Disruptive technology and technological fusion blur the boundaries of industries. Firms are frequently challenged by cross-boundary competitors, which redefine game rules and competitive advantages. This study proposed two types of dynamic capabilities, arena-defending and arena-expanding, because a firm generate new advantages in order to either protect its currently-dominant competition arena or enter new-to-firm competition arena. Furthermore, a firm applies external collaborations as the means to control environmental uncertainty, search opportunities, and acquire knowledge and resources for capability renewal. This study suggested that proper fit between dynamic capabilities and collaboration strategies enhance firm performance. Hypotheses were empirical tested by sample data drawn from a worldwide survey of innovation strategies and practices. The empirical results support that both dynamic capabilities contribute to firm performance. The results also showed that exploitation-oriented collaborations enhance the effectiveness of arena-defending capability but diminish the effectiveness of arena-expanding capability. In contrast, exploration-oriented collaborations boost the performance effect of arena-expanding capability but reduce the performance effect of arena-defending capability. This study offered a better understanding of cross-boundary competition and therefore distinguished dynamic capabilities for different competition attempts.

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