Buying from a rival: The effect of knowledge sharing, co-opetition and signal inference

The COVID-19 pandemic has put tremendous pressure on the global supply of critical medical devices such as ventilators, driving automakers to cross over to manufacture ventilators. However, it is not easy for these entrants to suddenly switch to the high-end medical devices (e.g., high-end ventilators) manufacturing since they lack the critical knowledge and key components. Interestingly, we observe that the entrants may be helped by the incumbent manufacturers, resulting in a co-opetition relationship where the former acquires the critical knowledge and key components from the latter. Intuitively, knowledge sharing may be rewardful for both the incumbent and entrant manufacturers because this strategy benefits the incumbents’ key components wholesaling business and induces the entrants to be informed as well. However, this intuition may be altered in a co-opetitive structure because of the signal inference. Being aware of this, in a co-opetitive supply chain comprising an incumbent manufacturer and an entrant manufacturer, we study the incumbent manufacturer’s preference over knowledge sharing. Furtherly, we also identify both “win–win” zones and “lose-lose” dilemmas for the two co-opetitive manufacturers.