This article addresses the scholarly debate on the relationship between interstate rivalry and military capacity. We draw on Tilly's bellicist theory of state formation in early modern Europe and Thies’ modifications to predatory theory, which prioritizes the role of interstate rivalry on state building, to explain variation in military capacity. We unpack the rivalry mechanism into spatial and positional rivalries and test how these two types of rivalry affect military capacity, and how positional rivalries affect military capacity in the long-term. Using time-series cross-sectional data analysis, we find that positional rivalries increase military capacity in the long term. Also, we find that spatial rivalry influences military capacity in the long-term, but its effects are uneven across indicators of military capacity, and it has a smaller effect on military capacity in comparison to positional rivalries. We conclude that not all types of rivalries have a uniform effect on military capacity and that competition over regional dominance, that is, positional rivalries, are the most impactful on military capacity. This study offers a more nuanced test of Tilly's bellicist theory and Thies’ modified predatory theory on state capacity.