Capacity of a wireless link can be enhanced by increasing the number of receive antennas. However, imposed receiver physical size constraints necessitate that the antenna elements be in close proximity, which typically reduces the overall link capacity of the wireless channel. Counterintuitively, under certain conditions the capacity of the overall link can be enhanced by decreasing antenna spacings. The focus of this paper is that of identifying the fundamental mechanisms and the conditions that give rise to this excess capacity. Closed-form expressions that directly quantify this capacity gain are derived based on a representative circuit theoretic model. Interesting insights are developed about the impact of different noise and interference sources and the limiting effect of heat losses in the antenna system. The capacity analysis is subsequently generalized to encompass the effect of antenna current deformation and load mismatch due to mutual coupling, based on the standard Method of Moments (MoM) analysis, demonstrating similar capacity enhancement behavior as predicted by the closed-form expressions.