Competition in Collaboration: The Problem of (Mis)Aligned Perception

Despite the benefits associated with interorganizational collaborations, they often fail to meet partnering firms’ expectations. A common issue is competitive tension between partners. Yet, competitive tension is a well-known issue in collaboration, such that partners should be able to set expectations and manage it accordingly. Why, then, does competitive tension often derail collaborations? We suggest that whether partners perceive each other as competitors is a key but understudied aspect of how competition shapes collaboration. We hypothesize that misaligned perception—one firm perceiving the other as a competitor but not vice versa—leads to misplaced expectations about partner behavior and collaboration performance and subsequent failure to meet those expectations. We test our theory in the U.S. software industry and find that collaborations characterized by misaligned perception are less likely to be renewed, even after controlling for partner quality and market overlap (i.e., objective competitive tension). Our examination of the social structure surrounding collaborations illustrates how the perceptions of third parties can moderate the effect of misaligned perception. We examine mechanisms and find that misalignment is linked to litigation between partners and lower collaboration performance. We contribute to the literatures on interfirm collaboration and on perception in social networks.