Abstract: How to implement co-opetition strategy has been considered as the key to acquire competitive advantage. Although scholars believe that co-opetition strategy could enhance firms’ performance, little empirical evidence has been given out. Through a valid survey of 116 Chongqing enterprises in alliance with rivals, by using structural equation model, whether and how co-opetition strategy has affected firms’ technological innovation activities is analyzed. It is claimed that co-opetition strategy could significantly enhance firms’ technological innovation performance and that “cooperative innovation” could significantly improve a firm’s technological innovation performance, whereas the stimulus of competition between partners has not been proved to be remarkable. A further regression analysis uncovered the reason that in the context of a transitional economy, the market competition mechanism behind state-owned enterprises has not stimulated innovation activity efficiently. The results provided empirical evidence and suggestions for improving firms’ technological innovation capability through implementation of co-opetition strategy during the transitional period.