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The study purpose was to understand how leaders in a large Canadian education cross-sector partnership (XSP) network involving higher education, industry, and nonprofit partners, generated and exchanged knowledge to address complex problems. A constructivist grounded theory methodology was employed, 40 participants were recruited, and data was analyzed using computer-assisted qualitative data analysis software and constant comparison. The resulting grounded theory framework demonstrates that as partnership deepens, from simple operational transactions to more complex adaptive work, greater capacity for emergence is generated. Leaders address complex problems through both organized mechanical structures and more flexible opportunities for experimentation. This theory has implications for education XSP leader development because the findings stress the importance of healthy organizational leading/learning conditions in relational space.