Int. Journal of Business Science and Applied Management, Volume 12, Issue 1, 2017
Innovation through Coopetition: An analysis of small- and medium-
sized trust companies operating in the Liechtenstein financial centre
Sascha Kraus
Institute for Entrepreneurship, University of Liechtenstein
rst-Franz-Josef-Strasse, 9490 Vaduz, Liechtenstein
Jasmin Schmid
University of Liechtenstein
rst-Franz-Josef-Strasse, 9490 Vaduz, Liechtenstein
Johanna Gast
Montpellier Business School MRM
2300, Avenue des Moulins, 34185 Montpellier Cedex 4, France
Coopetition has received increasing attention in the academic literature. Prior research has examined
the benefits and risks of coopetition as well as its potential impact on innovation in many different
contexts, including large companies and manufacturing industries. Surprisingly, despite the
omnipresence of small- and- medium-sized enterprises (SMEs) and the growing relevance of service
industries, coopetition in these contexts has not yet been widely explored. This study seeks to broaden
the present understanding of coopetition by finding an answer to the research question “How do small-
and medium-sized trust companies apply coopetition in the Liechtenstein trust industry and how can
this strategy facilitate innovation?” As such, the presented work investigates the application of
coopetition by small- and medium-sized trust companies operating in the Liechtenstein financial centre.
The qualitative expert interviews with major actors in the Liechtenstein trust industry reveal that
coopetition is a frequently applied business strategy among Liechtenstein trust companies, members of
the Liechtenstein financial centre and international competitors. The trustees’ conservative attitude,
however, is found to be a typical barrier to coopetition, since it induces trustees to give priority to the
protection of their own business. Nevertheless, coopeting partners recognise their ability to derive
crucial benefits from their cooperative interactions with rival organisations in terms of possibilities to
share resources, costs and know-how. Moreover, coopetition enables coopetitors to innovate their
current business models.
Keywords: Coopetition, Service Industry, Financial Industry, Innovation
Sascha Kraus, Jasmin Schmid and Johanna Gast
Many companies are under consistent pressure for survival and corporate success, given the
ongoing changes in economic environments (Park, Srivastava, & Gnyawali, 2014). External factors of
change include globalization, regulation, transition of countries into free market economies, stronger
competition through growing markets and constantly changing consumer behaviours (Volberda, Van
den Bosch, Flier, & Gedajlovic, 2001). These changes force companies to adapt to new market
conditions and to constantly innovate their products, services, and processes to remain competitive in
the marketplace (Bouncken & Kraus, 2013). Although adaptation to external changes and innovations
are fundamental factors for successful companies in the long term (Engel & del-Palacio, 2011), it
should be noted that many companies do not have enough experience or resources to react fast enough
to the changing economic landscape or to innovate their products, services, and processes. Facing such
difficulties, companies may consider engaging in coopetition, a special type of inter-organisational
collaboration (Bouncken, Gast, Kraus, & Bogers, 2015) which implies “that two firms can be involved
in and benefit from both cooperation and competition simultaneously” (Bengtsson & Kock, 2000, p.
411). Typically, competitors cooperate to increase their access to financial, human, social, or material
resources of their partners or to benefit from their partners’ knowhow, experiences and skills
(Bengtsson & Kock, 2000; Kraus, Meier, Niemand, Bouncken, & Ritala, 2017).
Small- and medium-sized enterprises (SMEs), defined by the European Commission (2003) as
companies with less than 250 employees, might particularly benefit from coopetition since these firms
face different problems compared to larger firms which potentially motivate them to adopt a
coopetition strategy. Such problems include their relatively small size, rising research and development
(R&D) costs, risks associated with innovation, their oftentimes limited market presence and
constrained access to financial, human, social, and material resources. Stemming from these
difficulties, SMEs tend to be particularly vulnerable and exposed to economic fluctuations (Gnyawali
& Park, 2009; Morris, Koçak, & Özer, 2007). In this case, coopetition might represent a new strategic
option (Bouncken & Kraus, 2013; Levy, Loebbecke, & Powell, 2003) as it provides access to resources
and technologies necessary to develop and introduce new products or services (Raza-Ullah, Bengtsson,
& Kock, 2014). Not surprisingly, several studies have emphasised the potentially positive link between
coopetition and innovation (e.g., Bouncken, Clauß, & Fredrich, 2016; Ritala & Hurmelinna-
Laukkanen, 2013).
Although the topic of coopetition has recently received increasing attention in academic literature,
existing research is rather limited as it focusses primarily on coopetition as a strategy for large
companies (e.g., Bengtsson & Kock, 2000; Gnyawali, He, & Madhavan, 2006) and investigates
coopetition mainly in manufacturing industries including engineering sectors (e.g., Salvetat &
raudel, 2012), technology sectors (e.g., Pereira & Leitão, 2016), or transportation sectors (e.g., Wu,
Choi, & Rungtusanatham, 2010). Interestingly, research merely analyses coopetition in resources-
constrained SMEs (e.g., Bengtsson & Johansson, 2014; Levy et al., 2003; Morris et al., 2007) and
service industries (e.g., Nair, Narasimhan, & Bendoly, 2011; Okura, 2007) including the financial
sector (e.g., Czakon, 2009). This is surprising given the omnipresence of SMEs as well as the high
importance of service industries in many economies.
This study seeks to fill this void in research by further developing the understanding of coopetition
in the financial service industry. Therefore, the application of coopetition, its potential barriers and
benefits as well as its implications for innovation are analysed in SMEs operating in the Liechtenstein
trust industry. This industry has faced significant structural changes since 2008 when the Liechtenstein
government decided to develop stricter regulations to improve their image in the international context
and implement a white money policy (Liechtenstein Marketing, 2014). These changes represented
fundamental changes in the economic environment of Liechtenstein trust companies as they have been
forced to adjust and innovate their business models and the services they offer. In this context,
coopetition seems a potential escape route for small- and medium-sized trust companies to join forces
as an attempt to increase their power to grow, survive and innovate in this stricter regulated business
environment. Therefore, the study aims to answer the following research question:
How do small- and medium-sized trust companies apply coopetition in the Liechtenstein trust
industry and how can this strategy facilitate innovation?
Considering the novelty of this research, a qualitative, exploratory research design is employed to
understand coopetition of SMEs in the financial service industry. To this end, the insights of expert
interviews with actors in the Liechtenstein trust industry are interpreted in an exploratory way to shed
light on the coopetitive activities of small- and medium-sized trust companies.
Int. Journal of Business Science and Applied Management /
2.1 Coopetition
2.1.1 Definition, benefits and risks
The term coopetition was coined by the CEO of the American multinational software and services
company Novell, Raymond Noorda, who referred to his firm’s business relationships with licensees
which were, simultaneously, their rivals (Lechner, Soppe, & Dowling, 2016). Until 1996, however,
coopetition remained rather unnoticed and it was only in 1996 that scholars and managers have started
to recognize this strategy. In the last two decades, coopetition has attained increasing popularity in
theory and practice. Accordingly, the number of publications on coopetition mostly in management and
business research has been growing steadily (Gast, Filser, Gundolf, & Kraus, 2015). As such, a large
range of contexts and industries have been examined including the contexts of MNEs and SMEs as
well as manufacturing and service industries while a major focus on MNEs and manufacturing
industries can be observed. The analysed service industries include financial (e.g., Czakon, 2009) and
insurance services (e.g., Okura, 2007), tourism (e.g., Wang & Krakover, 2008), education (e.g., Nair et
al., 2011), and health care (e.g., Peng & Bourne, 2009).
Coopetition can have a number of potential risks and benefits (Bouncken et al., 2015). Starting
with the possible risks, the management of coopetition is challenging (Gnyawali & Park, 2009) and
sometimes even dangerous (Pellegrin-Boucher, Le Roy, & Gurău, 2013). The potential danger may be
the result of tensions which can occur between the cooperating rivals and their employees since their
interactions are characterized by both cooperation and competition logics (Bouncken et al., 2015).
Coopetitors are thus acting simultaneously as friends who share and rivals who withhold and protect
information and knowledge. In this situation, opportunism and knowledge leakage represent major
risks. As knowledge and information are exposed to rivals and the exchange of knowledge and
resources with competitors is facilitated, partners may develop an opportunistic mindset. As a
consequence, they may become eager to use their power to force their partners to act only in their own
firm’s best interest or they may use and appropriate mutually developed knowledge and expertise for
their own firm’s advantage (Bouncken & Kraus, 2013; Pellegrin-Boucher et al., 2013). Moreover,
significant knowledge may leak unintentionally to a rival (Ritala & Hurmelinna-Laukkanen, 2013).
Both opportunism and knowledge leakage can hamper the joint generation of innovations (Cassiman,
Di Guardo, & Valentini, 2009) and force coopeting partners to carefully weigh knowledge sharing
against knowledge protection (Pellegrin-Boucher et al., 2013).
Coopetition can also bring significant benefits (Ritala & Sainio, 2014). For instance, coopetitors
can share their resources and knowledge (Bengtsson & Kock, 2000), costs, as well as risks and
uncertainties related to the development of innovations (Bouncken et al., 2015). Further, by combining
all partners’ experiences and expertise, coopeting firms can create a common knowledge base (Ritala &
Hurmelinna-Laukkanen, 2009) which may be used to develop their innovation capacity (e.g., Quintana-
Garcia & Benavides-Velasco, 2004; Ritala, 2012). As a result, the involved firms may come up with
ideas for products and/or services which they would be unable to create without coopetition.
Additionally, such external knowledge could also bring in new perspectives in relation to strategies or
business models (Roy & Yami, 2009). In fact, industry knowledge obtained through the cooperation
with competitors is a critical success factor and can provide companies with a sharp competitive
advantage (Loebecke, Van Fenema, & Powell, 1999). Another important impact of coopetition is that
coopetitors can add value to their own products, services or even processes (Golnam, Ritala, &
Wegmann, 2014) through coopetition. As Gnyawali and Park (2011), for instance, have argued,
increasing value positively influences every organisational function, meaning there is an opportunity
for widespread organisational advancement for the participants engaging in coopetition. Hence, the
combination of both competition and cooperation can foster the creation of additional value (Bouncken
et al., 2015).
2.1.2 Coopetition in SMEs
Prior research has shown that SMEs have to deal with specific problems that may drive them into
coopetition. Based on their small size and the associated liability of smallness (Akdoğan & Cingšz,
2012), rising R&D costs, risks associated with innovation, their limited market presence and
constrained access to financial, human, social, and material resources, SMEs tend to be especially
vulnerable and particularly exposed to fluctuations in their economic environment (Gnyawali & Park,
2009; Morris et al., 2007). Further, they frequently lack both the capacity and resources to exploit
knowledge and opportunities without the help of external partners (Levy et al., 2003).
Sascha Kraus, Jasmin Schmid and Johanna Gast
Facing these constraints and seeking to tackle these problems, SMEs may opt for coopetition as a
new strategic option (Bouncken & Kraus, 2013; Levy et al., 2003). Through coopetition, competitors
typically attempt to combine the advantages of cooperation and competition (Bengtsson & Kock,
2000). While cooperation enables access to resources and technologies necessary to develop and
introduce new products/services or to access new markets, competition makes sure that creative
tensions between the competitors remain in force (Quintana-Garcia & Benavides-Velasco, 2004, Raza-
Ullah et al., 2014).
By sharing resources and capabilities, as well as costs and risks for innovation through
coopetition, coopeting resource-constrained SMEs may mitigate uncertainty, improve innovation, gain
strength against rivals, and realize economies of scale (Gnyawali & Park, 2009). Moreover, they may
be better prepared to react to business disruptions (Gnyawali & Park, 2009; Morris et al., 2007), to
improve their position and legitimacy in the current market (Bengtsson & Johansson, 2014) or to enter
a completely new market (segment) (Morris et al., 2007). When trust, commitment and strong
relationships are managed efficiently in coopetition, SMEs can even increase their survival potential
(Tidström, 2009) and outperform bigger competitors by enlarging their market share and improving
their financial performance (Gnyawali & Park, 2009; Levy et al., 2003).
2.1.3 Coopetition and innovation
Innovations are a long-term success factor for any type of company, including SMEs or large
companies (Filser, Brem, Gast, Kraus, & Calabrò, 2016; Tidd, Bessant, & Pavitt, 2001). This
importance stems from the fact that innovations usually allow companies to grow and perform better
and to offer a competitive advantage (Ireland & Webb, 2007) which is important in order to remain
competitive in rapidly changing and highly technological environments. Given today’s aggressive
competitive environment, it is crucial for all types of firms including SMEs to engage in ongoing
innovation processes to remain competitive over the long-run (Ritala, Kraus, & Bouncken, 2016).
Coopetition may positively influence the processes of creating and developing innovations
(Gnyawali & Park, 2009; Roig‐Tierno, Kraus, & Cruz, 2017). As coopetitors interact in the same or
closely related industry, they face similar market conditions, customer needs and uncertainty situations
which lead to a similar perception of future changes and the creation of innovations (Baumard, 2009).
Existing findings emphasise a positive relationship between coopetition and innovation in large firms
as well as SMEs, including a positive effect on incremental and radical innovations (Bouncken and
Kraus, 2013; Ritala & Hurmelinna-Laukkanen, 2013; Bouncken & Fredrich, 2012), product and
process innovations (Pereira & Leio, 2016) and the number of product lines (Quintana-Garcia &
Benavides-Velasco, 2004). Further, coopetition can be of importance in innovation-intensive, dynamic
and complex industries with short product life-cycles, high R&D investments, and high technological
standards (Gnyawali & Park, 2009). Here, coopetition facilitates access to complementary resources
and know-how (Carayannis & Alexander, 1999) and diminishes knowledge asymmetries (Enberg,
2012). As a result, coopetiting firms may benefit from a winwin-situation of stronger innovativeness
(Quintana-Garcia & Benavides-Velasco, 2004), lower overall costs, higher resource and knowledge
stocks, and improved effectiveness and efficiency (Chin, Chan, & Lam, 2008).
This study focusses on the application of coopetition and its implications for innovation in the
financial service industries, in particular in the Liechtenstein trust industry, which represents a
collection of service-oriented companies. In the last decade, service industries have become an
important part of western economies (Snyder, Witell, Gustafsson, Fombelle, & Kristensson, 2016) as
they have been growing faster than manufacturing industries (Lusch & Nambisan, 2015) and still
possess huge growth potential (Zulkepli, Hasnan, & Mohtar, 2015). In service industries, innovations
and especially service innovations are crucial success factors (Steinicke, Marcus Wallenburg, &
Schmoltzi, 2012) and companies focus on innovating their services rather than their products (Parida,
Sjödin, Lenka, & Wincent, 2015).
Service innovation includes many different aspects which makes it difficult to develop one
universal definition (Martin, Gustafsson, & Choi, 2016). Snyder et al. (2016) define service innovation
as a construction or extension of companies’ services and processes. According to Witell, Snyder,
Gustafsson, Fombelle, and Kristensson (2016), technologies and new knowledge are the basic drivers
of service innovation. Therefore, service innovation is often associated with technology or product
innovation. Instead of innovating existing service models, most service companies innovate the
required products or processes which come along with their services. Kindström, Kowalkowski, and
Sandberg (2013) suggest that the focus should lie on innovating the services, markets, and business
models of companies operating in service industries. Business models are collections of services which
are offered to the customer as a collective entity. Business model innovation is understood as a type of
Int. Journal of Business Science and Applied Management /
innovation that “complements the traditional subjects of process, product, and organisational
innovation” (Zott, Amit, & Massa, 2011, p. 1032).
Despite their relevance, service industries are rarely analysed in coopetition research (e.g., Okura,
2007; Wang & Krakover, 2008; Nair et al., 2011; Peng & Bourne, 2009), and it remains to be studied
whether coopetition can influence service innovations positively.
2.2 Liechtenstein and its financial centre and trust industry
2.2.1 Liechtenstein financial centre
Service industries and financial services are becoming increasingly relevant sectors in the Western
economy (Snyder et al., 2016). The financial centre of Liechtenstein represents an important financial
service centre and includes the traditional banking industry, the trust industry, the asset management
industry, the insurance industry and the fund industry.
The financial centre of Liechtenstein is well positioned in the overall marketplace of Liechtenstein
as it plays a major role for the economic performance and the strong capital power of Liechtenstein
(Liechtenstein Institute of Professional Trustees and Fiduciaries, 2014). In 2015, 5.000 employees
worked in the financial industry of Liechtenstein, which represented 16% of the total workforce of
Liechtenstein (Official Administration Principality of Liechtenstein, 2015) given its total population of
37.129 (National Statistics Institute Liechtenstein, 2015). After manufacturing and other service
industries, financial services provided by the financial centre represent the country’s third largest
industry with 27% of the gross value added (Liechtenstein Marketing, 2014). Further, the financial
centre generates one-third of the total value creation in Liechtenstein.
Liechtenstein has no state debts which reflects the country’s immense capital power.
Liechtenstein’s attractiveness as a financial centre is further evident in its low and straightforward
corporate taxation amount of 12.5% (Liechtenstein Institute, 2015) and its representation in two strong
and free marketplaces, namely Switzerland and the European Economic Area (EEA).
2.2.2 Trust industry
One of the most important sectors in the financial centre is the trust industry. In fact, in 2010,
almost 90% of the gross domestic product (GDP) in the financial centre of Liechtenstein was
accumulated by the trust industry, indicating that the trust sector generated a GDP worth about 823
million CHF, equal to 14.5% of the whole country’s GDP. The value was reached by a relatively small
number of trust companies. In 2015, Liechtenstein was home to 378 trustees representing 251 trust
companies, including 76 single trustees and 53 trustees or trust companies with a limited trust license
(Financial Market Authority Liechtenstein, 2016). The small number of trustees stems from the strict
guidelines of the Liechtenstein government with respect to the qualifications to become a trustee. A
trustee is required to obtain the permission of the Financial Market Authority (FMA) to become a
trustee, to pass the trust exam, and needs to have three years of work experience in a related
The success of the Liechtenstein trust industry is also the result of the country’s liberal company
law which was developed during the economic crisis in 1920. In fact, by means of this law,
Liechtenstein’s trust industry could reach a competitive advantage compared to other financial
industries as its major business model was built on the existence of trust enterprises and foundations
and has been specifically developed and adapted to the economic environment (Liechtenstein Institute
of Professional Trustees and Fiduciaries, 2014).
2.2.3 Regulatory changes in the Liechtenstein financial centre
Recently, the Liechtenstein government implemented several regulatory and political changes as a
reaction to the financial crisis (Financial Market Authority Liechtenstein, 2016) as well as the tax
scandals which endangered the image of the Liechtenstein financial centre and influenced its
international relations (Liechtenstein Marketing, 2014).
In 2005, Liechtenstein established the FMA, responsible for the operative supervision of the whole
financial industry of Liechtenstein. In addition, the FMA verifies that the members of the financial
centre operate correctly according to national and international regulations and standards (Liechtenstein
Institute of Professional Trustees and Fiduciaries, 2014) and monitors whether money laundering or
terror financing takes place (Official Administration Principality of Liechtenstein, 2015). Through the
supervision of the whole financial centre and the publication of annual reports, the FMA seeks to
guarantee transparency and safety for the customers. Further, the FMA is in charge of superintending
the disbursement of trustee licenses which guarantees safety, quality and transparency (Financial
Market Authority Liechtenstein, 2016).
Sascha Kraus, Jasmin Schmid and Johanna Gast
Since 2008, Liechtenstein started to sign so-called Tax Information Exchange Agreements
Double Taxation Agreements
with a number of countries to improve the country’s image. Similarly, in
2013, the government decided to accept the standards of the Organisation for Economic Co-operation
and Development. These decisions represented important steps towards more transparency and
recognition in international relations.
Liechtenstein also implemented the European Market Infrastructure Regulation and the Capital
Requirements Regulation and Directive which regulates that banks need a higher proprietary capital to
ensure a higher financial stability of the financial sector (Financial Market Authority Liechtenstein,
2016). Further, the government attempted to bring the legal framework of Liechtenstein more in line
with the recommendations of the so-called Financial Action Task Force. Accordingly, Liechtenstein
developed a robust institutional framework for combating money laundering and terrorist financing and
moving towards greater transparency.
This increased regulation was primarily put into action by the government to develop the
consequent white money policy in an attempt to steer away from black-listing, to reach a more
sustainable economy with a long-term perspective, and to search for new economic opportunities.
Further, the signed agreements and implemented regulations helped to enhance the level of
transparency of the financial market in Liechtenstein, to become attractive for national and
international investors and to enable the Liechtenstein government to follow a white money policy.
Nevertheless, these regulations may also have harmed Liechtenstein, its financial centre, as well as
the actors in this industry, since bureaucracy increased and tax incomes decreased (Liechtenstein
Institute, 2015). In fact, due to its admission to the EEA, Liechtenstein was obliged to follow the
regulations of the EU which have been accompanied by a great amount of bureaucracy. For the trust
industry in particular, these regulations implied that trustees and asset managers faced stricter and more
complex regulations and their existing business models were no longer compatible, leading to changes
and reorientations within this industry.
Moreover, since the revision of the due diligence law in 2008, sensitive data had to be disclosed to
the Liechtenstein Financial Market Supervisory Authority, including the identification and verification
of the contracting party's identity, the identification and risk-based verification of the identity of the
beneficial owner, the preparation of a business profile, and the risk-adequate monitoring of the business
relationship (Financial Market Authority Liechtenstein, 2014). This step has strengthened the trustees’
duty of care towards the state and the client in an attempt to combat money laundering, terrorist
financing and organised crime (Financial Market Authority Liechtenstein, 2014). But these duties
brought a need for higher overall supervision which consequently led to increased costs and less
flexibility, while the overall safety of the customers and its assets increased (Heiss, 2013).
3.1 Research approach
Given the limited research on coopetition, this study is exploratory in nature to advance the
knowledge on coopetition in service industries and the financial sector in particular, two areas which
currently lack a well-structured theoretical base (Creswell, 2014). Therefore, this study applies a
qualitative research approach which facilitates theory-building within this field (Eisenhardt, 1989).
Qualitative research includes a set of different research approaches which aim to develop a holistic,
complex, and detailed understanding of a specific issue (Creswell, 2007).
In particular, expert interviews were conducted as they are a useful means to interpret not only the
present impacts of a certain phenomenon but also leave space for future outcomes. The application of
qualitative analyses in scientific publications shows that individual or group expert interviews are a
common method of qualitative research (Frels & Onwuegbuzie, 2013). In this study, individual expert
interviews were chosen as they represent the knowledge and opinions of individuals which can then be
compared and interpreted. Through such a comparison, conclusions and predictions can be made more
effectively than those of group interviews.
The Tax Information Exchange Agreements imply that Liechtenstein acknowledges other tax laws but
simultaneously applies and makes use of its own tax law. In addition, other states can obtain
information concerning one of their own citizens who is operating in Liechtenstein from Liechtenstein.
The Double Taxation Agreements regulate the taxation between two authorized states in the sense
that every state is allowed to tax a specific amount of money.
Int. Journal of Business Science and Applied Management /
3.2 Data collection
3.2.1 Individual expert interviews
Qualitative data were collected through expert interviews. Expert interviews are not an
independent method of qualitative research as this method is typically included in the group of “guided
interviews” (Bogner, Littig, & Menz, 2014). The interviews were guided by an interview guideline
consisting of semi-open questions that define the research field while small variations of questions
were allowed as well as follow-up questions on specific ideas. The interview guideline was developed
based on the literature review and the research question. After an introduction focusing on the personal
background of the interview participants, questions were being asked on their knowledge and opinions
concerning several themes, including (1) upcoming changes in the financial centre of Liechtenstein and
their effects, (2) potential future chances or opportunities for the Liechtenstein trust industry, (3) their
understanding of the concept of coopetition and possible strategic implications for their firms, (4) the
relationship between coopetition and the development of innovations and new business models, (5) the
results or advantages that could be developed through coopetition. To prove the functionality and
comprehensibility of the interview questions, a pre-test was carried out with a strategic manager of a
trust company (Creswell, 2014).
3.2.2 Selection of participants
The participating experts were randomly chosen to avoid a research bias. In this study, we only
interviewed experts from the Liechtenstein trust industry because this country has an international trust
industry and financial centre. To be selected, it was required that the expert worked in a high
management position of the respective firm. In total, nine experts were interviewed. These experts
include seven professionals from trust companies in Liechtenstein and two external experts. The
external experts are also acting within the trust industry but do not trade directly in the trust industry
itself. Assuming they work as a kind of control function in the whole financial area, their opinions and
understanding is of great value for the underlying research. In fact, the so-called “Financial Market
Authority” (FMA) or “Liechtenstein Institute of Professional Trustees and Fiduciaries” (THK) are the
most important regulatory bodies in the financial centre of Liechtenstein and the insights of their
experts are important to establish and represent an objective opinion and knowledge of the topic.
Further, these experts bring diverse expertise from the whole financial market. Therefore, the provided
data offers an overview not only of the trust industry but also of the broader financial centre in
Liechtenstein. Altogether, with this set of nine expert interviews, a saturation level was reached
whereby new data no longer yielded new insights (Creswell, 2014). The following table presents an
overview of the interview partners.
Table 1: Expert data
Number of
Years in trust
Trustee A
Trust company
Trustee B
Trust company
Successor of current
director (new generation)
Trustee C
Trust company
Trustee D
Trust, administration of
property, fund management
Trustee E
Trust company
IT department manager
Trustee F
Trust, compliance and law
company & bank
Trust advisory &
strategic department
2 ½
Trustee G
Trust company
Strategic department
2 ½
Regulator H
Regulating authority of the
trust industry
Regulator I
Regulating authority of the
trust industry
Head of an other financial
intermediaries division
Sascha Kraus, Jasmin Schmid and Johanna Gast
3.3 Data analysis
As a first step, the collected data were recorded and transcribed. This is necessary to confirm and
analyse the transcripts and to achieve usable and highly qualitative results. As a second step, the
transcripts were coded, representing the actual evaluation of the findings of the interviews. The main
goal here is to find homogeneous statements of the single expert interview to generalize the findings
and answer the research question.
Onwuegbuzie and Leech (2007) explain different evaluation methods to generalize qualitative
data. In this study, the generalization is facilitated through the analysis of words. The spoken words and
experiences represent a specific unit of the collected sample. To generalize the spoken words, a certain
type of legitimation and representation is needed. Therefore, it is necessary to develop criteria and
codes to scan the spoken data to determine key statements which in turn are then used to generalize
(Zachariadis, Scott, & Barrett, 2013). This type of evaluation is called “open coding” (Steger, 2003).
Next, the different codes were compared, which enabled the identification and investigation of subject
words or headline commonalities of the interviews to generalize a specific statement or subject
(Graneheim & Lundman, 2004). Through the collection of different codes, categories were built to
organize and present the results. Moreover, systematic connections were developed to answer the
research question (Onwuegbuzie & Leech, 2007). Finally, the results were compared with the existing
theoretical ideas and prior findings to provide further theoretical impact and to illustrate correlations
with the existing understanding of coopetition in this field.
4.1 Types of coopetition
To survive as an international financial centre and to secure human and financial resources as well
as future profits, all participants agreed that coopetition represents a promising opportunity. As
Regulator I stated: “I am convinced that the concept could help to bundle resources and corporate
forces to create new opportunities.” Both groups of interview partners, trustees and regulators,
declared that they already employ a certain type of coopetition. The analysis revealed that three
different types of coopetition have so far been developed by the actors in the Liechtenstein trust
4.1.1 Coopetition with other Liechtenstein trust companies
Several trustees noted that they work together with one or more Liechtenstein trust company to
attain synergy effects and to bundle resources. Both regulators mentioned the example of four trust
companies which engaged in coopetition to survive and share resources.
Like trustees A, B, and E reported, they work closely together with competing trust companies, in
particular small companies since they tend to be more flexible. Trustees A and B also work in relatively
small trust companies, hence coopetition was identified among more or less equally sized partners.
These firms emphasised that the working proposition is much more balanced between the small firms
and the risk of being acquired by the competitor is minimized as acquisitions are hardly financed.
Trustee F, with 200 employees the largest of the interviewed trust companies, also cooperated
with smaller firms to enlarge resource volumes, mandates, or profits. Furthermore, coopetition
represented a means to potentially acquire the smaller trust company: “coopetition with a smaller trust
company is […] a great opportunity […] to acquire the smaller company after a certain time.”
(Trustee F). For instance, coopetition between a larger and a smaller trust company and a subsequent
acquisition of the small firm by the larger one was identified as a solution once the owner of the small
trust company was close to retirement. In this case, a win-win situation occurred as the smaller trustee
got assisted by the large partner during the final years in business, including the exchange of resources,
know how, back office services or information systems. In exchange, the retired trustee transferred or
sold the mandates to the large trust company.
4.1.2 Coopetition with members of the Liechtenstein financial centre
Coopetition also appeared with other members of the Liechtenstein financial centre. Every
interview participant stated that they were already engaged in this type of coopetition with one or more
actors of Liechtenstein’s financial center simultaneously. However, different members of the financial
centre were chosen as partners for coopetition.
Next to other trust companies, the most common partners include accountants, independent asset
managers, banks, lawyers, risk management offices, or back office service providers. This type of
coopetition was typically a larger project which was realized over a long period of time with a broad
Int. Journal of Business Science and Applied Management /
project goal. These projects sought to promote and propose homogenous standards for a specific
market or customer segment.
The interviewed regulator explained two examples of this coopetition type. First, several trust
companies and other members of the Liechtenstein trust industry worked together to analyse the United
Kingdom (UK) market and sought to establish a common service standard tailored to the specific needs
of UK customers and authorities (Regulator H). Second, regulator I reported that they “developed a
coopetition project with several experts […]. The main goal is to figure out if the Islamic world would
be compatible with several financial services of Liechtenstein including, […] the trust industry. The
cooperating parties on this project include experts from the trust, IT and financial industry as well as
academic institutions.”
Coopetition with other members of the industry was recognized as a crucial success factor for the
future as it facilitates the development of innovations, the diversification of services, or the leveraging
of cross-selling opportunities. This means that several services, such as asset management and real
estate possibilities, are combined in one business model, increasing the range of services for customers.
4.1.3 Coopetition with international competitors
Coopetition was also observed among Liechtenstein trust companies and competitors from
international financial centres. Even though this type of cooperation was identified only by two of the
seven interviewed trustees, it was recognised as an essential means to enter international markets. The
trustees explained that it is fundamental to have frequent exchanges with local experts of international
markets. Given the fast changing and dynamic economy and regulatory environments, international
experts know their markets the best and through their help international financial sectors could be
investigated more easily and services could be innovated and adapted to fit the needs of those foreign
markets and customer segments. Therefore, trust companies in Liechtenstein engaged in coopetition
with foreign trust companies and tax companies as well as lawyers to provide optimal services to their
customers in these markets. Moreover, Regulator I mentioned that international partnerships need to be
developed to reduce costs and increase efficiency in international business processes.
According to some trustees (C, E, G) as well as both interviewed regulators, international
coopetition exists to explore specific customer segments or markets, including, for instance, UK
customers. This is especially useful for the UK market as mentioned by Regulator I. The UK market is
a particularly appealing market for the Liechtenstein trust industry since the UK offers a highly
attractive remittance basis tax regime for so-called ‘non-domiciled residents’. In a nutshell, this tax
regime allows foreign individuals to take residence in the UK without constituting their tax domicile in
the UK. Thus, foreign income and gains are not taxed in the UK as long as these income and gains are
not remitted to the UK. This tax regime especially attracts foreign High Net Worth Individuals;
individuals who are taxed on a remittance basis, mostly make use of offshore wealth structures, such as
in Liechtenstein, in order to shield their income and gains from UK income tax liabilities (HM Revenue
& Customs, 2016).
4.2 Barriers to coopetition
The interviewees agreed that recognizing potential opportunities and chances that come along with
coopetition are fundamental for survival and future success. However, the majority of the interview
partners came to the conclusion that trusteesconservatism represents the major barrier for developing
coopetition. As a result of their rather conservative attitude, trustees tend to give priority to the
protection of their own business, even while losing customers or revenues.
Several interviewees explained that the conservative attitude is directly related to the different
generations working in this industry, pointing to differences between younger and older generations.
Regulator I said: “In my opinion, the differences between the generations occur due to the fact that the
younger generation has a broader perspective and education, in contrast to a generation which is 80
years old and where the focus was always Liechtenstein, which in turn leads to a tight perspective.
While the younger generation is used to work in environments where concepts such as cooperation and
sharing economies are becoming standard, the older generation grew up in a less complex and
international business environment in which competition was much more emphasised. Hence, the
younger generation was reported to possess a higher awareness of the possible opportunities of
coopetition than their older colleagues. The older generation had more difficulties to accept coopetition
as for them strategical flexibility was not necessarily a key requirement both personally and
organisationally. Moreover, the data revealed that the awareness for coopetition was higher if the
trustee was younger and not close to retirement. In fact, when retiring soon some of the older trustees
did not truly consider new strategic options like coopetition.
Sascha Kraus, Jasmin Schmid and Johanna Gast
Trustee A stated: “In Liechtenstein, there is a proverb referring to the two oldest inhabitants of
Liechtenstein: The two oldest inhabitants in Liechtenstein are the ‘foehn’ and the envy.” Thus, a basic
requirement for coopetition in the Liechtenstein trust industry is the reduction of envy between trust
companies. Respondents suggested making coopetition projects public and communicating the
advantages and results in a transparent manner to reveal the creation of win-win situations through
coopetition and facilitate the development of a basic coopetition understanding among the actors in the
Liechtenstein trust industry.
Furthermore, the interviewed trustees reported that the most important requirements for
coopetition include proactiveness and trust. As such, coopetition should be initiated proactively by
means of small cooperative projects among the competitors. As soon as trust has been built up,
coopetition could become an integral part of corporate strategy.
4.3 Benefits of coopetition
Several positive results were achieved through coopetition including the possibility to share
resources, costs and know-how. Given the increasing number of regulations in the Liechtenstein trust
industry, trust companies faced resource shortages which constrained their possibilities of innovation,
internationalisation or strategy development (Regulator H and I). Through coopetition, required but
scarce resources were shared, representing an important and fundamental benefit especially for small-
and medium-sized companies as it supported their future survival. Moreover, costs for, e.g., the
development of information systems or compliance expenditures were shared and thus reduced for the
individual firms. Similarly, knowledge, information, and experiences were exchanged regarding
business model innovations and services.
Coopetition benefitted the participating companies not only as an exchange platform but also as a
means to successfully plan for the future, as explained by trustee B: “A growth in capital, profit,
economic success and highly qualified employees are definitely results which can be reached.”
Moreover, a strong worldwide network could be developed to extend coopetition possibilities and
leverage synergistic effects.
4.4 Innovation through coopetition
The interviewees emphasised that coopetition enabled them to innovate their current business
models in terms of complexity and service range, as well as diversification and cross-selling of their
business models. When cooperating with competitors, the involved companies found themselves in a
better position to specialise in one of their core competences and to optimize internal organisational
processes. Specialisation took place in compliance-related issues, legal advisory, back office services,
real estate services, asset management, or even fund management services. Regulator I said: “the
specialisation should take place at least in one unique selling proposition of the Liechtenstein trust
industry which are asset protection, privacy, and tax optimisation through the use of double taxation
treaties, succession planning, and family offices.” Through specialisation, a more efficient allocation of
services was achieved, allowing every business model to be customised for cost- and time-saving, since
the trust companies no longer needed to cover every single step independently. As a result, more
services, a higher service quality and more innovative pricing models were offered.
Taking a closer look at the nature of the service innovations facilitated by coopetition, innovations
were particularly identified for customer and organisational services. The main reason to innovate
customer services was to provide customers with more efficient solutions regarding time and costs as
well as asset protection, and to increase customer satisfaction. Trustee F stated: “Trust company F
already developed an innovative app for customers which provides the customer with necessary
information […] and a fact sheet of the Liechtenstein legal forms of companies […]. The advantage is
that it provides the customer with real-time data and current topics in wealth management in a cost-
efficient manner.” Trustee G explained that they were working on an agency service platform to relieve
customers of the time-consuming search for the right trust company. The agency service helped to
analyse the customer needs and to link the customer to the most suitable trust company.
Organisational service innovations seek to increase the efficiency, standardisation, and
centralization of organisational processes, and to reduce the time and costs spent by the organisations
on fulfilling compliance requirements. All interviewees expressed that regulations have been becoming
increasingly time-consuming. Although the interaction with customers should be the main aspect in the
trust industry, most of the processing time of handling customer cases is lost by complying with
regulations rather than interacting with customers and serving their needs. Organisational service
innovations can improve customer care and service customisation and help to fulfil due diligence
requirements more efficiently. Such innovations include digital information systems, IT-solutions, risk
software and compliance software. Here, coopetition helped to create new IT systems as trustee G
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stated: “At the moment we are cooperating with other Liechtenstein trust companies regarding an IT
system, which supports us in the administration of businesses and customers.” Additionally, trustees A,
B, C, D, E, F and G already used an IT-solution that was developed on the basis of coopetition.
5.1 Discussion of the core findings
In recent years, the Liechtenstein government has implemented many regulations to improve the
image of the Liechtenstein financial centre in the international context and to integrate a white money
policy (Financial Market Authority Liechtenstein, 2016). Generally, these regulations had a positive
impact on the Liechtenstein financial centre as they supported the government’s efforts to regain a
pioneering position and respected reputation in the international environment as well as more financial
stability and overall transparency.
However, in this constantly changing economic and regulatory environment, the actors in the
entire financial centre and especially in the trust industry struggled with the large amount of additional
regulations and bureaucratic changes to be implemented within a short period. Our data revealed that
the most common consequences for the actors in the Liechtenstein trust industry were the increasing
need for internationalisation, customisation, personal contacts as well as rising compliance, time and
cost expenditures. In such dynamic environments, research has argued that coopetition can provide a
solution especially for small, resource-constrained firms as it allows them to overcome these
consequences and to restore economic values, success, and future growth in terms of profit, employees,
performance and resources (Bengtsson & Kock, 2000; Bouncken et al., 2015; Ritala & Hurmelinna-
Laukkanen, 2013). This study’s exploration of the application of coopetition as well as its barriers,
benefits and implications for innovation in service industries, i.e. the Liechtenstein trust industry,
revealed that coopetition represents a potentially beneficial strategy for resource-constrained small- and
medium-sized trust companies. Three different types of coopetition were identified: (1) coopetition
among the trust companies, (2) coopetition with other members of the Liechtenstein financial centre
and (3) coopetition with international competitors.
This last case of international cooperation among competitors is particularly interesting as this
type of coopetitive link has rarely been identified and analysed in existing coopetition research. This is
surprising since cooperation among international partners is said to contribute to firms’ innovation
performance (e.g., Zhang, Shu, Jiang, & Malter, 2010) by providing access to complementary
resources, technologies, and know-how on different geographical locations (Mc Cutchen Jr,
Swamidass, & Teng, 2008). Our findings support this view as the respondents pointed out this special
value of their international partners’ resources and knowledge. As such, coopetition can support
international opportunities and the internationalisation for SMEs (e.g., Kock, Nisuls, & derqvist,
Interestingly, the trustees’ conservatism was found to be an important factor that impacted the
decision to opt for coopetition or not. The findings showed that younger generations were more suitable
to engage in coopetition as they were used to working in environments where coopetition-related
concepts such as cooperation and sharing economies are important. Older generations, however, were
used to work in less complex and international business environments in which competition was much
more emphasised than cooperation or coopetition. This finding revealed that a firm’s propensity to
engage in coopetition does not only depend on organisational factors but certainly also on the personal
characteristics, attitudes, and orientations of the managers in charge of strategic decisions (Geraudel &
Salvetat, 2014). It can thus also be the managers’ age, education, cultural background, personality etc.
which can impact the likelihood to opt for coopetition.
Through coopetition, several benefits and opportunities were achieved which increased the
coopeting firms’ overall performance and built a basis for innovation (Ritala & Sainio, 2014). Our
research supported existing findings in the sense that mutual knowledge transfer and creation as well as
the sharing of resources, costs, time, and compliance expenditures are the most common benefits of
coopetition initiated by the trust companies in the Liechtenstein trust industry. Through these
exchanges, resource scarcities and corporate boundaries were reduced (Granata, raudel, Gundolf,
Gast, & Marques, 2016), synergistic and scale effects were leveraged, new market entry was supported
(Bouncken & Fredrich, 2012; Bouncken & Kraus, 2013; Ritala, 2012), and innovation was facilitated
(Gnyawali & Park, 2009; Quintana-Garcia & Benavides-Velasco, 2004), in particular business model
and service innovations.
As such, coopetition led to new strategic perspectives for the trust companies and they gained
access to inputs required for service and business model innovation (Ritala & Sainio, 2014; Tsai,
2002). Several service innovations were developed by Liechtenstein trust companies through
Sascha Kraus, Jasmin Schmid and Johanna Gast
coopetition including innovations of customer and organisational services. Customer services were
innovated by building on information systems, such as mobile apps or IT solutions to create a more
intensive interaction between the customers and the company and to customize the provided services.
Organisational services were innovated by implementing information systems and software into
organisational processes to increase efficiency, reduce costs, and optimize processes along the value
chain. These changes were mainly driven by new technologies (Velu, 2016), additional capital (Witell
et al., 2016), and newly gained knowledge (Forés & Camisón, 2016). Further, business models were
innovated by integrating diversification and cross-selling practices in previous business models.
5.2 Theoretical implications
From a theoretical point-of-view, this study contributes to several coopetition-related literature
streams, such as the general coopetition literature, the specific streams of coopetition in service
industries as well as the application of coopetition by SMEs (e.g., Bengtsson & Johansson, 2014;
Czakon, 2009; Levy et al., 2003; Mention, 2011; Morris et al., 2007). So far, the SME and service
industry contexts and their peculiarities have been rarely investigated in coopetition research (e.g.,
Gnyawali & Park, 2009; Quintana-Garcia & Benavides-Velasco, 2004).
This is surprising given the importance of SMEs for employment, economic growth, and
innovation (Kollmann, Hensellek, & Kensbock, 2016) as well as their simultaneous sensitivity in terms
of resource and knowledge shortages. The associated liabilities of smallness of SMEs may hinder their
innovation and growth capability and possibly motivate them to cooperate with their rivals. Based on
this study’s findings, it can be proposed that coopetition represents indeed a potential strategic option
for resource-constrained SMEs as it enables sharing mechanisms through which resources, knowledge
and capabilities can be accessed and exchanged. Facing regulatory changes in their industry, the
interviewed small- and medium-sised trust companies pointed out the relevance of coopetitive
interactions as they enable the firms to join their individual forces. Such coopetition is not only limited
to national competitors but also extended to partnerships with international rivals (Kock et al., 2010).
5.3 Practical implications
Practically, this study suggests that managers of SMEs in service industries should be aware of the
benefits of coopetition to gain access to complementary resources and capabilities, cost and risk
sharing opportunities as well as knowledge and information exchange possibilities, and to strengthen
their innovation power. Next to typical cooperative partnerships with non-rivals, coopetition can come
along with additional advantages since competitors typically share the same contexts, threats, and
opportunities while they also possess complementary resources that are relevant to the other party.
When coopetition is in place, the partners have possibilities to access the coopeting rival’s financial,
social, human, technological, marketing, or other managerial resources, to transfer and integrate their
knowledge and expertise, and share risks and costs. The presented research shows that coopetition is
frequently applied among competitors in the particular case of small- and medium-sized trust
companies in the Liechtenstein financial centre and leads to crucial implications in terms of risk, cost,
and knowledge benefits as well as business model innovations.
5.4 Limitations and future research directions
This study has some limitations which give rise to future research directions. First, as a qualitative
study, the data collection can be criticized for the retrospective design which may lead to recall biases
(Hassan, 2005) endangering the study’s internal validity. Nevertheless, a retrospective approach
seemed necessary since the interviewees had to answer questions about past events. Second, lacking
objectivity of the qualitative data analysis and interpretation can be criticized. Seeking to increase
validity and reliability of the study, the multiple assessor method was used (Ryan, 1999). Future
research should attempt to restrict these potential limitations arising from qualitative research by
applying quantitative research methods which can then test and verify the qualitatively gained insights.
Third, our work only represents the opinions of small- and medium-sized trust companies in
Liechtenstein. To improve the generalizability of the findings, in future research, the whole financial
centre of Liechtenstein should be investigated, including banks, asset management companies, risk
management offices or accounting companies. In addition, international financial and trust industries
should be investigated to verify whether and how coopetition influences innovation.
Fourth, the geographical restriction should be noted. Due to the single focus on the small country
of Liechtenstein, general implications to the worldwide financial industry can hardly be given. Future
research should investigate whether or not similar findings can be found in different geographical
areas. Additionally, future research should determine if the size of a country influences the impact of
Int. Journal of Business Science and Applied Management /
coopetition between companies. In other words, it should be examined whether higher social contact in
smaller countries influences coopetition willingness.
Apart from this, the impact of entrepreneurial orientation and the results and success of
coopetition would be interesting to investigate using a quantitative research method. One interview
partner mentioned that the higher the entrepreneurial orientation, the higher is the resulting success and
the benefits of coopetition.
Since 2008, the implementation of many different regulations has challenged most of the actors of
Liechtenstein’s trust industry. The dynamic and constantly changing economic environment in the
financial centre of Liechtenstein has led to changes, improvements and renewals of the overall business
activities of trust companies. Nearly every Liechtenstein trust company has faced the problem of
increased regulation in the Liechtenstein marketplace over the last 10 years. To exist and survive,
coopetition represented a fundamental concept which has helped trust companies to overcome the
dynamic changes and to prepare successfully for the future.
The study sought to determine whether and how coopetition was applied by the central actors in
the trust industry and how coopetition can support innovation of trust companies. In doing so, nine
major actors of the Liechtenstein trust industry were interviewed, including seven resource-constrained
and small- and medium-sized trust companies and 2 regulators.
Evaluation of the data supported the assumption that coopetition is already established between
Liechtenstein trust companies, members of the Liechtenstein financial centre and international
competitors. This study demonstrated how coopetition was implemented in the trust industry and which
partners were chosen for coopetition. The main arguments why coopetition agreements have been
established include cost and risk sharing opportunities, the exchange of knowledge, experiences, and
capabilities, as well as the bundling of complementary resources. The process of developing new ideas,
business model or service innovations in particular are positively influenced through the access to
additional resources, knowledge and capabilities associated with coopetition. Furthermore, the
conducted research clarified which service and business model innovations were developed through
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