This cross-lagged longitudinal study investigates relationships between a firm's relational characteristics (knowledge transferability, trust, and diversity) and corporate entrepreneurship. We use survey and interview material covering an entire population of firms in two strategic small firm networks. Structural equation modeling is used to compare four competing causal models: (1) a stability model without cross-lagged structural paths, (2) a regular causation model (relational characteristics influences corporate entrepreneurship), (3) a reverse causation model (corporate entrepreneurship influences relational characteristics), and (4) a reciprocal causation model (both regular and reverse causation combined). We found support for the reciprocal causation model.