When competitors join forces, it raises eyebrows. Why would companies battling for market share decide to work together?
Yet across industries—from finance and telecommunications to renewable energy and AI—firms routinely collaborate to advance their shared interests. It’s a practice known as Business Collective Action (BCA), a coordinated effort among competing firms to advance a shared interest.
Such cooperation can yield tremendous benefits—setting innovation standards, influencing policy outcomes, or creating ethical codes in unregulated markets. But it also carries risks: alliances can consolidate power among dominant players, exclude smaller firms, and even produce unintended economic consequences.
Lori Yue, an Associate Professor in Columbia Business School’s Management Division, along with co-authors Sean Buchanan of the University of Manitoba, Lærke Højgaard Christiansen of the Technical University of Denmark, and Jochem Kroezen of Erasmus University, have the explanation for this paradox.
Their new study synthesizes decades of fragmented research to build the first comprehensive model of BCA., shedding light on when and why rivals cooperate, how those collaborations are organized, and what their collective influence means for markets and our society.
“Collaboration is about growing the pie so that each can get a bigger share,” Yue says.
Yue and her co-authors show that the impact of collective action depends less on whether it happens and more on how it is structured. Some alliances distribute power broadly, representing the interests of all participants. Others are tightly controlled by a few powerful actors who set the rules for everyone else. Both forms can be effective, however with very different implications for innovation and long-term stability.
How the Research Was Done
Yue and her co-authors conducted a systematic review of nearly 100 empirical studies, supplemented by more than 30 conceptual papers. The team examined four major traditions of research: corporate political activity, collective institutional entrepreneurship, strategic collaboration, and private regulation.
From this cross-disciplinary review, they developed a framework that identifies the triggers, coordination mechanisms, and internal political arrangements that define BCA.
Their model bridges research on market-based cooperation, such as industry consortia or technological alliances, with work on non-market coordination, including lobbying, trade associations, and self-regulatory schemes. The result is a unified theory that captures how collective action emerges, operates, and evolves across different contexts.
Why Companies Collaborate
Yue and her co-researchers’ framework begins with the observation that BCA arises in response to two broad kinds of external pressure: institutional and market. Institutional triggers include regulatory change, stakeholder activism, and what Yue calls “institutional voids”—gaps where formal laws or oversight mechanisms do not yet exist. In such cases, firms often band together to create private governance structures.
The electronics industry’s Responsible Business Alliance, for instance, sets labor and environmental standards for global supply chains in regions where regulation is weak or absent. Similarly, in emerging sectors like AI, companies such as Amazon, Google, and Microsoft have collaborated through initiatives like the Partnership on AI to establish ethical guidelines long before formal governmental legislation catches up.
"Sometimes regulation is behind the development of technology and innovation,” Yue says. “Industry players have an advantage in shaping regulation because they are the insiders and sometimes have more know-how than the regulators themselves."
Market triggers, by contrast, arise from competitive or technological dynamics. When innovation is rapid or the market landscape shifts, BCA can become a strategy for survival.
Yue points to examples such as the The 3rd Generation Partnership Project, a global consortium of telecom companies including Ericsson, Nokia, and Samsung that established the 3G, 4G, and 5G standards underlying modern mobile networks. These forms of collaboration help industries scale innovations, ensure compatibility, and promote customer trust—all while allowing individual firms to compete on the quality of their products.
Just as important as why firms cooperate is how they organize themselves when they do. Yue and her colleagues identify two distinct modes of governance that determine whether BCA is inclusive or hierarchical. “Representative” collective action occurs when each member has an equal voice in decision-making, leading to broad consensus but slow decision-making. These alliances tend to preserve existing arrangements rather than push for change.
In contrast, “controlled” collective action concentrates decision-making in the hands of powerful players—either large firms or dominant trade associations—allowing for rapid, decisive action. But such control can also lead to exclusion or exploitation of smaller participants.
History, too, shows both the promise and peril of BCA-based control. Earlier research by Yue on the pre-Federal Reserve banking system reveals how New York’s leading banks once organized to stabilize the financial system through the New York Clearing House Association. Initially a collaborative effort to coordinate check clearing and liquidity, the association evolved into America’s most prominent financial governance institution in the National Banking Era. Through it, New York banks self-regulated in regular times and pooled resources and mutually assisted during financial crises. However, as the banking industry consolidated, the clearing house eventually became dominated by elite banks and excluded smaller institutions. When a financial panic struck in 1907, their refusal to extend support to those excluded firms contributed to a nationwide crisis.
More than a century later, similar dynamics can be seen in digital ecosystems: platform leaders like Apple, Amazon, or Google create powerful, efficient systems for innovation but face scrutiny over monopolistic control and unequal profit-sharing with smaller competitors.
In this way, collaboration among competitors can strengthen industries and drive responsible innovation. Yet, when power becomes too concentrated, it can entrench inequality and undermine public trust.
