The new economic scenario increases the importance of the "innovative capacity" of the agents as crucial competitive instrument in order to attain the differentiating element required by the competitive process. Innovative capacity refers to the agents' capability to transform general knowledge into specific one using their stock of competencies and dynamic assets, including formal and informal , social and institutional environment of firms becomes increasingly important. The new competitive situation and the uncertainties generated by the economic globalization process intensify the role of institutional and social agents in strengthening the innovative capacity of firms. This, in turn, results in the generation of technological, organizational and market knowledge and in the development of formal and informal mechanisms to facilitate its diffusion through the productive internal network. In the framework defined by the new production and market conditions, innovative processes change from an individual (and often incremental) phenomenon to a collective one where both the capacity to collaborate and interact and the adequate institutional structure, fostering innovative activities on the part of economic agents, become crucial. The main objective of this paper is to present a proxy indicator of the agents' potentiality to learn, create "competencies", transform generic knowledge into specific knowledge and, therefore, innovate. It aims at analyzing the knowledge of firms, specially, the way they acquire, organize, memorize and transfer information (technical, organizational, etc.) thus contributing to increase the knowledge base itself.For that purpose, this paper analyze the application of such indicator to a sample of 245 firms in Argentina, most of them small and medium sized firms, located in different areas with heterogeneous incidence of externalities. In that sense, we will try to determine the importance of the agent's size and environment to understand the existing differences in innovative capacities. Finally, the paper will evaluate whether those firms with larger innovative capacity have had a more dynamic performance in the market as from the start of the trade openness and structural reforms processes.
