Abstract The aim of this paper is to construct an explanatory model of the relationship between the conditions of knowledge management and innovation capability and its effect on firm performance. All this, from the combination of both internal conditions (strategic purpose, decision making, information and communication technologies and behavioural environment) and external conditions (competitive environment), which guide the process of development and renewal of new capabilities that involve knowledge acquisition, appropriation and the generation of results. It discusses the concept of innovation capability and proposes a model that integrates the necessary conditions for the evolution of knowledge within the firm and its influence on innovation capability.