DP16025 Co-opetition and Disruption With Public Ownership

Author(s): Arnoud W A Boot, Vladimir Vladimirov
Publication Date: April 2021
Keyword(s): Co-opetition, Competition, Cooperation, Disruption, Innovation, public and private ownership
JEL(s): G31, G32, L41, O31
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16025

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. However, it may undermine commitment to intermediately attractive investments, making the benefit of being public U-shaped in investment attractiveness. Being public is most beneficial when firms compete intensely on disruption and, at the other extreme, when protecting cash-cow businesses. Our results explain evidence that stricter disclosure requirements increase the profitability of disruptive public firms.