Exploring the Dark Side of the Coopetition Paradox: Unintentional Knowledge Leakage, Capital Structure, and Organizational Decline in Small‐Firm Coopetition

While paradox theory's generative view implicitly assumes that actors possess the agency to navigate contradictory pursuits productively, an emerging dark‐side perspective suggests that power relations and material constraints may transform such pursuits into pragmatic paradoxes. Building on this perspective, we explore how constrained paradox navigation manifests in behavioural dysfunction and contributes to organizational decline. We study this process in small‐firm coopetition, where boundary‐spanning managers experience the paradoxical tension of coopetition while juggling persistent, contradictory demands. We propose that this tension is positively associated with unintentional knowledge leakage (UKL), a boundary‐regulation failure whereby managers inadvertently disclose sensitive knowledge to a competing partner. In turn, UKL relates to organizational decline, thereby mediating the tension–decline relationship, while capital structure (financial leverage) amplifies the tension–UKL association. Using survey and archival data from 236 Swedish small technology‐manufacturing firms, we find support for these relationships. We advance paradox theory by identifying boundary‐regulation failure as a distinct dark‐side dysfunction and financial leverage as a material boundary condition that exacerbates the constraining effects of paradox navigation. We also reorient coopetition research from intentional partner appropriation toward inadvertent disclosure by the focal firm's own managers. Practically, we highlight the importance of financial resilience in preserving managers' discretion when navigating coopetition's dark side.