Alliances with frenemies: capability-building mechanisms linking coopetition to firm performance

Coopetition functions as a double-edged sword, offering both benefits and costs. Drawing on the capability-building perspective, we examine the intermediate mechanism through which coopetition gives rise to superior performance. We explore two interrelated yet seemingly paradoxical learning capabilities, namely absorptive capacity (AC) and unlearning, which serve as mediating mechanisms that link coopetition to financial and non-financial performance. Our findings from a sample of 190 Iranian SMEs confirm that AC mediates the effect of coopetition on both financial and non-financial performance, whereas unlearning did not directly mediate any of these relationships. However, we found that unlearning serves as an important catalyst for the development of AC, which in turn affects performance. This study contributes to the literature by examining the bridging mechanism underlying the performance impact of coopetition and contributes to the debate on the development of capabilities in coopetition partnerships.