Corespective behavior is behavior by a company which avoids cutthroat competition in favour of a live-and-let-live attitude to competitors. Corespective behavior allows dominant firms to coordinate investment. Corespective behavior is a strategy to reduce corporate risk and is in direct conflict with the values of liberal ideology which emphasize competition.
The theory of corespective competition in a natural oligopoly stresses the fact that large, risky investments will not be undertaken unless the organization of the industry offers both high rewards and insurance against excessive risk and uncertainty to the successful investor.
Corespective behavior is common in oligopolies like Westinghouse and GE which regularly shared patents. Schumpeter called “corespective” competition and the exercise of market power as corespective behavior. Corespective behavior provides the key insurance policy; as long as it prevails, destructive competition will not trigger the excess capacity associated with an investment war, or lower price by enough to eliminate above average profits.
Barriers to entry make it possible for such industries to maintain above average profit rates for decades. The acceleration of liberalization across the globe in the past two decades strongly eroded the conditions necessary for the maintenance of corespective behavior in many of the worlds most important industries, as state imposed barriers to entry fell almost everywhere, financial capital began to move rapidly back and forth across national borders.
Technological change made it easier to shift real capital around the world and locate virtually any corporate function any where without significant loss of efficiency, and the long-term rate of growth of global aggregate demand declined.
This raised the intensity of competition in most of the globes core industries. - From: Structural Contradictions of Current Capitalism: A Keynes-Karl Marx-Schumpeter Analysis, James Crotty, Economics Department, University of Massachusetts, Amherst.
The centrepiece of the work of both Baran and Sweezy, for most of the English-speaking world the best-known representatives of the theory now known as state monopoly capitalism, premise their enquiry on the concept of the law of rising surplus, and hold forth against Schumpeters theory of the perennial gale of creative destruction which, they say, has subsided into occasional mild breeze which is no more a threat to the big corporations than is their own corespective behavior toward each other (Baran and Sweezy 1970:82).