A new study has found that specialist firms can increase their profits by sharing data with large technology competitors. Rather than weakening their position, this kind of collaboration can actually turn rivals into partners, easing competition and creating shared value. The research shows that data, when used strategically, can help smaller firms protect their market space while allowing bigger players to benefit from improved efficiency and product quality.

The study, “The Strategic Value of Data Sharing in Interdependent Markets,” was written by David Ronayne, Assistant Professor of Economics at ESMT Berlin, along with Hemant Bhargava from UC Davis, Antoine Dubus from ETH Zurich, and Shiva Shekhar from Tilburg University. Published in the journal Management Science, it models how data collected in one market can enhance products in another. The authors describe this effect as a “cross-market externality,” meaning that data in one area can indirectly improve performance elsewhere.

According to the researchers, when a specialist firm shares its valuable data with a large, generalist competitor, both sides can benefit. The generalist, now reliant on the specialist’s data, becomes less likely to compete aggressively in the specialist’s primary market. This creates a relationship the authors call “co-opetition,” where companies remain competitors but also cooperate to mutual advantage. The generalist gains from better product development, while the specialist enjoys reduced competition and more breathing space.

“Our findings reveal a surprising logic,” says Ronayne. “By making a generalist dependent on the specialist’s data, both firms profit. The specialist secures a more stable position in its market, while the generalist saves money and time on innovation.” The study challenges the usual belief that firms should guard their data at all costs, suggesting instead that strategic sharing can create win–win outcomes when managed carefully.

The authors identify several lessons for business leaders. Sharing data can make competition with larger firms less intense and improve profitability for smaller companies. Generalists, too, can increase their profits when they cooperate across markets. And for firms considering entering a new market, data-sharing agreements can serve as powerful bargaining tools. In this way, the study offers a fresh perspective on how firms of different sizes can coexist in data-driven industries.

This research is particularly relevant today, as major technology firms like Google and OpenAI expand into new areas to gain access to valuable data sources. For smaller players under pressure from such giants, the study provides a new playbook: collaboration may sometimes be a more innovative, more sustainable strategy than confrontation. However, Ronayne warns that firms must think about long-term effects, such as mergers, acquisitions, and the potential for weaker competition to harm consumers. The message is clear: data sharing can be profitable—but it must be done with foresight and responsibility.

More information: David Ronayne et al, The Strategic Value of Data Sharing in Interdependent Markets, Management Science. DOI: 10.1287/mnsc.2024.04938

Journal information: Management Science Provided by ESMT Berlin