Currently, it is commonly accepted that the not-invented-here syndrome (NIHS) refers to internal resistance against external knowledge, and that it has devastating consequences on innovation performance (IP). Nevertheless, studies on organisational practices that neutralise NIHS are incipient. Moreover, it is accepted that innovation capabilities (ICs) are perhaps the organisational routines with the highest positive influence on IP. In this study, based on the organisational routine framework and agency theory, we propose a model in which ICs (i.e., client-focused, marketing-focused, and technology-focused ICs) have a confounding effect on an NIHS–IP relation. Structural equation modelling (SEM) was used to test the proposed model with survey data from a sample of 161 service firms. We find that (1) NIHS influences IP negatively, and (2) ICs weaken NIHS–IP relation, practically turning it null. Finally, this paper provides insights for researchers and managers regarding a possible overestimation of the negative effects of NIHS on the literature.