Explaining Intersubsidiary Relationships

Abstract

A central goal of this research is to explain why companies operating in the same industry and pursuing very similar business models differ in terms of competition and cooperation between their subsidiaries. The classification scheme developed in the previous chapter allows a profound description of the prevailing intersubsidiary relationship. It does not reveal why, or when, a competitive relationship is preferred over a cooperative one, or vice versa. Since competition and cooperation between subsidiaries imply many opportunities but also some risks, it is essential for managers to understand these tradeoffs. They further need to develop an awareness of the settings in which certain intersubsidiary relationships are likely to evolve. The search for a theory that provides insights into these questions is a difficult one. As stated in subsection 2.2.3, competition and cooperation have long been regarded as two, fairly incompatible, ends of the same continuum. Although a growing body of literature on coopetition has evolved, the phenomenon of internal coopetition has been largely overlooked (Walley 2007: 25). As will be shown, theories that may be insightful for explaining competition and/or cooperation between firms are not easily transferable to an intraorganizational level. Accordingly, the suggestions found in the existing literature are rare. While Luo (2005) currently offers the most comprehensive conceptual approach to intersubsidiary coopetition, he completely refrains from adopting, or even discussing, any substantial theories.