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The more the better? Optimal degree of supply-chain cooperation between competitors

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  • Hubert Pun

    (University of Western Ontario, Ontario, Canada)

Abstract

We consider the outsourcing strategy problem of two competing original equipment manufacturers (OEMs) whose products are each made up of two components. The OEMs have different specializations, and therefore the component that each firm can produce in-house is different. Each firm must decide whether to outsource the other component to the competing OEM or to a third-party supplier. Prior research has demonstrated that competitors can be better off cooperating as supply-chain partners; therefore, one might expect that, as long as the OEMs are not at a severe cost disadvantage, they should maximize their cooperation as supply-chain partners, especially when competition between products is strong. Interestingly, this study finds that more cooperation between competitors may actually be harmful. Under certain conditions, while one of the OEMs should outsource to the competing firm, the other should outsource to a third-party supplier, even when the third-party supplier is more expensive and the competition is intense.

Suggested Citation

  • Hubert Pun, 2015. "The more the better? Optimal degree of supply-chain cooperation between competitors," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(12), pages 2092-2101, December.
    • Handle: RePEc:pal:jorsoc:v:66:y:2015:i:12:p:2092-2101
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    Citations

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    Cited by:

    1. Yasuhiro Arai & Noriaki Matsushima, 2023. "The impacts of suppliers and mutual outsourcing on organizational forms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(1), pages 114-132, February.
    2. Negoro, Kazuhiro & Matsubayashi, Nobuo, 2021. "Game-theoretic analysis of partner selection strategies for market entry in global supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 151(C).
    3. Sarat Kumar Jena & Abhijeet Ghadge, 2022. "Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective," Annals of Operations Research, Springer, vol. 315(2), pages 1729-1753, August.
    4. Katsaliaki, Korina & Kumar, Sameer & Loulos, Vasilis, 2024. "Supply chain coopetition: A review of structures, mechanisms and dynamics," International Journal of Production Economics, Elsevier, vol. 267(C).
    5. Prasenjit Mandal & Tarun Jain & Abhishek Chakraborty, 2021. "Quality collaboration contracts under product pricing strategies," Annals of Operations Research, Springer, vol. 302(1), pages 231-264, July.
    6. Li, Wei & Zhao, Xuan, 2022. "Competition or coopetition? Equilibrium analysis in the presence of process improvement," European Journal of Operational Research, Elsevier, vol. 297(1), pages 180-202.
    7. Pun, Hubert & Ghamat, Salar, 2016. "The value of partnership under competition: When competitors may be R&D joint-venture and supply-chain partners for a critical component," International Journal of Production Economics, Elsevier, vol. 177(C), pages 1-11.
    8. Wei, Shanting & Zhang, Zhuo & Ke, Ginger Y. & Chen, Xintong, 2019. "The more cooperation, the better? Optimizing enterprise cooperative strategy in collaborative innovation networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    9. Li, Dan & Chen, Jing & Liao, Yi, 2021. "Outsourcing strategy in the presence of the customer returns," International Journal of Production Economics, Elsevier, vol. 240(C).
    10. Cheng, Yongwei & Fan, Tijun, 2021. "Production coopetition strategies for an FV automaker and a competitive NEV automaker under the dual-credit policy," Omega, Elsevier, vol. 103(C).
    11. Fu, Xiao & Tan, Guofu, 2024. "Double markups under bilateral vertical contracting," Economics Letters, Elsevier, vol. 237(C).

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