The Evolution of Cooperation in the Face of Conflict

Firms in innovation-driven industries cooperate to develop interoperability standards and compatible technologies. Yet, cooperative firms may disagree about what constitutes fair, reasonable, and non-discriminatory terms for licensing intellectual property. Thus, conflict and patent litigation arise even as firms cooperate to build technologies and industry standards. We find that in innovation ecosystems, firms commonly increase cooperative efforts in response to conflict. Less-connected firms or those with valuable complementary technologies will likely expand cooperation than well-connected firms or technological competitors. Well-connected firms may pursue alternative cooperative opportunities. We suggest that defendant firms’ managers can adopt a dual cooperative strategy: (a) identify private and shared benefits from the joint development of complementary technologies with aggressors and (b) invest in alternative technological partnerships to influence the direction of future standards development.