Over the last decade, a new business strategy is becoming prevalent – coopetition. Unlike the binary notions of pure competition versus true collaboration, coopetition recognizes that in reality firms need to closely collaborate and intensely compete, simultaneously, with the same changing set of actors. However, in spite of the fact that coopetition scholars acknowledge that coopetition is highly contextual – that coopetition systems are more or less suitable to different industries, in different locations, and at different periods of their evolution – there has been little, if any, research on how particular institutional environments affect the evolution of specific coopetition systems. This chapter addresses this gap by focusing attention on the creation of coopetition strategies in high-technology industries, where the pressure to constantly innovate is overbearing (Breznitz 2005a, Cooke and Morgan 1998; Lester and Piore 2004). This approach sheds light on the role these strategies play in the successful evolution of certain industries. Furthermore, focusing our analysis specifically on high-technology industries in emerging economies offers a unique opportunity to move our knowledge of coopetition from abstract modeling to the dynamic reality of business development. This chapter shows that with the increasing fragmentation of production and the specialization in specific stages of production, and not whole, industries, different emerging economies need to develop different coopetition strategies that create and maintain very different competitive advantages, skills and management capabilities. Analyzing the hardware IT industry, the biggest and most global of the high-technology industries, this chapter illustrates the particular role of public policy in the development of very different strategies by offering a theoretical model and then testing it, in the process utilizing a critical case-study methodology and employing an exhaustive field-based industry study strategy. This is accomplished by building on extensive fieldwork, including more than 300 interviews and site visits in Israel and Taiwan. Thus, the chapter proceeds as follows: the first section develops a theoretical framework analyzing what specific needs coopetitive strategies must answer in
each industrial development model, and hence, what the particular role of public policy is in each case. The second section analyzes the cases of Israel and Taiwan, specifically looking at the role of the state in the development of the two-level coopetitive strategies in each country. The chapter concludes by summarizing our understanding of the co-evolution of industry and public policy in the development of coopetitive frameworks of new IT industries facing intensified globalization and production fragmentation.