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Cross-Functional "Coopetition": The Simultaneous Role of Cooperation and Competition withinFirmsAuthor(s): Xueming Luo, Rebecca J. Slotegraaf and Xing PanSource: Journal of Marketing, Vol. 70, No. 2 (Apr., 2006), pp. 67-80Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/30162086 .

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XuemingLuo,Rebecca J.Slotegraaf,& XingPanCross-FunctionalCoopetition"TheSimultaneous oleofCooperationandCompetitionithinirmsExtantmarketingiteratureends to view cross-functionalelationshipss primarilyooperativeor competitivennature, utnotboth. ncontrast,hisresearch focuses on cross-functionalcoopetition"i.e.,the oint ccurrenceofcooperation nd competitioncross functional reas within firm). singresponses frommidlevelmanagers andtop executives, he authorsfind hat ross-functionaloopetition nhances a firm's ustomer nd financial erfor-mance. The authors furtherhow thatthis nfluence s mediatedbymarket earning,ndicatinghatperformancereturns ocross-functionaloopetition ccurs throughn underlyingearningmechanism.cholars

cholars in marketingnd strategicmanagementargue thatknowledgetransfercross functionalboundaries s critical for numerousoutcomes,including ew product uccess (e.g., Griffinnd Hauser1992), organizationalearningHuber1991), and overallfirmerformancee.g.,Gray ndMeister 004). nthemar-ketingiterature,enon ndVaradarajn (1992) argue hata firm'smarketnowledgemust e transferredr dissemi-nated crossdepartmentsefore nowledgeanplay crit-ical role s a strategicsset.1Research lso indicateshatfirm's ompetitivedvantageies in itsability o transfermarket nowledge cross departmentse.g., Maltz andKohli1996).However, hetransferf knowledgecross functionalboundariesan berather ifficultndcomplicated.venthe

most organizedefforts o share knowledgeare oftenimpeded y employees'endenciesoguard ndselectivelyshare nformationGilmour 003).Consider henumber fcompanies hathaveexperiencedifficulties ith nternalknowledgeransfer.or example,Hewlett-Packard'sarlyfailurenthe aptopmarket ith 23-pound roductan beattributedo ts ack ofknowledgelow etweentsmarket-ing and engineering epartmentsFisher,Maltz, andJaworski997).GeneralMotors ound hat tsknowledge-IWerefer o "functions"nd"departments"nterchangeablythroughouthis rticle.

Xueming uo is Assistant rofessor fMarketing,ollegeofBusinessAdministration,niversityfTexas,Arlingtone-mail; uoxm@uta.edu).Rebecca J.Slotegraafs Assistant rofessorfMarketingnd Lilly ac-ulty ellowe-mail; slotegr@indiana.edu),ndXing an isAssistantro-fessor fMarketinge-mail; pan@indiana.edu), elley chool of Busi-ness, Indiana University.he authors appreciate the constructivecomments nd suggestions rom heanonymousJMreviewers, ohitDeshpande,KenPrice,K.Sivakumar,ndseminar articipantst theUni-versityfTexas,Arlington,nd JinanUniversitynChinaonprevious er-sionsof hismanuscript.

sharing ttemptsn the transferfmanufacturingnsightsfrom ts Saturn ivision oits other ivisions rovedmoredifficulthan xpectedKerwinndWoodruff992).BarillaSpA's own sales andmarketingreas mpeded nowledgetransfero tsoperationsrea when tattemptedo nstalljust-in-timeistributionystemHammond 994).Within cademicresearch crossmarketingndman-agement,cholars lsorecognizehat nowledgeransfersvaluable ut ften ifficulto achieve e.g., Kogut ndZan-der1992; Szulanski1996) and havesubsequentlytudiedbarriersoknowledgeransfer.lthoughesearch oints oseveral actorshat an impedeknowledgeransfercrossfunctionaloundaries ithinnorganization,critical ac-tor sthedegree fcompetitioncross unctions.nparticu-lar, esearch hows hat n arduous elationshipetween hesource ndthe ecipientSzulanski 996), r nterfunctionalrivalryMaltz ndKohli1996), an mpedenternal nowl-edgetransfer.nnumerousituations,unctions ust om-petefor firm'scarceresourcesnd thus re often eluc-tantnotonly o share nformationoprevent competingfunctionrom aining nowledgeut lso to receivenfor-mation or ear hat t willheightenhevalueofa compet-ingfunction'snowledgeGupta ndGovindarajan000).Thus,thequestions whetherompetingepartmentsaneffectivelyooperate ith ne anothero enhance rganiza-tional learning nd performance. ore generally, owshould irmstrategicallyanage ross-functionalompeti-tion ndcooperationo achieve ompetitivedvantage?

The extantmarketingiteratureas not addressed hisimportantuestion, ecause t s oftenssumed hat ross-functionalnteractionsetweenmarketingnd other unc-tional nits reprimarilyooperativercompetitive,utnotboth. On the one hand,manyresearchers ave viewedcross-functionalnteractionsrom cooperation spect,focusing n thevalue of interfunctionaloordinationndcommunicatione.g.,GriffinndHauser1992;Moormanand Rust1999;Narver nd Slater 990).On the ther and,othershave viewed cross-functionalnteractionsromcompetitionspect,focusing n interdepartmentalivalry

0 2006,American arketingssociation JournalfMarketingISSN:0022-2429print),547-7185electronic) 67 Vol. 0 April006), 7-80

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(e.g., Homburg,Workman, nd Krohmer1999; Levitt1969). However, lthough unctionalreas competewithone anothern thepursuitfdivergentndividualoalsandstrategic rioritiese.g.,Houston t al. 2001), theymustalsocooperateo that heywork oward hefirm's ommoninterestsNarvernd Slater 990).Consequently,norgani-zation'sfunctionalreas are often orced o compete ndcooperateimultaneouslyith ne another.hus, t s criti-cal to understandowthese eeminglyonflictingelation-ships nterplaynd affect irm erformance.In an efforto understandhese ffectsetter, e focuson cross-functionalcoopetition,"hichwe define s thejoint occurrence f cooperation nd competitioncrossfunctionalreas within firm. coopetitioniew of theinteractionsetweenmarketingnd other unctionalreasnotonlyemphasizes he need to address omplex nter-departmentaltructuresut also echoesthe mportancefcoordinatingiverse ndcompetitivenowledgend skillsacrossthecross-functionaloundarieswithin firm.Wearguethat ross-functionaloopetitionmproves firm'scustomerndfinancialerformance.We also investigate hethermarketearning lays amediatingole n therelationshipetween ross-functionalcoopetition nd firm erformance.his mediating olewould uggest hat heres an underlyingearningmecha-nismbywhich ross-functionaloopetitionontributesosuperior erformance.arketearnings groundedn theknowledge-basediewofthefirmGrant 996)and s rec-ognizedas an importantourcefor a firm's ompetitiveadvantage e.g., Kogutand Zander1992; Nonaka 1994;Sinkula1994).Althoughmarketingcholars ave focusedon thevalue ofknowledgecrossa broad rray ftopics,includingheutilizationf market nowledgee.g.,Desh-pandeand Zaltman1982; MenonandVaradarajan 992;Moorman, Zaltman, and Deshpande 1992) and theexchangeof knowledge cross functional nits Fisher,Maltz, ndJaworski997;Griffinnd Hauser1992;MaltzandKohli1996),how ntrafirmooperationmong ompet-ingfunctionsnfluencesfirm'searningboutkeymarket-ing ctivitiesasyet obeexplored. ollowing riortudies(e.g.,Menon t al. 1999;Moorman 995;Srivastava,her-vani, ndFahey1998),we refer o marketearnings anorganization'snowledgetores fkeymarketingctivities,such as developing ew products, uilding rand mageamongcustomers,nd establishinghannelpartnershipsand networksn themarket.Therefore,n this tudy, e empiricallyest1) whetherthe ointoccurrence f cross-functionalompetitionndcross-functional ooperation (intensityand ability)improves firm's ustomernd financial erformancend(2) whether firm'smarketearningmediateshese erfor-mance returns. ur results show thatcross-functionalcoopetition as an importantffect n performanceut-comesthroughnhancedmarketearning,aving hewayfornew nsightntohowcross-functionalnteractionsanaffect firm'sompetitivedvantage. urstudylsooffersmanagersvidencehat ooperationndcompetitionhouldboth e strategicallytimulatedcrossfunctionsopromoteintrafirmnowledgeransferndto enhance hefirm's us-tomernd financialerformance.

Cross-FunctionaloopetitionTheoretical Nature of Cross-FunctionalCoopetitionCoopetition, r the ointoccurrence f cooperative ndcompetitiveehaviors,an exist tmultipleevels, nclud-ingfirms,trategicusiness nitsSBUs), departments,ndtask groups (e.g., Brandenburgernd Nalebuff1996;Hamel,Doz, and Prahalad 989;Tsai 2002). One theoreti-cal foundationfcoopetitionan be drawn rom esearchon social structurenthe ociologyiterature.nparticular,the ocial embeddednessrameworkurportshat elationsare lways resentndthat he ocial structurefthese ela-tions nfluencesubsequent ehaviorsGranovetter985;Uzzi 1997,1999). In considerationf thetypes f socialrelations, eakties Granovetter973)are characterizedysporadic nteractions,et they an offer ighreturnsylinking eople or firms o diversepools of information(Burt 992). ncontrast,mbeddedies recharacterizedyfrequentndstrongernteractionsuchthatnformationsperceived s moretrustworthyGranovetter 985) andcooperationshighGulati 998). nconsideringoth ypesofrelations,esearch hows hat hegreatestalue s recog-nized whentheres a complementaryix of bothforms(Uzzi 1999).Thus,we expect hat irms nhance heir er-formance hen hey xhibitooperativeocial ties hat renestedna broaderompetitiveramework.Research in the marketingiterature upports ndextends hisnotion. orexample, argo nd Lusch 2004)point o the mportancef collaboration otonlyamonginterorganizationalartnersutalso among ntraorganiza-tional unctionsor firm'song-termiability.t the ntra-organizationalevel, omemarketingcholars ave lso rec-ognized that interdepartmentalnteractionmay be adouble-edged word, nvolvingboth collaboration ndrivalry e.g., Ruekert nd Walker1987). We explicitlyaddress his nterdepartmentalnteractiony examiningheeffectsf cross-functionaloopetition,r the ointoccur-rence of cooperationnd competition,cross functionalareaswithin firm.In cross-functionaloopetition,nterdepartmentalnter-actionsand thetransferf knowledge cross functionalareascan be bothcompetitivend cooperativen nature.Thecompetitiveature ften ccurs ecauseknowledgeangeneraterivate ainsforndividualepartmentsooutper-form heir ounterparts.ndeed, ross-functionalompeti-tionmayresult rom irect omparisonsmong unctionalunitsLevitt 969;Maltzand Kohli1996), nterdepartmen-talstruggleso obtainimitedangibleesourcese.g.,orga-nizationalapital, ersonnel)nd ntangibleesourcese.g.,top executives'mental ime, ttention)Frankwickt al.1994), nddivergentoalsandstrategicrioritiesHoustonet al. 2001; Ruekertnd Walker 987).Atthesametime,knowledgeransfercrossfunctions ithin firmmaybecooperativen nature ecausedepartmentseed to collabo-ratewith ne anothern thetransferf market nowledgefor he ommon nterestsf thefirm.nformalooperativeinteractionmongfunctional epartmentss particularlyimportantor btainingmorefrequentnd valuable nfor-mationGranovetter985)andfor chieving reaternow!-

68 JournalfMarketing,pril006

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edge transfercross departmentsRuekert nd Walker1987).Forexample, halltalk" ndstorytellingre nfor-malknowledgeransferrocesses hat ccur mong epart-ments s a means obring eople nddepartmentsogetherand to facilitate ttainmentf the organization's oals(Kohli and Jaworski 990).Thus,thedegree o whichfirm's epartmentsooperaten conjunction ithvariouslevels ofcompetitionn thefirm's ocial structureointlydefineshe irm'sevelofcross-functionaloopetition.To clarifyheconcept f cross-functionaloopetitionfurther,e brieflyiscusshow t differsrom worelatedconstructs:irst, ross-functionaloopetitions similar ointerorganizationallliances n thatboth nvolve oopera-tionbetween ompetingegmentsi.e., functions,irms),yetmportantifferencesxist.Anobvious ifferences thelevelofanalysis; heformersfocused t the ntraorganiza-tional evel, ndthe atter s focused t the nterorganiza-tional evel.As a result, or xample, hecompetitivele-ment fcoopetition ithin firm s likely o be differentfrom hecompetitivelementbetweenfirms, uch thatrivalrynd conflict re likely o be less extreme ithinfirm han etween irms.naddition,nderlyingharacter-istics of interorganizationallliances, uch as anticipatedfuturenteractionHeideandMiner1992)andrelationshipage AndersonndWeitz 989), renot ikely oplay rolein cross-functionaloopetition. econd,cross-functionalcoopetitions also similar omarketrientationn that othemphasize ooperationcrossfunctionsrdepartments.nparticular, processview of market rientationuggeststhatknowledge boutcustomers s disseminatedcrossdepartmentse.g., Kohli and Jaworski 990). However,coopetitionnd market rientationiffern an importantway.Whereasmarket rientation ocuseson promotingfunctional oordination nd reducing nterdepartmentalconflict nd frictione.g.,Narver nd Slater1990),cross-functionaloopetition ecognizes hat nterdepartmentalconflicts notalwaysunfavorablend can evenproducespecific enefitsAndersonndNarus1990; Lado, Boyd,and Hanlon1997).The Effect f Cross-Functional Coopetition onPerformanceWeexpect heoint ccurrencefcross-functionaloopera-tion ndcompetitionoenhance irmerformance.hesyn-ergy fcoopetitionas beentheorized oproduce ariousbenefits,ncludingearning,ostsavings, esourceharing,and nnovationLado,Boyd, ndHanlon1997).At an ntra-organizationalevel,cooperationmongcompeting nitsmaybe evident y absorbed nd frequentnteractionsouncover ompeting nits'know-howTsai 2002). There-fore,we focuson the bilitynd ntensity,espectively,fthe nature f interdepartmentalooperationnd examinetheperformanceffectsf cross-functionaloopetitionnmore detailby investigating1) the oint occurrence fcross-functionalooperativebilityndcompetitionnd 2)the ointoccurrence fcross-functionalooperativenten-sity ndcompetition.

The oint occurrence f cross unctional ooperativeabilitynd competition.ross-functionalooperativebil-

ityreferso skills nrecognizinghe value of newmarketknowledge s well as assimilating, ransforming,nddeployingmarketnowledgecross ateral ross-functionalinteractions,eflectingn absorptiveapacity or oopera-tiveknowledgeransferCohenand Levinthal 990;ZahraandGeorge 002).Theability or ross-functionaloopera-tion xtends eyond heacquisitionf market nowledge,because functionalnits hat o nothave thecapacity orassimilationndtransformationaynot e able to nternal-ize the vailable nowledgertodeployteffectively.Regardingheoint mpact f cross-functionaloopera-tive bilitynd ompetitionn firmerformance,t spossi-ble that negative ffectmayoccur. n particular,ind-fleisch ndMoorman2003) show that firm's ustomerorientationaydeterioratef he irmsengagedna coop-erativealliance withcompetitors; ne reason for thisdecline s a low evelof trustmong lliancemembers.t salso noted hatnterfunctionalivalryecreases he eveloftrustn informatione.g.,Maltz and Kohli 1996),whichsuggests hatcross-functionalompetition oupledwithcooperativebility oulddecrease firm'sustomer-basedperformance.However,we expect hat he ointoccurrence f cross-functionalooperativebilityndcompetitionas a posi-tive ffectn a firm's ustomererformancendfinancialperformance. combinationf cross-functionaloopera-tive bilityndcompetition aynurtureroductiventerac-tionse.g.,BrandenburgerndNalebuff996;Lado,Boyd,and Hanlon1997;Uzzi 1999) that an facilitateaternalefficiencies nd sharing f best practiceforsuccessfuldeploymentnd exploitationf knowledge.n particular,cooperationmong ompetitorsan foster reater nowl-edge seekingndresultnsyncreticentsLado,Boyd, ndHanlon 1997). High cross-functionalooperative bilityemphasizes henature f gaining, bsorbing,nd sharing

customer nd marketknowledge,whereashigh cross-functionalompetition ay providedepartments ithastrongncentiveoshare hisknowledgeounderstandneanother's ositions etter.ndeed,Tsai (2002) empiricallyshowsthatproductiventeractionsan be nurtured henthereshigh ompetitionor esourcescross firm'sBUsbecause they re more ikelyto share nformationndexploit aluableknowledgetores. heseproductiventer-actions analsoaffectirmerformance.orexample, onHippel (1987) shows that ooperationmongcompetingfirmsan mproveachfirm's rofits.As such, heoint ffectfhigh ooperativebilityndhighcompetition aygenerate etter roblemolving nsatisfyingustomereeds ndhigher erformanceHamel,Doz, andPrahalad1989;Lado, Boyd,and Hanlon 1997;Tsai 2002).Therefore,epredicthat t the unctionalevelwithinhefirm,he ointoccurrencefcooperativebilityandcompetitionivesrise obetterustomerndfinancialperformance.H1Theoint ccurrencef ross-functionalooperativebil-ity nd ompetitionas a positiveffectn a firm'sa)customererformancend b)financialerformance.

Theointeffectfcross unctionalooperativentensityand competition. ross-functionalooperativentensityCross-Functionaloopetition69

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refers o the degreeto which ateral, nterdepartmentalinteractionsrefrequentnd close within n organization.Prior esearchhows hat requentooperativenteractionenhances he evel ofcommunicationndknowledgehar-ing Ghoshal, orine,nd Szulanski 994;Tsai 2002).Fre-quentnteractionscrossfunctionalreasmay lso serve sa mechanism hathelpsfunctionsothrecognizewherepotentiallysefulmarket nowledgeould serve ndrouteit to the destinations cross functional oundariesforimprovedutcomesHuber1991).We expect hat he ointoccurrence f cross-functionalcooperativentensityndcompetitionas a positivenflu-enceon a firm's ustomererformancendfinancialerfor-mance.Morespecifically,requentnteractionsan createmoreopportunitieso shareknowledge nd ideas (Tsai2002),andsharingnformationcross ompetingunctionscan offer imely ntegrationf knowledgewithin firm(e.g.,Uzzi 1997),whichn turn timulatesuperior erfor-mance. ntensiveooperationcross ompetingepartmentsmaynotonlypromotehedevelopmentnd conversionftacitknowledgentoa sharedunderstandingf customerneeds Nonaka1994;RindfleischndMoorman 001) butalso generatemorecollaborative nd effectivetrategicdecisionmakingwithin heorganizationGhoshal,Korine,and Szulanski 994). ndeed, competitiventerdepartmen-tal structureoupledwith requentnteractionsay nablea firm ocapitalize n the ommunicationhannels ndtiesembeddedcross tsfunctionalreas, huseading ogreatermarketnd financial eturns.Furthermore,he ointoccurrencef cross-functionalcooperativentensityndcompetition ayreduceknowl-edge overlap nd create ynergies.n particular,lthoughthe ntraorganizationalunctionsre ikely o share imilarresource onstraintsnd market ituationsmposed ythefirm, nowledge crossdepartmentss less likelyto beredundant,iven hetraditionalmphases crossfunctions(MoormanndRust1999).With essredundancy,requentinteractionmong ompetingepartmentsrovides ccessto novel and complementary arketntelligencecrossfunctionalnowledgeilos Granovetter973).This accesstononredundantnformationostersetterroblemolvinganddecisionmakinge.g.,Cummings004)and s essentialfor he reationf customernd financial alue e.g.,Kohliand Jaworski 990). Therefore, e predict hat he ointoccurrence f cross-functionalooperativentensityndcompetitionnhances ustomernd financialerformance.

H2:The ointoccurrencef cross-functionalooperativeintensitynd ompetitionas positiveffectn a firm's(a) customererformancendb)financialerformance.The MediatingRole ofMarketLearningWe also argue hat firm ith epartmentshat imultane-ously ompetend ooperatemay nhancetsmarketearn-ing,which nturn illgenerateigher erformance.arketlearningroadly efers o a firm'sxpertisen and knowl-edgestores fkeymarketingctivities,uch s developingnewproducts, uilding rand mage,respondingo cus-tomers'needs, and establishing hannel relationships(Menon tal. 1999;Moorman 995; Srivastava,hervani,

andFahey1998).Onthe asis oftheknowledge-basediewof thefirm, hich osits hat ompetitivedvantageesultsfrom ifferentnowledgetoresndmarketxpertisee.g.,Grant1996; Nonaka1994),we examinewhethermarketlearnings a route romwhich ross-functionaloopetitionenhances firm'sustomerndfinancialerformance.The coexistence f cross-functionalooperationndcompetitions likely o create synergyhat mprovesfirm'smarketearning. irst,he ointoccurrencef cross-functionalooperative bility nd competitionffers heopportunityor ustomernd marketnowledgeo crossfirm's unctionaloundariesn an absorbed nd effectiveway.Withthefacilitatingffect f competition,roughtaboutbythe nterestnknowingmore bout ompetitors'positionsHamel,Doz, and Prahalad 989;Tsai 2002),thecooperativebilityorecognize,ssimilate,ndapply pe-cializedmarketnowledgecross ompetingepartmentsslikely o enhance heease and effectivenessithwhichlearningmayoccur (Cohen and Levinthal1989; Grant1996;Szulanski 996).Second, heoint ccurrencefcross-functionalooper-ative ntensityndcompetitions also expectedo mprovea firm'smarket earningby enablingdepartmentsoenhance heir nowledgetoresnproactivend nnovativeways. ntensivendfrequentnteractionsan improvehetransferfcomplex nowledgeHansen1999)andadapta-tion ocomplex ituationsUzzi 1997).Furthermore,s wepreviously ndicated, ross-functionalompetition aninstill hemotivationo understandther unctions'osi-tions. hus,when ntensiventeractionsccur cross om-peting unctions,his ointoccurrence f cross-functionalcooperativentensityndcompetitionnables hecompet-ing departmentso attain ew andcomplementarynowl-edgethat educes hechancefor nterdepartmentalisun-derstandingf complexknowledgeGriffinnd Hauser1996)andoffershe pportunityo diffuseovel deas andpromote reaterearninge.g.,Ghoshal,Korine, nd Szu-lanski 994).Therefore,e expect hat heointoccurrencef cross-functionalooperativebilityndcompetitionnd theointoccurrence f cross-functionalooperativentensityndcompetitionnable a firm o generate trongermarketlearning.

H3:A firm's arketearnings influencedy a) theointoccurrencef ts ross-functionalooperativebilityndcompetitionnd b) the ointoccurrencef ts cross-functionalooperativentensitynd ompetition.Extant iteraturenmarketinghows large nd accu-mulatingmount f evidenceregardinghe influence forganizationalearningnd marketntelligencenfirmer-formancee.g.,KohliandJaworski990;Maltz andKohli1996; Moorman, altman, nd Deshpande1992; Rind-fleisch ndMoorman 001; Zhou,Yim,andTse 2005). Inaddition,undamentalenets ftheknowledge-basediew(Grant 996;Kogut ndZander 992) ndicate hat uperiorknowledgetores ndorganizationalearning,s strategicassets, ead to mprovedinancialnd marketerformance.As previously rgued,we believe thatcross-functionalcoopetition1) helps firmuild henecessary nowledge

701 JournalfMarketing,pril006

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stores or uperiormarketearning,ntheform f theointoccurrence f cross-functionalooperative ntensityndcompetition,nd (2) enables the firm o exploittheseknowledgetores or uperiormarketearning,n theformoftheoint ccurrencefcross-functionalooperativebil-ity ndcompetition.nturn,uperiormarketearningeadsto improvedirm inancial nd market erformancee.g.,Dodgson1993;Kogut nd Zander 992).Therefore,e purporthat heperformancedvantagesof cross-functionaloopetitionre achievedthroughnunderlyingearningmechanism.H4:Marketearningediateshenfluencef heoint ccur-rence f ross-functionalooperativebilitynd ompeti-tion na firm'sa) customererformancend b)finan-cialperformance.H5:Marketearningediateshenfluencef heoint ccur-rence fcross-functionalooperativentensitynd om-petitionn a firm'sa) customererformancend b)financialerformance.Methodology

SampleThe sample consists of firmsthat operate in high-technologyectors uch as biotechnology,oftware evel-opment,nformationechnology,nd electronicswithinChina.As the econd argestconomyn theworld, hinarepresents criticalmarket o considerBoisotandChild1996;Walters nd Samiee2003). Usingtheofficial hinaBasic Statistical nits earbook s the amplingrame, erandomlyelected 00 firms eadquarterednmetropolitanareaswith ationwideperationsnChina.2The datawere ollected romwokey nformantsithintheorganizationo minimize otential ommonmethodbias. In particular,ommonmethod ias concerns risewhenboth ndependentnddependentariables remea-suredbythe samekey nformante.g.,VanBruggen, il-lien, nd Kacker 002).To specifyhetwokey nformantsfrom achofthe500 firms,hefirms ere elephonedndrequested o selectone midlevelmanager andomlye.g.,sales,marketing,esearch-and-developmentR&D] depart-mentmanager)nd onetopexecutivee.g.,chief xecutiveofficer,eneralmanager). he key nformantserecare-fully hosen to ensure hat heyhad theknowledgendbackgroundo complete hequestionnairen a thoughtfulmanner.hemidlevelmanagersndsenior xecutives ereinterviewedeparatelyAtuahene-Gimand Li 2002). Ingeneratingheseresponses or ach company, opexecu-tives nswered urvey uestions boutorganizationaler-formance, arketearning,nd firm emographicnforma-tion,whereasmidleveldepartment anagers nsweredquestions boutcross-functionalooperativeorces, om-petitive orces, nd some tems ffirm erformances acheck f datavalidity.

2These 00firms ere quallyelectedromivemajorities,includinghanghainthe ast,ChengduntheWest, eijingntheNorth, uangzhoun theSouth,ndChangshanCentralChina.Weselected his qualdistributionominimizeias ofregional arketeterogeneity.

A total f329 firms658 managers)met he creeningcriteriai.e.,theknowledgendbackgroundorespondndtwokey nformantsromachfirm)nd nitiallygreed oparticipate. ftermatching ey informantsnd deletingmissing ata,we endedup withusable nformationrom163 firms326 informants).s a result,we obtainedresponse ate f32.6%ofthe riginal ample163/500)nd49.5% of thequalifiednformants163/329).To testfornonresponseias,wecomparedhedemographicataof70firms hat greed o participateut did notcomplete heinterviewswith those of the completed and usefulresponses.Wefound o significantifferencen firmize,industry,ocation,ndownership.The resultsestinghe erformancetems hatweredes-ignatedocheck nformantesponse aliditysales growth,customer atisfaction,nd return n investmentROI])exhibithigh consistency etweentop executives andmidlevelmanagersGuttmans:.83,88, and .87, respec-tively). o ensure hat he enior xecutives ere ppropri-ate andreliable,we examined heextent f theirnvolve-ment n making trategic ecisions n thefirmLi andAtuahene-Lima 001); the results how high strategicinvolvementM = 6.81 ona seven-pointcale).Among hemidlevelmanagers,everal unctionalreas werecovered,includingales (38%), marketing33%), R&D (21%), andothers8%). Note that ll functionalreasmay generatemarket nowledgeo enhance ustomer alue (Kohli andJaworski990;Narver nd Slater 990)andthat heprocessof marketntelligence isseminationcross functionalboundaries an be evaluated y midlevelmanagers rommarketingnd other unctionalreas e.g.,Fisher,Maltz,andJaworski997;Maltz ndKohli1996). ngeneral,8%ofinformantsadmore han iveyears' xperiencen thefirm,nd 91% hadat least twoyears' xperience ith hefirm.hus, hekey nformantsere easonablynowledge-able aboutthecross-functionalynamicswithin he firm(e.g.,Johnson,ohi, ndGrewa12004). mong he irmsnour ample, 2.5%were mall rmediumnsize,with 00orfewermployees.he argestndustryegment as elec-tronics 36.3%), followedby informationechnology(28.1%) andbiotechnology18.7%).MeasuresWeassessed ll constructss multi-item easures.n addi-tion,we scored ach item n a seven-pointcale,rangingfrom strongly isagree"1) to "stronglygree" 7). ThequestionnaireaspreparednEnglish,ranslatedntoChi-neseby independentranslators,nd thenbacktranslatedintoEnglishto ensure ccuracy nd followappropriateguidelines Brislin 1970). The questionnairewas thenpretestedwith 17 Chinese managers n a pilot study.Reponses from hepretests nsured herelevance andequivalencef the inalmeasures.Wedescribe llmeasuresinTable1 and detail hem n theAppendix.Wediscuss hemeasurementesultsn the Results" ection.We measured ross unctionalcooperative ntensitywith ix items hatwe constructedo assess thedegree owhich he ateral ross-functionalnteractionsrefrequentand close.We adapted hismeasure n partfrom imilarresearchnmarketinghat ocuses nrelationalmbedded-

Cross-Functionaloopetition71

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TABLE 1Main Constructs, Sources, and DefinitionsKey nformantsnConstruct Construct ources Construct efinition theDyad

Cross-functional Antiand Frazier Theextent f hefrequencyndcloseness of he Midlevel anagerscooperativentensity (2001);Rindfleischnd lateralocial nteractionsmong unctionalreasMoorman2001) withinhefirm.Cross-functional Cohen nd Levinthal Theabilityoassimilate nddeploymarket Midlevel anagerscooperativebility (1990);Szulanski knowledgen ateral nteractionsmong unctional(1996);Zahra nd areas.George 2002)Cross-functional Levitt1969);Houston Thedegree o which epartmentsompete oth Midlevel anagerscompetition et al. 2001);Maltz nd forimitedangiblend ntangibleesources ndKohli1996);Ruekert fortrategicmportance,ower,nddepartmentand walker1987) charter.Marketearning Menon t al. 1999); Thefirm'sxpertisen ndknowledgetores f TopexecutivesMoorman1995); keymarketingctivitiesi.e.,developingewSrivastava, hervani, productevelopment,uildingrandmage,andFahey 1998) sensemakingustomers'urrentndpotentialneeds, ndothers).Firm erformance Moormannd Rust Theperceptionsf trategic arketerformance Topexecutives(1999) and financialerformancei.e.,marketharegrowth,ustomeroyalty,ewproductdevelopment,ales growth,ustomeratisfaction,sellingosts, ustomeretention,ustomerlifetimealue, ndROl).ness at other rganizationalevels e.g.,Antia nd Frazier2001; Rindfleisch nd Moorman 2001). Our cross-functional ooperativebilitymeasure ncludes ix itemsthat xaminehe oreunderlyingbilityoevaluate,ssimi-late, ndexploitmarket nowledgeransferredrom therdepartmentsuring ross-functionalnteractions.n linewith heprocess erspectivefabsorptiveapacityCohenandLevintha11990;ane, Salk,andLyles2001),thismea-sure xtendedhe hree-itemcale that zulanski1996) ini-tially uggestednd validated.The measure f cross unctional ompetitionncluded11 items hat ssessed he xtent o which unctionalreascompetewith one anotherfortangibleand intangibleresources,trategicmportance,nd charterRuekertndWalker 987)and the xtento which epartmentstrugglewith ne another ecause ofdivergentepartmentaloalsand strategic rioritiesHouston t al. 2001; Levitt 969;Maltz and Kohli 1996).We dropped ne item o enhancescale validitysee theAppendix),which esultedn a ten-itemmeasure.Wedeveloped he en-item easure fmarketearningto capture hefirm's xpertisen andknowledgetores fkeymarketingctivities,daptingurmeasure romMenonandcolleagues' 1999) list fkeymarketingctivities. iththese en tems,wemodelmarketearnings a higher-orderconstructfthree ubdimensions.hisapproachs similarto extantiteraturehat sesa second-orderactoro exam-ine cooperative ompetencySivadas and Dwyer2002).Ourthree ubdimensionsncludemarketearningnprod-uct/servicei.e.,developing newproduct/service,romot-

ingandselling product/service,ndrefiningndreposi-tioningnexisting roduct/service),ustomeri.e.,buildinga brandmage mong ustomers,evelopingxtensiveus-tomerervice apabilities,ndmakingenseofcustomers'current nd potentialneeds), and channel i.e., pricingbelowcompetitors,stablishing arketingnd distributionnetworksn themarket,ollaborating ithbusiness art-ners, ndknowingbout usiness nvironment).heresultsshowgoodoverall it: 2= 36.85,d.f.= 32,p > .05; com-parativefit ndex (CFI) = .981, goodness-of-fitndex(GFI) = .957,and rootmean quare rror fapproximation(RMSEA) = .031; as we expected, he threefirst-orderlatent onstructsoaded significantlyn marketearning(product/services:= .753,p < .01;customer: = .816,p

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tentwith xtant esearche.g.. Lee and Grewal 004; Luo2001), and we measuredirm wnership singa dummyvariable1 = firms ith oreignwnership, = otherwise[i.e., state- r private-ownedirmsl) ue to strategicndoperations ifferencesetween oreignnd local firms nChina e.g.,PengandLuo 2000). In addition, e includedtwo industryariables o control or market ffectshathave beenreportedo influence firm's trategichoicesand performanceutcomes e.g.,Atuahene-Limand Li2002; Li andCalantone 998; Zhou,Yim,and Tse 2005).Specifically,e includedndustryostility},hichwe mea-suredusingthe five-itemcale thatJaworski nd Kohli(1993) developed, nd market olatility, hichwe mea-sured sing four-itemcale that s well-acceptedn mar-ketingiteraturee.g.,Li andCalantone1998; Slater ndNarver 994;Zhou,Yim, ndTse 2005).

Analysis nd ResultsMeasure ValidationFollowing hework f Anderson ndGerbing1988), wetest hevalidityf themeasures sing onfirmatoryactoranalysis.Overallmodel statistics ndicatethatthe chi-squareforthe measurement odelwith ll constructss1427.18 p = .00),with nacceptable atio fchi-squareodegrees of freedomof 1.67; the CFI, GFI, adjustedgoodness-of-fitndex AGFI), and RMSEA are .96, .94,.93,and 05,respectively.Convergentalidityor achof themeasures,s indi-catedbyCronbach's lpha, ll exceeded he 7 benchmark(Nunnally978).As Table2 shows, heminimumeliabilityacrossthemeasures s .90. Furthermore,t .71 orhigher,theaveragevariance xtractedAVE) for each constructexceeds he 5 benchmarkFornellnd Larcker 981).Discriminantalidity f themeasureswas supportedwith wodifferentpproaches. irst,weconducted seriesofchi-square ifferenceestsby examining airsof con-structssing womodels one constrained odel ndoneunconstrainedodel)for achpairofmeasured onstructs(Anderson nd Gerbing1988). The results uggest hatunconstrained odelsfit he databetter han onstrainedmodels,ndicatingiscriminantalidity.econd,we com-pared heAVEof the ndividualonstructs ith he quaredcorrelation etween onstructairs Fornell nd Larcker1981).As is evidentnTable2,the argestorrelations thatbetween ustomer erformancend financial erformance

(r= .58),which,when quaredr2= .336), s less than heAVE for ither ustomererformancer financial erfor-mance AVE = .75 and 72,respectively).n all cases,wefind hat heAVEs exceedthesquared orrelations,hichagain onfirmsiscriminantalidity.The Effects of Cross-Functional CoopetitionUsingregressionnalysis,we captureheeffectsf cross-functionaloopetitionwiththe interaction etween hecooperationndcompetitiononstructs. e mean-centeredthese ariables eforereatinghe nteractiono reduce nycollinearityetween hemain and the nteractionffects(Aiken ndWest1996).Following iken ndWest's 1996)and Cohen and Cohen's (1983) recommendations, eentered hevariablesnto he model n distinctteps:Weenteredhe ovariates,hen hemain ffects,ndfinallyheinteractionffects. o examine he incrementalffect fincludinghe nteractionetween ross-functionaloopera-tion ndcompetition,e examined he hange nR-square(AR2),which ndicates hevalue of includingdditionalvariablesn a model Cohen ndCohen1983)and thevalueof interactionsn particularAikenand West1996). Theresults or the effects f cross-functionaloopetitionnfirmerformanceppearnTable3.Theresults howthat he nteractionetweeni.e.,thejoint ccurrencef)cross-functionalooperativebilityndcompetitionas a positive nd significantffect n cus-tomer erformanceb = .19,p < .01) and onfinancialer-formanceb = .26,p < .01), nsupportfH1 see Table3).In addition,he results howthat he ointoccurrence fcross-functionalooperativentensityndcompetitionas apositive nd significantffect n customer erformance(b= .23,p < .01) andonfinancialerformanceb = .16,p

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TABLEThe EffectfCross-Functionaloopetitionn CustomerndFinancial erformanceIndependent ariables

Customer erformanceModel1 Model2 Model3

FinancialPerformanceModel4 Model5 Model6

Coopetition ffectsJointccurrencef ross-functionalooperativeabilityndcompetitionCAxCM) .19** .26**Jointccurrencef ross-functionalooperativeintensityndcompetitionCIx CM) .23** .16*MainEffectsCross-functionalooperativebilityCA) .27** .29** .36** .39**Cross-functionalooperativentensityCI) .32** .36** .22** .23**Cross-functionalompetitionCM) -.16* -.13 -.11 -.10CovariatesFirm ize .06 .04 .04 .16* .17* .16*Firmwnership .16* .16* .14 .09 .08 .08Industryostility .24** .23** .24** .22** .21** .21**Marketolatility -.09 -.11 -.10 -.12 -.16* -.16OverallModelF value 8.83** 10.65** 8.87** 7.21 * 11.77** 10.04**Adjusted 2 .25 .43 .51 .21 .45 .55AR2 .18 .08 .24 .10Incremental 9.52** 3.96** 13.47** 4.43***p< 05.**p< 01.

functional ooperativeabilityand competitionhas astrongerffectn financial erformancehan n customerperformancex2dltf11.28, d.f.dlf1, p < .01) andthathejointoccurrencef cross-functionalooperativentensityandcompetitionas a strongerffect n customererfor-mance han n financialerformancex2dlff3.71,d.f.diff1,p < .10). It is possible hat requentnteractionmongcompetingepartmentselpsbuild ustomeretentionndloyalty, hereasmprovementsn a firm's inancialerfor-mancerequiremore bsorptivend assimilatingoopera-tion mong ompeting epartments.The MediatingRole ofMarketLearningTo examine he extent o whichmarketearningmediatesthe ffectsf cross-functionaloopetition,e relied n thethree-step ediated egressionpproach hatBaron andKenny 1986) recommend. ore specifically,o establishmediationfmarketearning,oopetition ust ffectmar-ket earningndperformance,ndmarketingearningmustaffecterformance.s we previouslyndicated,heresultsshowthat ross-functionaloopetitionffectserformance(see Models 3 and 6 in Table 3). Therefore,o establishmediation,ross-functionaloopetition ust ffectmarketlearning,ndmarketearningmust ffecterformance.heresults howthat he ointoccurrencef cross-functionalcooperativebilityndcompetitionas a positiveffectnmarketearningb = .22,p < .01) and that heointoccur-rence fcross-functionalooperativentensityndcompeti-tionhas a positive ffect nmarketearningb = .17,p