This study empirically examines the dynamics and conditions of conflict managing approaches on government and business collaboration. It posits that conflict for mutual benefit critically effects government and business collaboration outcomes. This study adopts Deutsch’s (1973) theory of goal interdependence to understand when and how government officials and business managers adopt the mutually beneficial conflict approach. It proposes that cooperative goals between government officials and business managers promote the mutually beneficial conflict approach and reduce win-lose competitive conflict and avoiding conflict. A total of 101 interviews were conducted in China in 2009. Results of structural equation modeling and other analyses support several of hypotheses as well the proposed theoretical model that goal interdependence affects different conflict approaches (conflict for mutual benefit, win-lose competitive conflict and avoiding conflict) that in turn influence government and business collaboration outcomes, specifically task accomplishment, future collaboration and public interest. It identifies that conflict for mutual benefit approach taken by government officials and business managers can promote task accomplishment, future collaboration and public interest. Path estimates show that avoiding conflict can undermine task accomplishment and public interest. But results indicate that win-lose competitive conflict approach does not necessarily undermine task accomplishment, future collaboration, and the public interest as expected. Findings suggest important practical implications that government officials and business managers can improve their collaboration in China by strengthening their cooperative goals and discussing conflicts for mutual benefit. The study contributes to the conflict management literature as well as the generalization of goal interdependence theory.