With the Sydney Olympics, we have all been pre-occupied with competition lately. Our minds have been on performance and winning against the best in the world.

Being competitive is the Holy Grail in both sport and business. But in business (and maybe even in sport), there's more to competition than meets the eye. Some of the recent work of the Australian Business Foundation is telling us paradoxically, that the more you collaborate, the stronger your competitive success.

It seems collaboration in business is a performance-enhancing substance, and what's more, it's legal!

In his 1990 book, The Competitive Advantage of Nations, Harvard Business School professor, Michael Porter, pioneered the concept that competition and collaboration can co-exist to drive remarkable business productivity and performance because of the concentration of specialised capabilities, skills, institutions and rivals, related businesses and sophisticated customers.

Other scholars and analysts have suggested that the new knowledge economy requires a totally different characterisation of competitiveness; even coining the new term, "alliance capitalism".

They suggest that collaboration is critical in an age where continuing innovation, access to global markets and intangible assets like knowledge and skills are increasingly decisive in sustained superior business performance.

The classical idea of the lone, self-interested economic actor with perfect information making the rational decision to maximise benefits to himself has past its use by date.

Economic learning is as often incubated by connections with other firms and institutions. Through them, we learn how to turn knowledge into new capabilities and thereby find its commercial value.

Mechanisms and institutions that foster such collaboration serve to put companies in touch with the know-how, resources, technologies, skills and motivation that pushes them along a strongly competitive, productive and high growth path.

A home-spun example of this is Australia's wine industry, which has just been the subject of a study by Professor Ian Marsh and Brendan Shaw of the Australian Graduate School of Management.

Marsh & Shaw show how the Australian wine industry has transformed itself over a decade or so from being a domestic commodity industry to a knowledge-driven cluster producing premium global brands.

The study found that industry-wide collaboration and linkages facilitated three significant changes in the wine industry:

• adopting a global business orientation;
• developing superior marketing capabilities and so becoming market-led, not producer-driver; and
• fostering and diffusing technical developments and innovations.

This collaboration, according to Marsh & Shaw, took hold through various industry champions, institutional arrangements, industry organisations and collaborative planning mechanisms like Strategy 2025, which documented the vision of what the wine industry could become and set the necessary objectives and targets.

A crucial reflection from this study was that the process of collaboration was not orderly, centralised or sequential. Collaboration was a more chaotic product of visionary leaders, responsive and capable firms, practical programs, negotiated agreements, government regulation and standards and unplanned opportunities capitalised on.

In the case of the wine industry, collaboration was the means through which knowledge enhanced competitive performance, specifically in terms of disseminating and realising opportunities for export and for innovation.

The wine industry's actions created a kind of "strategic envelope", a shared frame of reference, that positioned individual producers to recognise and to react better to day to day developments and opportunities as they arose.

Such strategic collaboration holds lessons for other Australian enterprises, because it allows firms to take advantage of their smallness and flexibility on one hand, and to leverage into global markets on the other.

Sharing visions, risks and know-how and specifying desired outcomes that can be attained collectively are the active ingredients of collaboration that enhance performance and ensure Australian businesses can compete and win against the world's best.