This paper argues for a bidirectional relationship between competitive intensity perceived by a firm and its strategic response in the form of forging collaborations. Consistent with a variety of theoretical perspectives including enactment, cognition, and the resource-based view, we conceptualize competitive intensity as a firm-level construct and hypothesize that collaboration will reduce the perceived competitive intensity due to the twin mechanisms of information acquisition and risk reduction. We also predict an inverted U-shaped relationship for the impact of competitive intensity on the likelihood of forming at least one collaboration. We test our predictions using data on the dynamic and competitive Chinese market. Our analyses provide strong support to the bidirectional argument.