Events

Mr. Young Hou
Ph.D. Candidate in Business Administration, Strategy
Harvard Business School

In this paper, I examine how retail firms’ intangible resources in brand equity affect their incentives to compete and cooperate in a vertical setting. I exploit a natural experiment in the ready-to-eat breakfast cereal industry, in which the largest private-label manufacturer (Ralston) merged with one of the leading branded manufacturers (Post). Post-Ralston subsequently both competed and cooperated with retailers. Through this lens, I assess changes to competition and performance outcomes as a result of vertical co-opetition. Leveraging 4.5 billion observations, I show that competition between retailers and Post-Ralston decreased, allowing Post-Ralston to capture market share. More broadly, I find that retailers with significant private-label resources across multiple categories are less inclined to fully cooperate with individual manufacturers, such as Post-Ralston, as there exist high opportunity costs to do so. This paper contributes to the competitive and corporate strategy literatures by unpacking the tradeoffs that retail firms face in choosing between the potential gains of co-opetition in a focal product category and the potential loss in decreasing the value of their umbrella brand resources.