Co-opetition and Disruption With Public Ownership

Abstract

Do mandatory disclosure requirements make public firms less disruptive and competitive? Not necessarily. We offer a new perspective showing that mandatory disclosure facilitates "co-opetition" --- a strategy of competing on some dimensions while avoiding competition on others. Co-opetition encourages disruption by elevating profitability and lowering financing costs. The downside of co-opetition is that cannibalizing technologies on which firms cooperate is costlier, which may erode firms' commitment to disruption. This cost mainly affects intermediately-attractive investments and is outweighed by the benefits of co-opetition when rivals also pursue disruption. Our results explain evidence of higher profitability in disruptive public firms following stricter disclosure requirements.

Keywords: co-opetition, cooperation, competition, public firms, public ownership, disruption

JEL Classification: G31, G32, L41, O31