This paper aims to make a contribution to the stream of literature on action research by describing a longitudinal collaborative research project which evolved out of a long-term, participation partnership with Volvo Cars. The collaboration was aimed at developing innovation capabilities in the company and accumulating knowledge on how capabilities are developed. The paper provides insights into the design of collaborative research projects to enable mutual, sustainable learning. It draws on key notions in the literature on collaborative management research and action learning, highlighting the research design of the project at Volvo Cars and its relations to action learning. The paper describes how the research design opened the way to establishing a learning system at Volvo Cars while simultaneously generating new scientific knowledge within the area of innovation capabilities. The paper provides rich and detailed data on a collaborative research setting and highlights key aspects related to organizing and undertaking collaborative research. (Contains 4 tables and 1 figure.)