, emissions, and supply chain fragility without completely relinquishing their competitive edge.
What the ScienceDirect Study Reveals
A recent study in the Journal of Cleaner Production titled “Competition or coopetition? Collaboration strategies for the circular economy” explores this balancing act through a series of case studies on Danish companies engaged in circular economy initiatives. The researchers found that companies often experience an inverted U-shaped relationship between coopetition and sustainability outcomes. This means that while moderate levels of coopetition lead to higher sustainability performance, excessive collaboration can diminish returns. Too much closeness may lead to loss of strategic distinctiveness, diminished motivation to outperform, or even the leaking of proprietary knowledge.
The study also introduces the idea of the “knotted paradox”, describing the tension companies face as they attempt to balance shared ambition with self-interest. Firms collaborate to develop recycling systems, shared logistics infrastructure, or joint lobbying platforms. Yet they simultaneously compete to differentiate products, attract customers, and own value capture. This paradox requires delicate management—not a rigid strategy but a flexible, evolving process rooted in trust, transparency, and clear boundary-setting.
A Broader Academic View
Beyond the Danish context, coopetition has been studied in various sectors across Europe. Siarhei Manzhynski and colleagues have delved deep into how firms structure and sustain coopetitive relationships. Their findings reinforce the idea that successful coopetition depends not just on mutual interest but on mechanisms that manage complexity. One of these is bracketing, where companies agree on what areas will be shared and what stays private. This prevents confusion, misaligned expectations, or mission creep. Another mechanism, gluing, refers to the creation of shared values and informal norms that sustain the partnership even in the absence of formal agreements. Without these anchors, even well-intentioned collaborations can unravel when external conditions change or when individual goals start to diverge.
In a 2023 study involving firms from the Belarusian housing industry, Manzhynski and Biedenbach explored how coopetition intensity and balance affected sustainability outcomes. They found that while coopetition intensity follows the same inverted U-shaped path, the balance between competition and cooperation doesn’t always guarantee better environmental or social results. Some firms achieved high levels of cooperation without compromising competitiveness, while others ended up skewing too far toward shared gains at the expense of their unique value propositions. The key takeaway was that coopetition must be actively managed and periodically recalibrated.
Coopetition in Supply Chains
Another rich area of coopetition research lies in supply chains, where companies often share logistics networks, resource streams, and information systems. In the UK, firms working on sustainable supply chain management have been found to engage in coopetition to create shared standards, co-develop greener technologies, or push for regulatory changes. Here, trust plays a central role. Without it, even the most promising coopetitive ventures collapse into conflict or stagnate due to fear of exploitation. Reciprocity, joint governance structures, and clear rules of engagement are essential to making these efforts viable.
Interestingly, coopetition seems to be most effective during the value creation phase—when firms are pooling resources, knowledge, or technology to develop something new. But challenges often arise during value appropriation, when it’s time to decide who benefits and how. For example, two companies might jointly invest in a green innovation, but disagreements about market rights, pricing, or customer ownership can unravel years of cooperation. Managing this transition from co-creation to co-capture is one of the thorniest issues in coopetition, and one that requires both foresight and flexibility.
Practitioner Insights and Implications
Managers and policymakers are beginning to take these findings seriously. In a 2022 interview, Siarhei Manzhynski emphasized that coopetition is not just an academic idea but a practical tool—especially for small and medium-sized enterprises. For resource-constrained firms, partnering with competitors can be the fastest route to innovation, market access, or regulatory compliance. However, this doesn’t mean abandoning competitive instincts. Instead, it means competing smarter, by focusing on strategic areas of differentiation while joining forces where collaboration adds value.
Even policymakers are reconsidering the implications of competition law in the age of sustainability. The European Union, for example, is exploring how antitrust regulations might be updated to allow for more collaborative innovation among rivals, especially in green tech, mobility, and energy systems. Without such legal reforms, many coopetitive efforts may remain informal or risk being penalized. This intersection of policy and practice highlights the need for updated governance structures that reflect the realities of 21st-century business.
Synthesizing Insights: A New Strategic Playbook
Taken together, these insights suggest that coopetition is not just a reaction to sustainability pressures—it is a strategic evolution. To use it effectively, companies must first map out shared problems that no one player can solve alone. This might include circular supply chain design, shared infrastructure for recycling, or industry-wide standards for carbon reporting. Once these common grounds are identified, the next step is to draw clear boundaries: what will be shared and what will be protected. These boundaries help maintain trust and prevent mission creep.
Building strong relational foundations is also essential. Coopetition requires not only legal agreements but also cultural alignment, open communication, and mechanisms for conflict resolution. Finally, managers must develop metrics that measure value creation across all three dimensions of the triple bottom line—economic, environmental, and social. Only then can they determine whether coopetition is delivering balanced results or merely shifting value from one area to another.
Real-World Example
One of the clearest examples of effective coopetition can be found in the European automotive industry. Carmakers like BMW, Volkswagen, and Daimler fiercely compete for consumers, yet they collaborate on shared platforms for electric vehicle batteries, recycling infrastructure, and software development. These partnerships allow them to reduce costs, speed up innovation, and meet stringent environmental targets without sacrificing their brand identities or market positions. What makes this work is not just shared interest but carefully structured agreements that balance openness with strategic control.
Takeaways
So, should companies pursue competition or coopetition? The answer is neither—and both. Competition remains vital for driving innovation, fostering differentiation, and ensuring accountability. But coopetition, when intelligently managed, allows companies to tackle challenges that would be insurmountable alone. The two strategies are not mutually exclusive. Rather, they are complementary forces that, when properly aligned, can unlock innovation, resilience, and shared value.
The challenge lies in finding the right balance. Too little coopetition leaves firms isolated. Too much blurs boundaries and undermines strategic autonomy. As with most things in business, the key lies in judgment, adaptability, and a willingness to rethink old assumptions. Coopetition is not a trend or a buzzword. It is a strategic necessity in an era defined by complexity, collaboration, and climate change.
Conclusion
The future of business is not a binary choice between cooperation and competition. It is about mastering the art of both, guided by trust, clarity, and shared ambition. Coopetition offers a path forward: not just for stronger businesses, but for a healthier planet and a more inclusive economy. For firms willing to embrace this paradox, the rewards are real, and they’re already within reach.
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