Abstract Firms are increasingly dependent on the knowledge and expertise in external organizations to innovate, problem‐solve, and improve supply chain performance. This research examines two capabilities that enable firms to collaborate successfully as a means to combine knowledge and expertise in an episodic collaboration initiative. Building from two theoretical foundations, the knowledge‐based and relational views of the firm, we examine the effects of absorptive capacity and collaborative process competence on the outcomes of an episodic collaboration initiative. Using structural equation modeling, we empirically validate the positive effect of absorptive capacity, collaborative process competence and level of engagement on the operational and relational success of a collaboration effort. Results show that collaborative process competence mediates the relationship between absorptive capacity and collaborative engagement, and positively influences both operational and relational outcomes. Finally, we offer suggestions for managers to improve the effectiveness of inter‐firm collaboration initiatives and discuss future research opportunities.
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